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Astound Broadband, LLC Franchise Agreement
ORDINANCE NO.3911 AN ORDINANCE OF THE CITY OF EDMONDS, WASHINGTON, GRANTING TO ASTOUND BROADBAND, LLC, A NON-EXCLUSIVE FRANCHISE TO INSTALL, OPERATE, AND MAINTAIN A FIBER OPTIC TELECOMMUNICATIONS SYSTEM IN, ON, OVER, UPON, ALONG, AND ACROSS THE PUBLIC RIGHTS -OF -WAY OF THE CITY OF EDMONDS, WASHINGTON, PRESCRIBING CERTAIN RIGHTS, DUTIES, TERMS, AND CONDITIONS WITH RESPECT THERETO, ESTABLISHING AN EFFECTIVE DATE, AND REPEALING ORDINANCE NO. 3371. WHEREAS, Astound Broadband, LLC, has requested that the City grant it the right to install, operate, and maintain a fiber optic -based telecommunications system within the public ways of the City; and WHEREAS, the City Council has found it desirable for the welfare of the City and its residents that such a non-exclusive franchise be granted to Astound Broadband, LLC; and WHEREAS, the City Council has the authority under state law to grant franchises for the use of its streets and other public properties; and WHEREAS, the City is willing to grant the rights requested subject to certain terms and conditions, NOW, THEREFORE, THE CITY COUNCIL OF THE CITY OF EDMONDS, WASHINGTON DO ORDAIN AS FOLLOWS: Section 1. Definitions. For the purposes of this Franchise, the following terms, phrases, words, and abbreviations shall have the meanings ascribed to them below. When not inconsistent with the context, words used in the present tense include the future tense, words in the plural number include the singular number, and words in the singular number include the plural number. a. "Affiliate" means an entity which owns or controls, is owned or controlled by, or is under common ownership with the Franchisee. b. "City" means the City of Edmonds, Washington. C. "Communication Service" shall mean any telecommunications services, telecommunications capacity, or dark fiber, provided by the Franchisee using its Facilities, either directly or as a carrier for its subsidiaries, Affiliates, or any other person engaged in Communication Services, including, but not limited to, the transmission of voice, data or other electronic information, facsimile reproduction, burglar alarm monitoring, meter reading and home shopping, or other subsequently developed technology that carries an electronic signal over fiber optic cable. Communication Service shall also include non -switched, dedicated and private line, high capacity fiber optic transmission services to firms, businesses or institutions within the City. However, Communications Services shall not include the provision of cable television, open video, or similar services, as defined in the Communications Act of 1934, as amended, for which a separate franchise would be required. d. "Facilities" shall mean the Franchisee's fiber optic cable system constructed and operated within the City's Public Ways, and shall include all cables, wires, conduits, ducts, pedestals, and any associated converter, equipment, or other facilities within the City's Public Ways, designed and constructed for the purpose of providing Communication Service. e. "FCC" means the Federal Communications Commission, or any successor governmental entity hereto. f. "Franchise" shall mean the initial authorization, or renewal thereof, granted by the City, through this Ordinance, or a subsequently adopted Ordinance, which authorizes construction and operation of the Franchisee's Facilities for the purpose of offering Communication Service. g. "Franchisee" means Astound Broadband, LLC, a Washington limited liability company, or the lawful successor, transferee, or assignee thereof. h. "Person" means an individual, partnership, association, joint stock company, trust, corporation, or governmental entity. i. "Public Way" shall mean the surface of, and any space above or below, any public street, highway, freeway, bridge, path, alley, court, boulevard, sidewalk, parkway, lane, drive, circle, or other public right-of-way, including, but not limited to, public utility easements, utility strips, or rights -of -way dedicated for compatible uses and any temporary or permanent fixtures or improvements located thereon now or hereafter held by the City in the Service Area, which shall entitle the City and the Franchisee the use thereof for the purpose of installing, operating, repairing, and maintaining the Facilities. Public Way shall also mean any easement now or hereafter held by the City within the Service Area for the purpose of public travel, or for utility or public service use dedicated for compatible uses, and shall include other easements or rights -of -way, which within their proper use and meaning entitle the City and the Franchisee to the use thereof for the purposes of installing or transmitting the Franchisee's Communication Service over wires, cable, conductors, amplifiers, appliances, attachments, and other property as may be ordinarily necessary and pertinent to the Communication Service Facilities. 2 j. "Service Area" means the present municipal boundaries of the City, and shall include any additions thereto by annexation or other legal means. Section 2. Authority Granted. The City hereby grants to the Franchisee, its heirs, successors, legal representatives, and assigns, subject to the terms and conditions hereinafter set forth, the right, privilege, and authority to utilize the Public Ways of the City for construction and operation of the Franchisee's Facilities and to acquire, construct, operate, maintain, replace, use, install, remove, repair, reconstruct, inspect, sell, lease, transfer or to otherwise utilize in any lawful manner, all necessary equipment and facilities thereto for Franchisee's Facilities, and to provide Communication Service to persons located within the City. Section 3. Construction Permits Required. A. Prior to site -specific location and installation of any portion of its Facilities within a Public Way, the Franchisee shall apply for and obtain a Construction Permit pursuant to ECDC Chapter 18.60. In addition to any criteria set forth in ECDC Chapter 18.60, the City Engineer shall apply the following criteria in the issuance or denial of a Construction Permit application: 1. Whether the Franchisee has received all requisite licenses, certificates, and authorizations from applicable federal, state, and local agencies with jurisdiction over the activities proposed by the Franchisee; 2. Whether there is sufficient capacity in the Public Ways to accommodate the Franchisee's proposed Facilities; 3. The capacity of the Public Ways to accommodate additional utility, cable, and Facilities if the Construction Permit is granted; 4. The damage or disruption, if any, of public or private Facilities, utilities, improvements, service, travel or landscaping if the Construction Permit is granted; 5. The public interest in minimizing the cost and disruption of construction within the Public Ways; and 6. The availability of alternate routes and/or locations for the proposed Facilities. B. Unless otherwise provided in said Permit and except for emergency repairs, the Franchisee shall give the City at least 48 hours notice of the Franchisee's intent to commence work in the Public Ways. The Franchisee shall file plans or maps with the City showing the proposed location of its Facilities and pay all duly established permit and inspection fees associated with the processing of the permit. In no case shall any work commence within any Public Way without said Permit, except as otherwise provided in this Franchise. Section 4. Grant Limited to OcgWation. Nothing contained herein shall be construed to grant or convey any right, title, or interest in the Public Ways of the City to the Franchisee, nor shall anything contained herein constitute a warranty of title. Section 5. Term of Franchise. The term of this Franchise shall be for a period of five (5) years from the date of acceptance as set forth in Section 31 (Acceptance), unless sooner terminated. This Franchise shall not renew unless and until the City and Franchisee reach agreement on a renewal and said agreement is approved by ordinance of the City Council. In the event that agreement cannot be reached, this Franchise shall terminate at the end of the then current term. Nothing in this Section prevents the parties from reaching agreement on renewal earlier than the time periods indicated. Section 6. Non -Exclusive Grant. This Franchise shall not in any manner prevent the City from entering into other similar agreements or granting other or further franchises in, under, on, across, over, through, along or below any of said Public Ways of the City. However, the City shall not permit any such future franchisee to physically interfere with the Franchisee's Facilities and any such rights shall be granted pursuant to applicable law. In the event that such physical interference or disruption occurs, the City Engineer may assist the Franchisee and such subsequent franchisee in resolving the dispute. Further, this Franchise shall in no way prevent or prohibit the City from using any of its Public Ways or affect its jurisdiction over them or any part of them, and the City shall retain power to make all necessary changes, relocations, repairs, maintenance, establishment, improvement, dedication of the same as the City may deem fit, including the dedication, establishment, maintenance, and improvement of all new Public Ways, all in compliance with this Franchise. Section 7. Relocation of Facilities. A. The Franchisee agrees and covenants, to protect, support, temporarily disconnect, relocate, or remove from any Public Way any portion of its Facilities when so required by the City Engineer by reason of traffic conditions, public safety, dedications of new Public Ways and the establishment and improvement thereof, widening and improvement of existing Public Ways, street vacations, freeway construction, change or establishment of street grade, or the construction of any public improvement or structure by any governmental agency acting in a governmental capacity; provided that the Franchisee shall in all cases have the privilege to temporarily bypass, in the authorized portion of the same public way upon approval by the City Engineer, any section of cable or any other facility required to be temporarily disconnected or removed. B. Upon the reasonable request of the City Engineer and in order to facilitate the design of City street and right-of-way improvements, the Franchisee agrees to, at its sole cost and expense, locate, and if reasonably determined necessary by the City, to excavate and expose portions of its Facilities for inspection so that the location of same may be taken into account in the improvement design, PROVIDED that, Franchisee shall not be required to excavate and expose it's Facilities unless the Franchisee's as -built plans and maps of its Facilities submitted pursuant to Section 9 (Maps and Records) of this Franchise are reasonably determined by the City Engineer to be inadequate for purposes of this paragraph. The decision to relocate said 0 Facilities in order to accommodate the City's improvements shall be made by the City Engineer upon review of the location and construction of the Franchisee's Facilities. C. If the City Engineer determines that the project necessitates the relocation of the Franchisee's then existing Facilities, the City shall: 1. Within a reasonable time, which shall be no less than 30 days, prior to the commencement of such improvement project, provide the Franchisee with written notice requiring such relocation. Provided, however, that in the event an emergency posing a threat to public safety, health or welfare, or in the event of an emergency beyond the control of the City and which will result in severe financial consequences to the City, the City shall give the Franchisee written notice as soon as practicable; and 2. Provide the Franchisee with copies of information for such improvement project and a proposed location for the Franchisee's Facilities so that the Franchisee may relocate its Facilities in other Public Ways in order to accommodate such improvement project. 3. The Franchisee shall complete relocation of its Facilities at no charge or expense to the City so as to accommodate the improvement project at least 10 days prior to commencement of the project. In the event of an emergency as described herein, the Franchisee shall relocate its Facilities within the time period specified by the City Engineer. D. The Franchisee may, after receipt of written notice requesting a relocation of its Facilities, submit to the City written alternatives to such relocation. The City shall evaluate such alternatives and advise the Franchisee in writing if one or more of the alternatives are suitable to accommodate the work, which would otherwise necessitate relocation of the Facilities. If so requested by the City, the Franchisee shall submit additional information to assist the City in making such evaluation. The City shall give each alternative proposed by the Franchisee full and fair consideration, within a reasonable time, so as to allow for the relocation work to be performed in a timely manner. In the event the City ultimately determines that there is no other reasonable alternative, the Franchisee shall relocate its Facilities as otherwise provided in this Section. E. The provisions of this Section shall in no manner preclude or restrict the Franchisee from making any arrangements it may deem appropriate when responding to a request for relocation of its Facilities by any person or entity other than the City, where the Facilities to be constructed by said person or entity are not or will not become City -owned, operated or maintained Facilities; provided, that such arrangements do not unduly delay a City construction project. F. The Franchisee will indemnify, hold harmless, and pay the costs of defending the City against any and all claims, suits, actions, damages, or liabilities for delays on City construction projects caused by or arising out of the failure of the Franchisee to relocate its 4� Facilities in a timely manner; provided, that the Franchisee shall not be responsible for damages due to delays caused by the City or circumstances beyond the reasonable control of the Franchisee. G. The cost and expenses associated with relocation of the Franchisee's Facilities shall be the responsibility of the Franchisee unless: (1) the Franchisee had paid for the relocation cost of the same Facilities at the request of the City within the past five years; (2) aerial to underground relocation of Facilities is required by the City and the Franchisee has an ownership share of the aerial supporting structures, in which case the City shall be responsible for the additional incremental costs of underground relocation compared to aerial relocation, or as provided for in the Franchisee's tariff, if said amount is less; and, (3) when the City requests relocation solely for aesthetic purposes, unless the Franchisee agrees to be responsible for the costs thereof. H. In the event that the City orders the Franchisee to relocate its Facilities for a project which is primarily for private benefit, the private party or parties causing the need for such project shall reimburse the Franchisee for the cost of relocation and the same proportion as their contribution to the cost of the project. In the event of an unforeseen emergency that creates a threat to the public safety, health, or welfare, the City may require the Franchisee to relocate its Facilities at its own expense, any other portion of this Section notwithstanding. Section 8. Undergrounding of Facilities. Consistent with ECDC Chapter 18.05, all of Franchisee's facilities shall be placed underground. Section 9. Maps and Records. After construction is complete, the Franchisee shall provide the City with accurate copies of as -built plans and maps in a form and content prescribed by the City Engineer. These plans and maps shall be provided at no cost to the City, and shall include hard copies and digital copies in a format specified by the City Engineer. Section 10. Work in Public Nays. A. During any period of relocation, construction, or maintenance, all surface structures, if any, shall be erected and used in such places and positions within said Public Ways and other public properties so as to interfere as little as possible with the free passage of traffic and the free use of adjoining property. The Franchisee shall at all times post and maintain proper barricades and comply with all applicable safety regulations during such period of construction as required by the ordinances of the City or the laws of the state of Washington, including RCW 39.04.180 for the construction of trench safety systems. B. During the progress of the work, the Franchisee shall not unnecessarily obstruct the passage or proper use of the Public Ways, and all work by the Franchisee in any area covered by this Franchise and as described in this Section shall be performed in accordance with City of Edmonds Public Works Construction Standards and warranted for a period of one year. C. The City may require the Franchisee, and its construction, relocation, or placement of ducts or conduits within the Public Ways to provide the City with additional ducts 0 or conduits and related structures necessary to access the same. The terms and conditions under which additional ducts and/or conduits shall be provided shall be consistent with Section 7 (Relocation of Communications System) of RCW Chapter 35.99. D. The Franchisee shall cooperate with the City and all other persons with authority from the City to occupy and use the Public Ways of the City in coordinate of construction activities and joint trenching projects. By February 1st of each calendar year, the Franchisee shall provide the City with a schedule of its proposed construction activities in, around, or that may affect the Public Ways of the City. The Franchisee shall also meet with the City and other grantees, franchisees, permittees, and users of the Public Ways of the City annually, or as determined by the City, to schedule and coordinate construction activities. The City Engineer shall coordinate all construction locations, activities, and schedules to minimize public inconvenience, disruption, or damage to the Public Ways of the City. E. Consistent with RCW Chapter 35.99, the Franchisee may, on an annual basis, file notice with the City Clerk and the City Engineer of its desire to receive notices related to public improvement projects within the Public Ways of the City. In the event that the Franchisee is mailed such a notice and fails to coordinate installation or construction of its Facilities with the public improvement project, the City Engineer may deny the Franchisee's construction permit application for those portions of any of the Franchisee's construction projects which seek to disrupt the surface of any said street for a period of up to five years, as reasonably determined by the City Engineer for the purpose of protecting the City's investment in said public improvement projects. In the alternative, the City Engineer may require the Franchisee to fully restore the surface and sub -surface areas of such street to the condition that it was in immediately after completion of the public improvement project. F. If either the City or the Franchisee shall at any time after installation of the Facilities plan to make excavations in area covered by this Franchise and as described in this Section, the party planning such excavation shall afford the other, upon receipt of written request to do so, an opportunity to share such an excavation. PROVIDED THAT: 1. Such joint use shall not unreasonably delay the work of the party causing the excavation to be made or unreasonably increase its costs; 2. Such joint use shall be arranged and accomplished on terms and conditions satisfactory to both parties; and 3. Either party may deny such request for safety reasons or if their respective uses of the trench are incompatible. Section 11. Restoration after Construction. The Franchisee shall, after installation, construction, relocation, maintenance, removal, or repair of its Facilities within the Public Ways, restore the surface of said Public Ways and any other City -owned property that may be disturbed by the work, to at least the same condition the Public Way or City -owned property was in immediately prior to any such installation, construction, relocation, maintenance, or repair, reasonable wear and tear excepted. The Public Works Department shall have final approval of 7 the condition of such Public Ways and City -owned property after restoration, all in accordance with the Edmonds Municipal Code and Public Works Construction standards. All survey monuments which are to be disturbed or displaced by such work shall be referenced and restored, as per WAC 332-120, as the same now exists or may hereafter be amended, and all pertinent federal, state and local standards and specifications. The Franchisee agrees to promptly complete all restoration work and to promptly repair any damage caused by such work to the Public Ways or other affected area at its sole cost and expense according to the time and terms specified in the Construction Permit issued by the City all in accordance with the applicable provisions of the Edmonds Municipal Code, as the same now exists or as it may hereafter be amended or superseded. All work and restoration by the Franchisee pursuant to this Section shall be performed in accord with City of Edmonds Public Works Construction standards and warranted for a period of one year. Section 12. Emergency Work - Permit Waiver. In the event of any emergency in which any of the Franchisee's Facilities located in, above, or under any Public Way break, are damaged, or if the Franchisee's construction area is otherwise in such a condition as to immediately endanger the property, life, health, or safety of any individual, the Franchisee shall immediately take the proper emergency measures to repair its Facilities, to cure or remedy the dangerous conditions for the protection of property, life, health, or safety of individuals without first applying for and obtaining a permit as required by this Franchise. However, this shall not relieve the Franchisee from the requirement of notifying the City of the emergency work and obtaining any permits necessary for this purpose as promptly as reasonably possible after the emergency work. The Franchisee shall notify the City by telephone immediately upon learning of the emergency and shall apply for all required permits not later than the second succeeding day during which the Edmonds City Hall is open for business. Section 13. Dangerous Conditions, Authority for City to Abate. Whenever construction, installation, or excavation of the Facilities authorized by this Franchise has caused or contributed to a condition that appears to substantially impair the lateral support of the adjoining Public Way, street, or public place, or endangers the public, street utilities, or City -owned property, the City Engineer may reasonably require the Franchisee, at the Franchisee's own expense, to take action to protect the public, adjacent public places, City -owned property, streets, utilities, and Public Ways. Such action may include compliance within a reasonably prescribed time. In the event that the Franchisee fails or refuses to promptly take the actions directed by the City, or fails to fully comply with such directions, or if emergency conditions exist which require immediate action, the City may enter upon the property and take such actions as are necessary to protect the public, the adjacent streets, utilities, Public Ways, to maintain the lateral support thereof, or actions regarded as necessary safety precautions; and the Franchisee shall be liable to the City for the reasonable costs thereof. Section 14. Recovery of Costs. The Franchisee shall be subject to all permit fees associated with activities undertaken through the authority granted in this Franchise or under the laws of the City. Where the City incurs costs and expenses for review, inspection, or supervision of activities undertaken through the authority granted in this Franchise or any ordinances relating 8 to the subject for which a permit fee is not established, the Franchisee shall reimburse the City directly for any and all reasonable costs, after receipt of an itemized bill. In addition to the above, the Franchisee shall promptly reimburse the City for any and all reasonable costs the City incurs in response to any emergency involving the Franchisee's Facilities, after receipt of an itemized bill. The time of City employees shall be charged at their respective rate of salary, including overtime if applicable, plus benefits and a reasonable overhead. All billings will be itemized as to specifically identify the costs and expenses for each project for which the City claims reimbursement. The billing may be on an annual basis, but the City shall provide the Franchise with the City's itemization of costs at the conclusion of each project for information purposes. Provided, however, that this Section shall not be construed to allow the City to invoice Franchisee for costs incurred during the processing of Franchisee's initial franchise application to the extent that such costs were covered by application fees paid to the City pursuant to a fee schedule duly established by the City. Section 15. Consideration. Pursuant to RCW 35.21.860, the City is precluded from imposing a fee on a "telephone business" as defined in RCW 82.04.065, except for certain authorized costs and expenses or any applicable tax authorized by RCW 35.21.865. This Franchise is premised upon the City and Franchisee's understanding that the activities proposed by the Franchisee constitute a "telephone business." As such, the rights granted under this Franchise are not conditioned upon payment of compensation in addition to reimbursement for costs and expenses as set forth in Section 14 (Recovery of Costs) herein, payment of the cost recovery fees as set forth by the City and payment of any applicable local utility tax applicable to Franchisee's operations. The City hereby reserves its right to impose a fee on the Franchisee, to the extent authorized by law, for purposes other than to recover its administrative expenses, if the Franchisee's operations are not those of a "telephone business" as defined in RCW 82.04.065, if the Franchisee's operations are now those of a telephone business and change in the future, or if statutory prohibitions on the imposition of such fees are removed. The City also reserves its right to require that the Franchisee obtain a separate agreement for its change in use, which agreement may include provisions intended to regulate the Franchisee's operations, as allowed under applicable law. Section 16. Indemnification and Waiver. A. Franchisee hereby releases, covenants not to bring suit and agrees to indemnify, defend and hold harmless the City, its officers, employees, agents and representatives from any and all claims, costs, judgments, awards or liability to any person arising from injury, sickness, or death of any person or damage to property: 1. For which the negligent acts or omissions of Franchisee, its agents, servants, officers or employees in performing the activities authorized by this Franchise are the proximate cause; 2. By virtue of the Franchisee's exercise of the rights granted herein; Z 3. By virtue of the City permitting Franchisee use of the City's Public Ways or other public property; 4. Based on the City's inspection or lack of inspection of work performed by Franchisee, its agents and servants, officers or employees in connection with work authorized on the Public Ways or property over which the City has control pursuant to this Franchise or pursuant to any other permit or approval issued in connection with this Franchise; 5. Arising as a result of the negligent acts or omissions of Franchisee, its agents, servants, officers or employees in barricading, instituting trench safety systems or providing other adequate warnings of any excavation, construction, or work upon the Public Ways, in any Public Way, or other public place in performance of work or services permitted under this Franchise. B. The provisions of Subsection A of this Section shall apply to claims by Franchisee's own employees and the employees of the Franchisee's agents, representatives, contractors, and subcontractors to which Franchisee might otherwise be immune under Title 51 RCW. This waiver of immunity under Title 51 RCW has been mutually negotiated by the parties hereto, and Franchisee acknowledges that the City would not enter into this Franchise without Franchisee's waiver thereof. C. Inspection or acceptance by the City of any work performed by the Franchisee at the time of completion of construction shall not be grounds for avoidance of any of these covenants of indemnification. Provided that Franchisee has been given prompt written notice by the City of any such claim, said indemnification obligations shall extend to claims which are not reduced to a suit and any claims which may be compromised with Franchisee's consent prior to the culmination of any litigation or the institution of any litigation. The City has the right to defend or participate in the defense of any such claim, and has the right to approve any settlement or other compromise of any such claim, provided that Franchisee shall not be liable for such settlement or other compromise unless it has consented thereto. D. In the event that Franchisee refuses the tender of defense in any suit or any claim, said tender having been made pursuant to this Section, and said refusal is subsequently determined by a court having jurisdiction (or such other tribunal that the parties shall agree to the matter), to have been a wrongful refusal on the part of the Franchisee, then Franchisee shall pay all of the City's costs for defense of the action, including all reasonable expert witness fees, reasonable attorney's fees, the reasonable costs of the City, and reasonable fees of recovering under this Subsection. E. The obligations of Franchisee under the indemnification provisions of this Section shall apply regardless of whether liability for damages arising out of bodily injury to persons or damages to property were caused or contributed to by the City, its officers, agents, employees or contractors except to the extent that such claims, actions, damages, costs, expenses, and attorney's fees were caused by the sole negligence or any willful, malicious, or criminal act 10 on the part of the City, its officers, agents, employees or contractors. In the event that a court of competent jurisdiction determines that this Franchise is subject to the provisions RCW 4.24.115, the parties agree that the indemnity provisions hereunder shall be deemed amended to conform to said statute and liability shall be allocated as provided therein. E. Notwithstanding any other provisions of this Section, Franchisee assumes the risk of damage to its Facilities located in the Public Ways and upon City -owned property from such activities conducted by the City, its officers, agents, employees and contractors, except to the extent any such damage or destruction is caused by or arises from the sole negligence or any willful, malicious, or criminal act on the part of the City, its officers, agents, employees or contractors. Franchisee releases and waives any and all such claims against the City, its officers, agents, employees or contractors. Franchisee further agrees to indemnify, hold harmless and defend the City against any claims for damages, including, but not limited to, business interruption damages and lost profits, brought by or under users of Franchisee's Facilities as the result of any interruption of service due to damage or destruction of Franchisee's Facilities caused by or arising out of activities conducted by the City, its officers, agents, employees or contractors, except to the extent any such damage or destruction is caused by or arises from the sole negligence or any willful or malicious actions on the part of the City, its officers, agents, employees or contractors. Section 17. Insurance. The Franchisee shall procure and maintain insurance against claims for injuries to persons or damages to property which may arise from or in connection with the exercise of the rights, privileges and authority granted hereunder to the Franchisee, its agents, representatives or employees. The Franchisee shall provide to the City, for its inspection, an insurance certificate naming the City as an additional insured as its respective interests may appear prior to the commencement of any work or installation of any Facilities pursuant to this Franchise. Such insurance certificate shall evidence: A. Comprehensive general liability insurance, written on an occurrence basis, including contractual liability coverage, with limits, inclusive of umbrella or excess liability coverage, not less than: (1) $3,000,000.00 for bodily injury or death to each person; and (2) $3,000,000.00 for property damage resulting from any one accident. B. Automobile liability for owned, non -owned and hired vehicles with a limit, inclusive of umbrella or excess liability coverage, of $3,000,000.00 for each person and $3,000,000.00 for each accident. C. Worker's compensation within statutory limits and employer's liability insurance with limits, inclusive of umbrella or excess liability coverages, of not less than $1,000,000.00. The liability insurance policies required by this Section shall be maintained by the Franchisee throughout the term of this Franchise, and such other period of time during which the 11 Franchisee is operating without a Franchise hereunder, or is engaged in the removal of its Facilities. Payment of deductibles and self -insured retentions shall be the sole responsibility of the Franchisee. The insurance certificate required by this Section shall contain a clause stating that the coverage shall apply separately to each insured against whom a claim is made or suit is brought, except with respect to the limits of the insurer's liability. The Franchisee's insurance shall be primary insurance with respect to the City. Any insurance maintained by the City, its officers, officials, employees, consultants, agents, and volunteers shall be in excess of the Franchisee's insurance and shall not contribute with it. In addition to the coverage requirements set forth in this Section, the insurance certificate required by this Section shall contain language which provides that the policy may not be cancelled, reduced in coverage, nor the intention not to renew be stated until at least 30 days after receipt by the City of written notice of the same via U.S. mail. Within 15 days after receipt by the City of said notice, and in no event later than 5 days prior to said cancellation or non - renewal, the Franchisee shall obtain and furnish to the City replacement insurance certificate(s) meeting the requirements of this Section Section 18. Abandonment and Removal of the Franchisee's Facilities. Upon the expiration, termination, or revocation of the rights granted under this Franchise, the Franchisee shall remove all of its Facilities from the Public Ways of the City within 90 days of receiving notice from the City Engineer. Provided, however, that the City may permit the Franchisee's improvements to be abandoned in place in such a manner as the City may prescribe. Upon permanent abandonment, and Franchisee's agreement to transfer ownership of the Facilities to the City, the Franchisee shall submit to the City a proposal and instruments for transferring ownership to the City. Any such Facilities which are not permitted to be abandoned in place which are not removed within ninety (90) days of receipt of said notice shall automatically become the property of the City. Provided, however, that nothing contained within this Section shall prevent the City from compelling the Franchisee to remove any such Facilities through judicial action when the City has not permitted the Franchisee to abandon said Facilities in place. Section 19. Construction Bond. Before undertaking any of the work, installation, improvements, construction, repair, relocation or maintenance authorized by this Franchise, the Franchisee shall furnish a street repair or sidewalk bond written by a corporate surety acceptable to the City equal to at least 125% of the estimated cost of restoring the Public Ways of the City to the pre -construction condition required by Section 11 (Restoration after Construction) of this Franchise. Said bond shall be required to remain in full force until 60 days after completion of the construction of Grantee's Facilities and other improvements from the Public Ways of the City, and said bond, or separate bond acceptable to the City, shall warrant all such restoration work for a period of one year. In the event that a bond issued to meet the requirements of this Section is canceled by the surety, after proper notice and pursuant to the terms of said bond, Franchisee shall, prior to expiration of said bond, be responsible for obtaining a replacement bond which complies with the terms of this Section. Section 20. Modification. The City and the Franchisee hereby reserve the right to alter, amend or modify the terms and conditions of this Franchise upon the written agreement of both parties to such alteration, amendment or modification. Said modifications shall be approved by 12 v the City by ordinance and accepted by the Franchisee consistent with Section 31 (Acceptance) hereof. Section 21. Forfeiture and Revocation. A. This Franchise may be terminated for failure by Franchisee to comply with the material provisions hereof and other provisions of the Edmonds Municipal Code. In addition to termination, the City may impose lesser sanctions, including, but not limited to, monetary penalties, for violation of this Franchise in accordance with the terms of the Franchise herein. B. If the City has reason to believe that Franchisee is in violation of this Franchise or other provisions of the Edmonds Municipal Code, the following procedures shall be followed by the City: 1. The City shall provide Franchisee with a detailed written notice, by certified mail, detailing the violation, the steps necessary to cure such violation, and a reasonable time period within which the violation must be cured. Within thirty days (30) thereafter, Franchisee shall respond demonstrating that no violation occurred, that any problem has been corrected, or with a proposal to correct the problem within a specified period of time. 2. Franchisee may request an extension of time to cure an alleged violation if construction is suspended or delayed by the City, or where unusual weather, natural consequences (e.g., earthquakes, floods, etc.), extraordinary acts of third parties, or other circumstances which are reasonably beyond the control of Franchisee delay progress, provided that Franchisee has not, through its own actions or inactions, contributed to the delay. The amount of additional time allowed will be determined by the City. The extension of time in any case shall not be greater than the extent of the actual non-contributory delay experienced by Franchisee. 3. If said response is not satisfactory to City, the City may declare Franchisee to be in default, with written notice, by certified mail, to Franchisee. Within ten business days after notice to Franchisee, Franchisee may deliver to the City a request for a hearing before the City Council. If no such request is received, the City may declare the Franchise terminated for cause or impose lesser sanctions. 4. If Franchisee files a timely written request for a hearing, such hearing shall be held within thirty (30) days after the City's receipt of the request therefor. Such hearing shall be open to the public and Franchisee and other interested parties may offer written and/or oral evidence explaining or mitigating such alleged non-compliance. Within ten days after the hearing, the City Council, on the basis of the record, will make the determination as to whether there is cause for termination, whether the Franchise will be terminated, or whether lesser sanctions should be imposed. The City Council may in its sole discretion fix an additional time period to cure violations. If the deficiency has not been cured at the expiration of any additional time period or if the City Council does not grant any additional period, the City Council may by resolution declare the Franchise to be terminated and forfeited or impose lesser sanctions. 13 5. If Franchisee appeals revocation and termination, such revocation may be held in abeyance pending judicial review by a court of competent jurisdiction, provided the Franchisee is otherwise in compliance with this Franchise. In any such appeal, Franchisee shall be responsible for the costs of preparing and filing the City's administrative record with the Court and such costs shall be paid prior to the City's filing thereof. C. In the event that the City elects to impose monetary penalties upon the Franchisee for failure by to comply with the material provisions of this Franchise, said penalties shall be assessed at five hundred ($500.00) per day, per violation, for each day beyond thirty (30) days that Franchisee has been in violation. D. Monetary penalties may be assessed retroactive to the date that notification was provided to Franchisee in such cases where Franchisee has been non -responsive in correcting the violation or in the case of flagrant violations. If payment of any penalty is delinquent by three (3) months or more, the City may: (1) require partial or total forfeiture of any performance bond or other surety posted by Franchisee; (2) terminate this Franchise; and/or (3) commence a civil action in a court of competent jurisdiction to collect said penalty. E. Franchisee shall not be deemed to be in default, failure, violation, or non- compliance with any provision of this Franchise where performance was rendered impossible due to materially, substantially, and reasonably to an act of God, fire, flood, storm, or other element or casualty, theft, war, disaster, strike, lock -out, boycott, prevailing war or war preparation, or bona fide legal proceedings, beyond the control of Franchisee. Section 22. City Ordinances and Regulations. Nothing herein shall be deemed to direct or restrict the City's ability to adopt and enforce all necessary and appropriate ordinances regulating the performance of the conditions of this Franchise, including any valid ordinance made in the exercise of its police powers in the interest of public safety and for the welfare of the public. The City shall have the authority at all times to control by appropriate regulations the locations, elevation, manner or construction and maintenance of any Facilities by the Franchisee, and the Franchisee shall promptly conform with all such regulations, unless compliance would cause the Franchisee to violate other requirements of the law. Section 23. Survival. All of the provisions, conditions, and requirements of this Franchise shall be in addition to any and all other obligations and liabilities the Franchisee may have to the City at common law, by statute, or by contract. The provisions, conditions, and requirements of Sections 7, Relocation of Facilities; 8, Under rig of Facilities; 10, Work in Public Ways; 11, Restoration after Construction; 13, Dangerous Conditions, Authority for City to Abate, 16, Indemnification and Waiver, 17, Insurance; and 18,Abandonment and Removal of the Franchisee's Facilities, shall survive the expiration or termination of this Franchise, and any renewals or extensions thereof and remain effective until such time as the Franchisee removes its Facilities from the Public Ways, transfers ownership of said Facilities to a third party, or abandons said System in place, all as provided herein. All of the provisions, conditions, regulations and requirements contained in this Franchise shall further be binding upon the heirs, successors, executors, administrators, legal representatives and assigns of the Franchisee and all privileges, as well as all obligations and liabilities of the Franchisee shall inure to its heirs, 14 successors, and assigns equally as if they were specifically mentioned wherever the Franchisee is named herein. Section 24. Seyerability. In any section, sentence, clause, or phrase of this Franchise should be held to be invalid or unconstitutional by a court of competent jurisdiction, such invalidity or unconstitutionality shall not affect the validity or constitutionality of any other section, sentence, clause, or phrase of this Franchise. Section 25. Assignment. This agreement may not be assigned or transferred without prior written notice to the City, except that the Franchisee may freely assign this Franchise without notice in whole or part to a parent, subsidiary, or affiliated corporation or as part of any corporate financing, reorganization or refinancing. In the case of transfer or assignment as security by mortgage or other security instrument in whole or in part to secure indebtedness, such notice shall not be required unless and until the secured party elects to realize upon the collateral. Franchisee may, without the prior written notice to the City: (i) Lease the Facilities, or any portion thereof, to another; (ii) Grant an Indefeasible Right of User Interest in the Facilities, or any portion thereof, to another; or (iii) Offer or provide capacity or bandwidth in its Facilities to another, PROVIDED THAT: Franchisee at all times retains exclusive control over such Facilities and remains responsible for locating, servicing, repairing, relocating or removing its Facilities pursuant to the terms and conditions of this Franchise. Section 26. Notice. Any notice or information required or permitted to be given to the parties under this Franchise may be sent to the following addresses unless otherwise specified: City City of Edmonds City Engineer 121 511' Avenue North Edmonds, WA 98020 Telephone: (425) 771-0220 Franchisee: Astound Broadband, LLC 401 Kirkland Parkplace Suite 500 Kirkland, WA 98033 ATTN: Steve Weed, CEO, and Jim Penney, EVP Telephone: 425-896-1891 Notice shall be deemed given upon receipt in the case of personal delivery, three days after deposit in the United States Mail in the case of regular mail, or the next day in the case of overnight delivery. Section 27. Entire Franchise. This Franchise constitutes the entire understanding and agreement between the parties as to the subject matter herein and no other agreements or understandings, written or otherwise, shall be binding upon the parties upon approval and acceptance of this Franchise. Provided further, that the City and Franchisee reserve all rights they may have under law to the maximum extent possible and neither the City nor Franchisee shall be deemed to have waived any rights they may now have or may acquire in the future by entering into this Franchise. 15 Section 28. Attorne's Bees. If any suit or other action is instituted in connection with any controversy arising under this Franchise, the prevailing party shall be entitled to recover all of its costs and expenses including such sum as the court may judge reasonable for attorney's fees, including fees upon appeal of any judgment or ruling. Section 29. Non -waiver. Failure of the City to declare any such breach or default immediately upon the occurrence thereof, or delay in taking any action in connection therewith, shall not waive such breach or default, but the City shall have the right to declare any such breach or default at any time. Failure of the City to declare one breach or default does not act as a waiver of the City's right to declare another breach or default. Section 30. Governing Law/Venue. This Franchise shall be governed by and construed in accordance with the laws of the state of Washington. The venue and jurisdiction over any dispute related to this Franchise shall be with the Snohomish County Superior Court, or, with respect to any federal question, with the United States District Court for the Western District of Washington, at Seattle. Section 31. Acceptance. Within 60 days after the passage and approval of this ordinance, this Franchise shall be accepted by Franchisee by its filing with the City Clerk an unconditional written acceptance thereof. Failure of the Franchisee to so accept this Franchise within said period of time shall be deemed a rejection thereof, and the rights and privileges herein granted shall, after the expiration of the 60 day period, absolutely cease and determine, unless the time period is extended by ordinance duly passed for that purpose. Section 32. Effective Date. This ordinance, being an exercise of a power specifically delegated to the City legislative body, is not subject to referendum, and shall take effect 5 days after the passage and publication of an approved summary thereof consisting of the title. Section 33. Repealer. Ordinance No. 3371, An Ordinance granting an Open Video Franchise to Black Rock Cable, Inc. is hereby repealed and that franchise terminated upon the Effective Date. C OF EDMONDS MAYOR, DAVID O. EARLING ATTEST/AUTHENTICATED: .9d CITY CLERK SANDRA S. CHASE 16 APPROVED AS TO FROM: OFFICE OF THE Cl Y ATTORNEY: By: 3EFF AY FILED WITH THE CITY CLERK: 02-15-2013 PASSED BY THE CITY COUNCIL: 02-19-2013 PUBLISHED: 02-24-2013 EFFECTIVE DATE: 03-01-2013 ORDINANCE NO.: 3911 17 SUMMARY OF ORDINANCE NO.3911 of the City of Edmonds, Washington On the 19th day of February, 2013, the City Council of the City of Edmonds, passed Ordinance No. 3911. A summary of the content of said ordinance, consisting of the title, provides as follows: AN ORDINANCE OF THE CITY OF EDMONDS, WASHINGTON, GRANTING TO ASTOUND BROADBAND, LLC, A NON-EXCLUSIVE FRANCHISE TO INSTALL, OPERATE, AND MAINTAIN A FIBER OPTIC TELECOMMUNICATIONS SYSTEM IN, ON, OVER, UPON, ALONG, AND ACROSS THE PUBLIC RIGHTS -OF -WAY OF THE CITY OF EDMONDS, WASHINGTON, PRESCRIBING CERTAIN RIGHTS, DUTIES, TERMS, AND CONDITIONS WITH RESPECT THERETO, ESTABLISHING AN EFFECTIVE DATE, AND REPEALING ORDINANCE NO. 3371. The full text of this Ordinance will be mailed upon request. DATED this 20th day of February, 2013. City Clerk, Sandra S. Chase 18 LM Dav[sWright n Tremalne LLP October 4, 2013 VIA U.S. MAIL Jeff Taraday, City Attorney City of Edmonds 151 Fifth Avenue N Edmonds, WA 98020 RECEIVED OCT 0 9 2013 EDMONDS CITY CLERK Suite 2400 1300 SW Fifth Avenue Portland, OR 97201-5630 Alan J. Galloway 503.778.5219 tel 503.778.5299 fax alangalloway@dwt.com Re: Corrections to Ordinance No. 3911 — Franchise for Astound Broadband LLC Dear Mr. Taraday: I am writing on behalf of my client Astound Broadband LLC ("Astound"). Astound has identified minor errors in Ordinance No. 3911, effective March 31, 2013, which granted a franchise for a telecommunications system to Astound and repealed Ordinance No. 3371. Ordinance No. 3371 had granted an open video system franchise to Black Rock Cable, Inc. ("Black Rock"), which was acquired by Astound's parent company, WaveDivision Holdings, LLC, in January 2013. WDH Black Rock is now a subsidiary of Astound. While it is evident that the City and Astound had the same intent with respect to Ordinance No. 3911, Section 15 of the ordinance inadvertently cites a Washington statute incorrectly. That section, as enacted, reads: Section 15. Consideration. Pursuant to RCW 35.21.860, the City is precluded from imposing a fee on a "telephone business" as defined in RCVS.' 82.04.065, except for certain authorized costs and expenses or any applicable tax authorized by RCW 35.21.865. This Franchise is premised upon the City and Franchisee's understanding that the activities proposed by the Franchisee constitute a "telephone business." As such, the rights granted under this Franchise are not conditioned upon payment of compensation in addition to reimbursement for costs and expenses as set forth in Section 14 (Recovery of Costs) herein, payment of the cost recovery fees as set forth by the City and payment of any applicable local utility tax applicable to Franchisee's operations. The City hereby reserves its right to impose a fee on the Franchisee, to the extent authorized by law, for purposes other than to recover its administrative expenses, if the Franchisee's operations are not those of a "telephone business" as defined in RCW 82.04.065, if the Franchisee's operations are now those of a telephone business and change in the future, or if statutory prohibitions DWT 22710141v2 0085000-001523 Anchorage I New York I Seattle ESellm+Ue 1 Portland Shanghai Los Angeles San Francisco Washington, D.C. www.dwt.com Jeff Taraday, City Attorney City of Edmonds October 4, 2013 Page 2 on the imposition of such fees are removed. The City also reserves its right to require that the Franchisee obtain a separate agreement for its change in use, which agreement may include provisions intended to regulate the Franchisee's operations, as allowed under applicable law. (Emphasis added.) From the forgoing it is clear that both the City and Astound recognized that RCW 35.21.860 limits fees upon a "telephone business" as that phrase is used in RCW 35.21.860, and intended to utilize the definition "telephone business" consistent with RCW 35.21.860. However, the two references to RCW 82.04.065 are erroneous and fail to capture that intent. The statute limiting franchise fees, RCW 35.21.860, expressly references a definition of "telephone business" in RCW 82.16.010, not RCW 82.04.065. RCW 82.04.065, the statute cited in the ordinance, contains no definition of "telephone business." RCW 82.16.010, in contrast, defines "telephone business" as follows: (iii) "Telephone business" means the business of providing network telephone service. It includes cooperative or farmer line telephone companies or associations operating an exchange. And the definition of "network telephone service," also in RCW 82.16.010, is as follows: (ii) "Network telephone service" means the providing by any person of access to a telephone network, telephone network switching service, toll service, or coin telephone services, or the providing of telephonic, video, data, or similar communication or transmission for hire, via a telephone network; toll line or channel, cable, microwave, or similar communication or transmission system. "Network telephone service" includes the provision of transmission to and from the site of an internet provider via a telephone network, toll line or channel, cable, microwave, or similar communication or transmission system. "Network telephone service" does not include the providing of competitive telephone service, the providing of cable television service, the providing of broadcast services by radio or television stations, nor the provision of internet access as defined in RCW 82.04.297, including the reception of dial -in connection, provided at the site of the internet service provider. The preceding definition is also similar to the definition of "telephone business" in Edmonds Municipal Code § 3.20.020(G). Although I believe the intent to use the RCW 82.16.010 definition is reasonably clear from language of Ordinance No. 3911 itself, I would appreciate it if the City would confirm that the intent of the City was to reference the definition of "telephone business" in RCW 82.16.010 and that both parties agree that Astound will pay the utility tax rate established in Edmonds DWT 22710141v2 0085000-001523 Jeff Taraday, City Attorney City of Edmonds October 4, 2013 Page 3 Municipal Code § 3.20.050(D) on its gross income from use of its telecommunications facilities to the same extent that Black Rock formerly paid its franchise fee under the prior ordinance. I would appreciate it if you would confirm that at your earliest convenience. In addition, please do not hesitate to contact me if you have any questions as to this matter. I look forward to hearing from you soon. Very truly yours, Davis Wright Tremaine LLP Alan J. G lo�vay AJG/cap cc: Jim Penney DWT 22710141v2 0085000-001523 vftmg;4 (jL)AVEO DIVISION HOLDINGS (O"E, BUSINESS ae .l lnfe-1ph— BROADBAND SOLUTIONS astound Via FedEx April 16, 2013 City of Edmonds Attn: City Clerk First Floor City Hall 121 Fifth Avenue North Edmonds, WA 98020 RECEIVED APR 17 2013 EDMONDS CITY CLERK Re: Unconditional Written Acceptance of City of Edmonds, Washington (the "LLty") Ordinance No. 3911 by Astound Broadband, LLC ("Astound'), (the "Acceptance') Dear Sir or Madam: Enclosed with this letter is the original, fully executed Acceptance, which is hereby filed with the City Clerk on behalf of Astound, pursuant to Section 31 of City Ordinance No. 3911. Please do not hesitate to contact me should you have any questions, I can be reached by email at dvonmoritz@wavebroadband.com or by telephone at 425-896-1868. Very Truly Yours David von Moritz Lf Legal Assistant Enclosure Cc: James A. Penney, Executive Vice President, Astound Broadband, LLC N N O I` L[i N L- C) O N O rl- Lq LO N V co M O co a Y ACCEPTANCE OF ORDINANCE NO. 3911 WHEREAS, the City granted an open video system franchise to Black Rock Cable, Inc. ("Black Rock") through the enactment of Ordinance No. 3371, which was accepted by Black Rock; and WHEREAS, the term of the Black Rock open video system franchise had expired on April 26, 2011 and had not been renewed; and WHEREAS, WaveDivision Holdings, LLC ("Wave") acquired Black Rock in 2012; and WHEREAS, Black Rock never provided cable service in the City and Wave did not intend to provide cable service in the City, but did intend on providing telecommunications services through a subsidiary; and WHEREAS, Wave requested that the City grant a telecommunications franchise to Astound Broadband, LLC ("Astound"), a wholly -owned subsidiary of Wave, to provide telecommunications service in the City; and WHEREAS, Astound submitted an application for a telecommunications franchise, which was reviewed by City staff, WHEREAS, representatives of Astound and the City negotiated a telecommunications franchise agreement (the "Franchise"); and WHEREAS, the City conditionally approved the Franchise to Astound through the enactment of Ordinance No. 3911 on February 19, 2013 and effective on March 1, 2013; and WHEREAS, Ordinance No. 3911 also repealed Ordinance No. 3371 and terminated the open video system franchise granted to Black Rock. WHEREAS, Ordinance No. 3911 requires that Astound comply with Section 31 of the Franchise by filing with the City Clerk an unconditional written acceptance of the Franchise. NOW, THEREFORE, Astound and its successors, heirs, assigns and transferees desires to accept, be bound by and to faithfully observe all of the lawful terms and conditions set forth in the Franchise and Ordinance No. 3911. By executing this Acceptance, Astound and its successors, heirs, assigns and transferees make the following representations, agreements, warranties and guarantees to the City: 1. Astound, its successors, heirs, assigns and transferees desires to accept, be bound by and to faithfully observe or guarantee all of the terms and conditions set forth in in the Franchise and Ordinance No. 3911. r� 2. Astound agrees that it has undertaken to be bound by all surviving lawful commitments and agreements previously made to the City by Black Rock, its subsidiaries or predecessors. 3. Astound, its successors, heirs, assigns and transferees agree that all agreements, representations, guaranties and warranties set forth herein shall be binding upon any subsequent successors, heirs, assigns and transferees, if any. 4. Astound, its successors, heirs, assigns and transferees each acknowledge that they are subject to the City's right to exercise its lawful police power, subject to the provisions of Edmonds City Code. 5. Astound, its successors, heirs, assigns and transferees agree that they will fully comply with all lawful bonding, insurance and letter of credit requirements in the Franchise. 6. Wave agrees and consents to the termination of the Black Rock open video system franchise, Ordinance No. 3371. 7. This Acceptance shall be read in conjunction with, but not amend or supersede any provisions set forth in the Franchise. Dated: APEA Dated: 2 ASTOUND BROADBAND, LLC WAVEDIVISION HOLDINGS, LLC . # .- . . .,* , I - I . SUMMARY OF ORDINANCE NO.3371 of the City of Edmonds, Washington On the 31st day of July, 2001, the City Council of the City of Edmonds, passed Ordinance No. 3371. A summary of the content of said ordinance, consisting of the title, provides as follows: AN ORDINANCE OF THE CITY OF EDMONDS, WASHINGTON, GRANTING A NON-EXCLUSIVE FRANCHISE TO BLACK ROCK CABLE, INC. TO OPERATE AND MAINTAIN AN OPEN VIDEO SYSTEM IN THE CITY OF EDMONDS, SETTING FORTH THE TERMS AND CONDITIONS ACCOMPANYING THE GRANT OF FRANCHISE AND FIXING A TIME WHEN THE SAME SHALL BECOME EFFECTIVE. The full text of this Ordinance will be mailed upon request. DATED this 1st day of August, 2001_ CITY CLERK, SANDRA S. CHASE {RJM438278.DOC;1100006.080042/)- 32 - w.eIvE BLACK ROCK CABLE auslNEss (t)(ILVE, FIBER -BASED COMMUNICATION DIVISION HOLDINGS astound SERVICES AND SOLUTIONS Via Overnight Delivery September 28, 2012 City of Edmonds 121 Fifth Avenue North Edmonds, WA 98020 Re: Black Rock Cable, Inc. I WaveDivision Hol_dings,_LLC OVS Franchise Dear Sir or Madam: Following up on our letter of September 24, 2012, we want to provide you with some additional information regarding our planned acquisition of Black Rock. On September 20, 2012, we entered into a definitive merger agreement to acquire Black Rock. The definitive agreement was entered into on behalf of WaveDivision Holdings, LLC ("Wave") by OH WDH Holdco, LLC ("Holdco"). As a result of the transaction, Black Rock's operations will be owned by Wave through its wholly -owned subsidiary Astound Broadband, LLC ("Astound"). The following briefly describes each of Wave, Holdco and Astound: • Wave provides cable television, broadband and telephone services under the trade name Wave Broadband in Skagit County, Snohomish County, Whatcom County and many other areas in Washington. s Holdco is affiliated with Oak Hill Capital Partners and GI Partners, two leading private equity firms with longstanding cable and IT infrastructure expertise. In a separate transaction that is scheduled to close in early October 2012, Holdco will become the parent company of Wave. Astound is a wholly -owned subsidiary of Wave that is registered with the Washington Transportation and Utilities Commission as a competitive telecommunications company and operates as Competitive Local Exchange Carrier. Attached are an original and two copies of a completed and signed Federal Communications Commission Form 394 "Application for Franchise Authority Consent to Assignment or Transfer of Control of Cable Television Franchise," together with the exhibits thereto. Please note that certain of the schedules to the merger agreement contain proprietary and confidential information, such as customer names and payment amounts, and therefore have been redacted in their entirety. We believe the materials provided clearly establish that Wave satisfies the requisite legal, technical and financial qualifications outlined under applicable federal and local law and under the franchise, and that these materials furnish you with all the information necessary to make a prompt and conclusive determination on our request for consent. The FCC Form 394 submission materials {02110954.D0C;1 } will be deemed filed with you on receipt of this letter on October 1, 2012, which will be the start date for consideration of this request pursuant to 47 CFR §76.502. The definitive merger agreement contemplates two alternative transaction structures. The final transaction structure will depend on the outcome of a pending request for a tax ruling by the Washington Department of Revenue, and we expect to make the final structure determination immediately prior to closing. Regardless of the ultimate structure of the transaction, the franchise holder will be an entity that is indirectly wholly -owned by Wave. The following is a brief description of the two transaction structures, which are described in greater detail in the Form 394: • Alternative 1 (Change of Control) — Astound will form a new wholly -owned corporate subsidiary, which will merge with and into Black Rock, with Black Rock Cable, Inc. as the surviving entity in the merger. If the merger is accomplished in this manner there will be no transfer or assignment of the franchise held by Black Rock Cable, Inc. and the parties' request for consent under the FCC Form 394 submission will be in respect of a change of control of Black Rock Cable, Inc. + Alternative 2 (Assignment of Franchise) — Astound will form a new wholly -owned limited liability company subsidiary ("LLC"), which Black Rock will merge with and into, with the LLC as the surviving entity in the merger. If the merger is accomplished in this manner there will be a transfer and assignment of the franchise held by Black Rock Cable, Inc. and the parties' request for consent under the FCC Form 394 submission will be in respect of a transfer and assignment of the franchise from Black Rock Cable, Inc. to the LLC. As you are aware, Black Rock's franchise with the City has expired and Black Rock recently filed a request for renewal of the franchise. We request that you continue to process the renewal. And, in connection with the renewal we also request your consent to the change of ownership of Black Rock and, depending on the final determination of the transaction structure, a related change in the franchise holder. Because the transaction must close no later than November 30, 2012, we look forward to working with you to obtain swift approval of our request for the City's consent. A proposed form of consent will be submitted shortly. Please do not hesitate to contact us if you have any questions. Very Truly Yours, Black Rock Cable, Inc. By: Robert Warshawer Title: President {02110954.DOC;1 } WaveDivision Holdings, LLC By:� Jam s A. Penney s Title: Executive Vice President Federal Communications Commission Washington, D.C, 20554 FCC 394 APPLICATION FOR FRANCHISE AUTHORITY CONSENT TO ASSIGNMENT OR TRANSFER OF CONTROL OF CABLE TELEVISION FRANCHISE FCC Form 394 September 28, 2012 City of Edmonds, Washington Approved by OMB 3060-0573 FOR FRANCHISE AUTHORITY USE ONLY SECTION I. GENERAL INFORMATION DATE 1. Community Unit Identification Number. September 28, 2012 N/A 2. Application for: IN Assignment of Franchise 0 Transfer of Control 3. Franchising authority: City of Edmonds 4. Identity community where the systemlfranchise that is the subject of the assignment or transfer of controi Is located: Snohomish County, Washington 5. Date system was acquired or (for system's constructed by the transteror/assignor) the date on which September 4, 2001 service was provided to the first subscriber in the franchise area: 6. Proposed effective date of closing of the transaction assigning or transferring ownership of the November 30, 2012 system to transferee/asslgnee: 7 Attach as an Exhibit a schedule of any and all additional information or material filed with this application that is identified Exhibit No. in the franchise as required to be provided to the franchising authority when requesting Its approval of the type of N/A transaction that is the subject of this application. PARTI- TRANSFEROR/ASSIGNOR 1. II IM I{.O.G {I 1. 1....... 1 - - - -' - Legal name of Transferor[Assignor (if individual, list last name first) Black Rock Cable, Inc. Assumed name used for doing business (if any) Black Rock Cable Mailing street address or P.O. Box 1512 Fairview Avenue City State ZIP Code Telephone No. (include area code) Bellingham WA 98229 360-738-3116 2.(a) Attach as an Exhibit a copy of the contract or agreement that provides for the assignment or transfer of control (including any exhibits or schedules thereto necessary in order to understand the terms thereof). If there is only an oral agreement, reduce the terms to writing and attach. (Confidential trade, business, pricing, or marketing information, or other information not otherwise publicly available, may be redacted.) FiT�] (b) Does the contract submitted in response to (a) above embody the full and complete agreement between the transferor/assignor and transferee/assignee? ❑X Yes ❑ No If No, explain In an Exhibit. Exhibit No. N/A FCC 394 Master September 1996 Page 1 FCC Form 394 September 28, 2012 City of Edmonds, Washington PART II - TRANSFEREE/ASSIGNEE s ?. % 1 Aie 6tim�d;nn erlrirncv and ralanhnna mJrnhpr ^Ffha 1rancfPrnA1atsl0nea ,. 1-1 ,.zi .........._,.._. _— .._.._.- -- -- - Legal name of Transferee/Assignee (if individual, list last name first) 1 Black Rock Cable, Inc.* or 2 WDH Black Rock, LLC* Assumed name used for doing business (if any) Black Rock Mailing street address or P.O. Box 401 Kirkland Park face, Suite 500 City State IiP Code Telephone No. (include area code) Kirkland WA 98033 425-576-8200 *Note: The definitive agreement set forth in Exhibit 1 contemplates that the merger will be accomplished by one of two alternative transaction structures, with the final structure to be determined immediately prior to closing. The final transaction structure will depend on the outcome of a pending request for a tax ruling by the Washington Department of Revenue. The following is a brief description of the two alternative structures to the transaction, as described in greater detail in Exhibit 1: ■ Alternative 1 (Change_ of Control) — WaveDivision Holdings, LLC will form a new corporate subsidiary (WDH Black Rock Merger Sub, Inc.), which will merge with and into Black Rock Cable, Inc., with Black Rock Cable, Inc. as the surviving entity in the merger. If the merger is accomplished in this manner there will be no transfer or assignment of the franchise held by Black Rock Cable, Inc. and the parties' request for consent under this FCC Form 394 submission will be in respect of a change of control of Black Rock Cable, Inc. • Alternative 2 (Assignment of Franchise — WaveDivision Holdings, LLC will form a new limited liability company subsidiary (WDH Black Rock, LLC). Black Rock Cable, Inc. will merge with and into WDH Black Rock, LLC, with WDH Black Rock, LLC as the surviving entity in the merger. If the merger is accomplished in this manner there will be a transfer and assignment of the franchise held by Black Rock Cable, Inc. to WDH Black Rock, LLC, and the parties' request for consent under this FCC Form 394 submission will be in respect of a transfer and assignment of the franchise from Black Rock Cable, Inc. to WDH Black Rock, LLC. !hl Inrllna+a the name mailinn address anti rolanhrop. numhPr of the person to contact. if other than the translereerassirinee .. ... „v......._..... _-- ---• - _ _ .._.._ .._...__. _. _.._ Name of contact person (list last name first) Penney, James A. Firm or company name (if any) WaveDivision Holdings, LLC Mailing street address or P.O. Box 401 Kirkland Place, Suite 500 Cily State I ZIP Code Telephone No. (include area code) Kirkland WA 98033 425-896-1891 (c) Attach as an Exhibit the name, mailing address, and telephone number of each additional person Exhibit No. who should be contacted, if any, 2 (d) Indicate the address where the system's records will be maintained. Street address 401 Kirkland Place, Suite 500 City State ZIP Code Kirkland WA i 98033 FCC 394 September 1996 Page 2 2. Indicate on an attached Exhibit any plans to change the current terms and conditions of service and operations of the system as a conseouence of the transaction for which approval is sought. SECTION II. TRANSFEREE'S/ASSIGNEE'S LEGAL QUALIFICATIONS 1. Transferee/Assignee is: F-1 Corporation 1iLimited Partnership FCC Form 394 September 28, 2012 City of Edmonds, Washington Exhibit No. ::] a. Jurisdiction of incorporation: d. Name and address of registered agent in jurisdiction b. Date of incorporation: c. For profit or non -for -profit: a. Jurisdiction in which formed: c. Name and address of registered agent in jurisdiction: b: Date of formation: General Partnership a. Jurisdiction b. whose laws govern formation: Date of formation; ❑ Individual Other - Describe in an exhibit Exhibit No. 4 2. List the transferee/assignee, and, if the transferee/asslgnee is not a natural person, each of its officers, directors, stockholders beneficially holding more than 5% of the outstanding voting shares, general partners, and Ilmlted partners holding an equity interest of more than 5%. Use only one column for each individual or entity. Attach additional pages if necessary. (Read carefully - the lettered items below refer to corresponding lines in the following table.) (a) Name, residence, occupation or principal business, and principal place of business. (If other than an individual, also show name, address and citizenship of natural person authorized to vote the voting securities of the applicant that it holds.) List the applicant first, officers next, then directors and, thereafter, remaining stockholders and/or partners. (b) Citizenship. (c) Relationship to the transferee/assignee (e.g,, officer, director, etc.) (d) Number of shares or nature of partnership interest. (a) Number of votes. (f) Percentage of votes. Please see Exhibit 5 FCC 394 September 1996 Page 3 FCC Form 394 September 28, 2012 City of Edmonds, Washington 3. If the applicant is a corporation or a limited partnership, Is the transferee/assignee formed under the laws of, or duly qualified to transact business in, the State or other Jurisdiction In which the system operates? 0 Yes ❑ No If the answer is No, explain in an Exhibit. Exhibit No. 11 5 4. Has the transferee/assignee had any interest in or in connection with an application which has been dismissed or denied by any franchise authority? ❑Yes 0 No If the answer is Yes, describe circumstances in an Exhibit. Exhibit No. N/A 5. Has an adverse finding been made or an adverse final action been taken by any court or administrative body with respect to the transferee/assignee In a civil, criminal or administrative proceeding, brought under the provisions of any law or regulation related to the following: any felony; revocation, suspension or involuntary transfer of any authority (including cable franchises) to provide video programming services; mass media related antitrust or unfair competition; fraudulent statements to another governmental unit; or employment discrimination? ❑ Yes 0 No If the answer is Yes, attach as an Exhibit a full description of the persons and matter(s) involved, including an identification of any court or administrative body and any proceeding (by dates and file numbers, if applicable), and Exhibit No. the disposition of such proceeding. N/A 6 Are there any documents, instruments, contracts or understandings relating to ownership or future ownership rights with respect to any attributable interest as described in Question 2 (including, but not limited to, non -voting stock interests, beneficial stock ownership interests, options, warrants, debentures)? Q Yes ❑ No If Yes, provide particulars in an Exhibit. Exhibit No. S Do documents, instruments, agreements or understandings for the pledge of stock of the transferee/assignee, as security for loans or contractual performance, provide that: (a) voting rights will remain with the applicant, even in the event of default on the obligation; (b) In the event of default, there will be either a private or public sale of the stock; and (c) prior to the exercise of any ownership rights by a purchaser at a sale described in (b), any prior consent of the FCC and/or of the franchising authority, if required pursuant to federal, state or local law or pursuant to the terms of the franchise agreement will be obtained? Yes ❑ No If No, attach as an Exhibit a full explanation. Exhibit No. N/A SECTION III - TRANSFEREE'S/ASSIGNEE'S FINANCIAL QUALIFICATIONS +. The transferee/assignee certifies that it has sufficient net liquid assets on hand or available from committed resources to consummate the transaction and operate the facilities for three months. ❑x Yes ❑ No 2. Attach as an Exhibit the most recent financial statements, prepared in accordance with generally accepted accounting principles, including a balance sheet and income statement for at least one full year, for the transferee/assignee or parent entity that has been prepared in the ordinary course of business, if any such financial statements are routinely prepared. Such statements, if not otherwise publicly available, may be marked CONFIDENTIAL and will be maintained as confidential by the franchise authority and its agents to the extent permissible under local law. Exhibit No. 7 FCC 394 September 1996 Page 4 FCC Form 394 September 28, 2012 City of Edmonds, Washington SECTION IV - TRANSFEREE'S/ASSIGNEE'S TECHNICAL QUALIFICATIONS Set forth in an Exhibit a narrative account of the transferee's/assignee's technical qualifications, experience and expertise regarding cable television systems, Including, but not limited to, summary Information about appropriate management personnel that will be involved in the system's management and operations. The transfereefasslgnee may, but need not, list a representative sample of cable systems currently or formerly owned or operated. Exhibit No. 8 SECTION V - CERTIFICATIONS PART 1 - Transferor/Assignor All the statements made in the application and attached Exhibits are considered material representations, and all the Exhibits are a material part hereof and are incorporated herein as if set out in full in the application. I CERTIFY that the statements In this application are true, complete Signature i and correct to the best of my knowledge and belief and are made in good faith. s _ WILLFUL FALSE STATEMENTS MADE ON THIS FORM ARE Date PUNISHABLE BY FINE AND/OR IMPRISONMENT. U.S. CODE, TITLE September 28, 2012 18, SECTION 1001. Print full name By: Robert Warshawer Check appropriate classification: ❑ Individual ❑ General Partner PART II - Transferee/Assignee ® Officer ❑ Other. Explain: President All the statements made in the application and attached Exhibits are considered material representations, and all the Exhibits are a material part hereof and are incorporated herein as if set out in full in the application. The transferee/assignee certified that he/she: (a) Has a current copy of the FCC's Rules governing cable television systems. (b) Has a current copy of the franchise that is the subject of this application, and of any applicable state laws or local ordinances and related regulations. (c) Will use its best efforts to comply with the terns of the franchise and applicable state laws or local ordinances and related regulations, and to effect changes, as promptly as practicable, in the operation of the system, if any changes are necessary to cure any violations thereof or defaults thereunder presently in effect or ongoing. i CERTIFY that the statements in this application are true, complete Signature and correct to the best of my knowledge and belief and are made in good faith. WILLFUL FALSE STATEMENTS MADE ON THIS FORM ARE Date PUNISHABLE BY FINE AND/OR IMPRISONMENT. U.S. CODE, TITLE 18, SECTION 1001. Prini By: appropriate classification: ❑ Individual ❑ General Partner FCC 394 Page 5 September 28, 2012 name James A. Penney ® Officer ❑ Other. Explain: Executive Vice President September 1996 EXHIBITS to FCC Form 394 Exhibit 1 Section 1, Part 1, Item 2tal Copy of Contract or Agreement providing for the Change of Control Merner Agreement Attached is a copy of the Agreement and Plan of Merger (the "Merger Agreement"), dated as of September 20, 2012, by and among Black Rock Cable, Inc., a Nevada corporation (referred to in the Merger Agreement as the "Company'), OH WDH Holdco, LLC, a Delaware limited liability company (referred to in the Merger Agreement as the "Parent'), Robert Warshawer, an individual and principal of the Company (referred to in the Merger Agreement as the `Principal') and Brad Kollmyer, an individual and greater than 10% shareholder of the Company (referred to in the Merger Agreement together with Principal, as the "Principal Shareholders'), together with all of the Exhibits and Schedules thereto as of the signing date. Please note certain confidential and proprietary information of the parties has been redacted in the attached copy of the Merger Agreement and the Schedules thereto. Black Rock Cable, Inc. will be providing updated Schedules to OH WDH Holdco, LLC in accordance with the terms of the Merger Agreement. The updated Schedules are not material to the structure of the transaction described in this Form 394, and copies of the updated Schedules will not be provided as part of this Form 394, unless specifically requested in writing. Any such updated Schedules will be redacted for confidential and proprietary information. Transaction Structure Under the terms of the Merger Agreement, the merger will be accomplished by one of two alternative transaction structures. The final transaction structure will depend on the outcome of a pending request for a tax ruling by the Washington Department of Revenue and we expect to make the structure determination immediately prior to closing. The following is a description of the two alternative structures for the transaction: • Alternative 1 (Change of Control — WDH Black Rock Merger Sub, Inc. (a newly formed, wholly -owned corporate subsidiary of Astound Broadband, LLC) will merge with and into Black Rock Cable, Inc. As a result of this merger, the separate corporate existence of WDH Black Rock Merger Sub, Inc. will cease and Black Rock Cable, Inc. will be the surviving entity in the merger. If the merger is accomplished in this manner there will be no transfer or assignment of the franchise held by Black Rock Cable, Inc. and the parties' request for consent under this FCC Form 394 submission will be in respect of a change of control of Black Rock Cable, Inc. • Alternative 2 (Assignment of Franchise) — WDH Black Rock, LLC (a newly formed, wholly -awned limited liability company subsidiary of Astound Broadband, LLC) will merge with Black Rock Cable, Inc. As a result of this merger, the separate corporate existence of Black Rock Cable, Inc. will cease and WDH Black Rock, LLC will be the surviving entity in the merger. If the merger is accomplished in this manner there will be a transfer and assignment of the franchise held by Black Rock Cable, Inc. to WDH Black Rock, LLC, and the parties' request for consent under this FCC Form 394 submission will be in respect of a transfer and assignment of the franchise from Black Rock Cable, Inc. to WDH Black Rock, LLC. r: EXHIBITS to FCC Form 394 Pro Forma Ownershi As described in Exhibit 6, OH WDH Holdco, LLC will acquire ownership of WaveDivision Holdings, LLC in a transaction that is expected to close on or about October 12, 2012 (the "OH Closing"). As a result of that transaction, OH WDH Holdco, LLC will be the direct parent and owner of 100% of the membership interests of WaveDivision Holdings, LLC. Under the terms of the Merger Agreement, all rights of OH WDH Holdco, LLC will be assigned to and assumed by Astound Broadband, LLC, a wholly -owned subsidiary of WaveDivision Holdings, LLC. Astound Broadband, LLC is a Washington limited liability company and is registered with the Washington Transportation and Utilities Commission as a competitive telecommunications company. A copy of the registration of Astound Broadband, LLC, issued under Docket Number UT-090160 on February 28, 2009, is attached as Exhibit 1-A. Attached as Exhibit 1-13 is an organization chart that shows the pro forma structure of WaveDivision Holdings, LLC and its affiliates, after giving effect to the acquisition of Black Rock and the OH Closing: Management of Black Rock Following completion of the merger, all of the current members of the management team of Black Rock Cable, Inc. (other than Bob Warshawer, the current president and principal shareholder of Black Rock Cable, Inc.) are expected to continue to be involved in the management of the business of Black Rock. EXHIBITS to FCC Form 394 EXHIBIT 1 Section I, Part I, Item 2(a) Merger A reement AGREEMENT AND PLAN OF MERGER among BLACK ROCK CABLE, INC. and OH WDH HOLDCO, LLC and THE PRINCIPAL SHAREHOLDERS dated as of September 20, 2012 m447b2-1821174Am TABLE OF CONTENTS PM ARTICLE. I THE MERGER. ................................................:................................ I Section1.01. The Merger...................................................................................................... .1 Section 1.02 Closing............................................................. ....................... ....................4........2 Section1.03 Effective Time ............................. .................................. ...................... ........,.....,....,2 Section 1.04 Effects of the Merger............................................................................................2 Section 1.05 Certificate of Incorporation; By -taws .................. ............ ....... ....2 Section 1,06 Directors and Officers-........................................................... ..................,..........3 Section 1.07 Merger Approvals... ..... .............. ................................ 4 ................. 4 ....................... 3 ARTICLE 11 EFFECT OF THE; MERGER ON CAPITAL STOCK...........................................4 Section 2,01 Merger Consideration..,..,..................................................,.................,,,...„......4 Section 2.02 Payment Procedures............................................................................................. 5 Section2.03 Escrow Account._........ .....................................................................................6 Section 2.04 Purchase Price Adjustments.................................................................................7 Section 2.05 Indemnification................................................................................................... I 1 Section 2.06 Shareholders Agent, ........ ...............................................................................13 Section2.07 TaxWithholding_..............................................................................................15 Section 2,08 Tax Structure.; Allocations,.........................,.......,............,..................................15 Section 2,09 Post -Closing Payments to Shareholders..... ......... .............................................. 16 ARTICLE III REPRESENTATIONS AND WARRANTIES OF T RE COMPANY ............... 16 Section 3.01 Organization; Standing and Power; Charter Documents, Minutes; Subsidiaries.......... ...... ........... ......... ............................. ::............ .......................... 16 Section3.02 Capital Structure..... .... ........ I ......... I .......... p ....... ;.o:...... :......... ................... 17 Section 3.03 Authority; Non -contravention; Third Party and Govemmental Consents.,.....,.. 19 Section 3.04 Financial Statements; Receivables; 1.,iabilities...................................................19 Section 3.05 Absence of Certain Changes or Events ..............................................................20 Section3.06 Taxes..................................................................................................................20 Section3,07 intellectual Property ......................... ....,............ ,....... ....................... ............. ..... 22 1 m44762-1821124.doc Section 3,08 Compliance; Permits...........................................................................................24 Section3.09 Litigation...........................................................................................................25 Section 3.10 Brokers' and Finders' Fees..................................................................................25 Section 3.11 Related Party Transactions.................................................................................25 Section3.12 Employee Matters...............................................................................................25 Section 3.13 Real Property and Personal Property Matters.....................................................29 Section 3.14 ]Environmental Matters., ..................................................................................... 30 Section3,15 Material Contracts..............................................................................................30 Section3.16 Franchises........................................................................................................... 32 Section 3.17 Bonds; Letters of Credit.....................................................................................33 Section 3.18 Accuracy of Statements ............... __.................................. .:..................... .......... 33 ARTICLE IV REPRESENTATIONS AND WARRANTIES OF PARENT ............................33 Section4,01 Organization.......................................................................................................33 Section 4.02 Authority; Non -contravention; Third Party and Governmental Consents,...... .... 33 Section 4.03 Financial Capability. ................................ ........................................ ........ ........ 34 Section4.04 Legal Proceedings...............................................................................................34 ARTICLEV COVENANTS..................................................................................................34 Section 5.01 Conduct of Business of the Company................................................................34 Section5,02 Other Actions...................................................................................................37 Section 5.03 Access to Information; Confidentiality.................,.........,..................................37 Section5.04 Net Solicitation,..................................................................................................38 Section 5.05 Notices of Certain Events .............. ........................ ....................................... ......39 Section5,06 Employees ............ ............................ ................................................................. 39 Section 5.07 Directors' and Officers" Indemnification and Insurance....................................39 Section 5,08 Reasonable Best Efforts......................................................................................40 Section 5.09 Public Announcements....................................................................................42 Section 5.10 Franchise Consents.............................................................................................42 Section5,11 Further Assurances ....... ......... ............ ........... ........ ........................ :..................... 43 Section5.12 Additional Covenants.........................................................................................43 Section 5.13 Non -Competition Agreement ..............................:.... ii m44762-1821124AC Section 5,14 Company Disclosure Schedules ............................,.......,...................................43 ARTICLEVI CONDITIONS.....................................................................................................44 Section 6.01 Conditions to Each Party's Obligation to Effect the Merger..............................44 Section 6.02 Conditions to Obligations of Parent and Merger Sub ....................... :,............. .44 Section 6.03 Conditions to Obligation of the Company-- ................................ -...# .............. 45 ARTICLE VII TERMINATION, AMENDMENT AND WAIVER.........................................45 Section 7,01 Termination by Mutual Consent........................................................................45 Section 7.02 Termination by Either Parent or the Company— ........................ kq ............... ...... 45 Section 7,03 'Termination by Parent........................................................................................46 Section 7.04 Termination by the Company .... ....................... ............ ............. :..:.... :..:.............. A6 Section 7.05 Notice of Termination; Effect of Termination .............................................,.... 46 Section 7.06 Termination. Fee; Expenses Following Termination ... ........ :........................... .,.47 Section7,07 Amendment..................................................................................................47 Section 7,08 Extension; Waiver— .........................................................................................47 ARTICLE VIII MISCELLANEOUS.........................................................................................48 Section8.01 Definitions.......................................................................................................... 48 Section 8.02 Interpretation; Construction................................................,...............................56 Section8.03 Survival .......... ................................... ...................................... :............ .............. .56 Section8.04 Governing Law ....................... ..................... „,....... .................... ...... ....... ....::..._.57 Section 8.05 Submission to Jurisdiction ......... ................................. :................................. :...... 57 Section 8.06 Waiver of Jury Triad.......................................................*......... ...,.................. ...57 Section8.07 Notices.................................................................................................................58 Section8.08 Entire Agreement..............................................................................................58 Section 8.09 No Third Party Beneficiaries..............................................................................59 Section8,10 Severability..................................... ............................ ........................................ 59 Section8.11 Assignment........................................................................................................59 Section8. t2 Remedies........................................................................................................59 Section 8,13 Specific Performance ................... .................. ................................ ,...... ..... 59 Section 8.14 Counterparts; Effectiveness..................................................................... ........60 in44"62-! 821124,d(w AGREEMENT AND PLAN OF MERGER This Agreement and Plan of Merger (this "Agreement"), is entered into as of September 20, 2012, by and among BLACK ROCK CABLE, INC,, a Nevada corporation (the "Company"), OH WDH HOLDCO, LLC, a Delaware limited liability company ("Parent"), an individual and principal of the Company ("Principal") and an individual and greater than 10% shareholder of the Company (together with Principal, the "Principal Shareholders"). Capitalized terms used herein (including in the inunediately preceding sentence) and not otherwise defined herein shall have the meanings set forth in this Agreement and in Section 8,01 hereof. RECITALS WHEREAS, the parties intend that Parent acquire the Company pursuant to a merger by which a wholly -owned Subsidiary of Parent, to be formed by Parent prior to Closing ("Merger Sub"), will merge with the Company, on the tenns and subject to the conditions set forth herein; WHEREAS, in the Merger; upon the terms and subject to the conditions of this Agreement, each share of common stock of the Company (the "Company Common Stack.") will be converted into the right to receive the Merger Consideration; WHEREAS, the Board of Directors of the Company (the "Company Board") has unanimously (a) determined that it is in the best interests of the Company and its shareholders (each, a "Company Shareholder" and collectively, the "Company Shareholders."), and declared it advisable, to enter into this Agreement with Parent, (b) approved the execution, delivery and performance of this Agxeetrient and the consummation of the transactions contemplated hereby, including the Merger, and (c) resolved, subject to the terms and conditions set forth in this Agreement, to recommend adoption of this Agreement by the shareholders of the Company, WHEREAS, the managers of Parent have, on the terms and subject to the conditions set forth in this Agreement, unanimously approved this Agreement; and WHEREAS, the parties desire to make certain representations, warranties, covenants and agreements in connection with the Merger and the transactions contemplated by this Agreement and also to prescribe certain conditions to the Merger, NOW, THEREFORE, in consideration of the foregoing and of the representations, warranties, covenants and agreements contained in this Agreement, the parties, intending to be legally bound, agree as follows; ARTICLE I TIIE MERGER Section 1.01 The Merger, On the terms and subject to the conditions set forth in this Agreement, and in accordance with the Nevada Corporations Code ("NCC"), at the Effective, Time, (a) Merger Sub will .merge with and into the Company (the "Merger"), and (b) the fn44762-1821124.dua separate corporate existence of Merger Sub will cease and the Company will continue its corporate existence under the NCC as the surviving corporation in the Merger (sometimes referred to herein as the "Surviving Company"). Notwithstanding the foregoing, in the event that Parent elects to proceed with the LLC Merger, then in accordance with the NCC and the Washington Limited Liability Company Act ("WA LLC Act"), at the Effective Time, (A) the Avlerger shall be accomplished by the Company merging with and into Merger Sub, and (13) the separate existence of the Company will cease and Merger Sub will continue its existence as a limited liability company under the WA LLC Act as the Surviving Company, Section 1.02 Closing, Upon the terms and subject to the conditions set forth herein, the closing of the Merger (the "Closing") will take place as soon as practicable (and, in any event, within three (3) Business Days, or such later date as determined by Parent but not later than the E,nd Date) after satisfaction or, to the extent permitted hereunder, waiver of all conditions to the Merger set forth in Article VI (other than those conditions that by their nature are to be satisfied at the Closing, but subject to the satisfaction or, to the extent permitted hereunder, waiver of all such conditions), unless this Agreement has been terminated pursuant to its terms or unless another time or date is agreed to in writing by the parties hereto, The Closing shall be held at the offices of Graham & Dunn PC, Pier 70 — Suite 300, 1201 Alaskan Way, Seattle, WA, 98121, unless another placc is agreed to in writing by the parties hereto, and the actual date of the Closing is hereinafter referred to as the "Closing Date". Section 1.03 Effective Time. Subject to the provisions of this Agreement, at the Closing, the Company, Parent and Merger Sub will cause a certificate of merger (the "-`Certificate of Merger") to be executed, acknowledged and #fled with the Secretary of State of the State of Nevada (and, if applicable in connection with the LLC Merger, the Secretary of State of the State of Washington), in accordance with the relevant provisions of the NCC (and the WA LLC Act, as applicable) and shall make all other filings or recordings required under the NCC (and WA LLC Act, as applicable). The Merger will become effective at such time as the Certificate of Merger has been duty filed with the Secretary of State of the State of Nevada (and the Secretary of State of the State of Washington, if applicable) or at such later date or time as may be agreed by the Company and Parent in writing and specified in the Certificate of Merger in accordance with the NCC (and/or the WA LLC Act, if applicable) (the effective time of the Merger being hereinafter referred to as the "Effective Time"). Section 1.04 Effects of the Merger. The Merger shall have the effects set forth herein and in the applicable provisions of the NCC (and the WA LLC Act, if applicable). Without limiting the generality of the• foregoing, and subject thereto, from and after the Effective 'rime, all property, rights, privileges, immunities, powers, franchises, licenses and authority of the Company and Merger Sub shall vest in the Surviving Company, and all debts, liabilities, obligations, restrictions and duties of each of the Company and Merger Sub shall become the debts, liabilities, obligations, restrictions and duties of the Surviving Company. Section 1.05 Certificate of Incorporation; bylaws, At the Effective Time, (a) the certificate of incorporation of the Compwiy shall be amended so as to road in its entirety as determined by Parent and set forth in the Certificate of Merger, and, as so amended, shall be the certificate of incorporation of the Surviving Company until thereafter amended in accordance 2 m44752-1621124.doc with the terms thereof or as provided by applicable Law, and (b) the by-laws of Merger Sub as in effect immediately prior to the Effective Time shall be the by-laws of the Surviving Company until thereafter amended in accordance with the terms thereof, the certificate of incorporation of the Surviving Company or as provided by applicable Law. Notwithstanding the foregoing, in the event that Parent elects to proceed with the LLC Merger, at the Effective Time, the certification of formation and the limited liability company agreement of the Merger Sub, each as in effect immediately prior to the Effective Time, shall be the certification of formation and the limited liability company agreement of the Surviving Company until thereafter amended in accordance with the terms thereof. Section 1.06 Directors and Officers. The directors and officers of Merger Sub, in each case, immediately prior to the Effective Time shall, from and after the Effective '[dine, be the directors and officers, respectively, of the Surviving Company until their successors have been duly elected or appointed and qualified or until their earlier death, resignation or removal in accordance with the certificate of incorporation and by-laws of the Surviving Company. Notwithstanding the foregoing, in the event that Parent elects to proceed with the LLC Merger, at the Effective Time, the managers and officers of the Merger Sub in office immediately prior to the Effective Time, shall; from and after the Effective Time, be the managers and officers, respectively, of the Surviving Company until their successors have been duly elected or appointed and qualified or until their earlier death, resignation or removal in accordance with the certificate of formation and limited liability company agreement of the Surviving Company Section 1.07 Merger Approvals. (a) Company Board Approval. The Company confirms, represents and warrants that the Company Board, by resolutions duly adopted by unanimous vote at a meeting of all directors of the Company duly called and held or by unanimous written consent, has (i) determined that this Agreement and the transactions contemplated hereby, including the Merger, are fair to, and in the best interests of, the Company Shareholders, (H) directed that the '`agreement of merger" contained in this Agreement be submitted to the Company Shareholders for adoption, and (iii) resolved to recommend that the Company Shareholders adopt the "agreement of merger" set forth in this Agreement (collectively, the "Company Board Recommendation") and directed that such matter be submitted for consideration of the Company Shareholders. Prior to the Effective Time, the Board of Directors shall not withdraw, rescind, qualify or modify the Company Board Recommendation. (b) Company Shareholder Approval. By execution hereof, Principal, in his capacity as a Company Shareholder and holder of a majority of the shares of Company Common Stock, hereby irrevocably approves and adopts this Agreement and the approves the Merger, and his approval herein shall constitute action by majority written consent of the Company Shareholders in accordance with NCC Section 78,320. Principal represents and warrants that (i) he is the sole record, and beneficial owner of the shares of Company Common Stock set forth opposite his name on Section 3.02 to the Company Disclosure Schedule, (ii) he has the sole power and authority to vote the shares of Company Common Stock registered in his name and (iii) no Consent of any other Person is required in connection herewith, Principal shall not m44762-1821124AaP, withdraw, rescind, qualify or modify his approval given under this Section 1.07(b) at any time prior to the Iffectivc Time, (c) Shareholder Letter, It shall be a condition to the closing of this Agreement that all current Company Shareholders execute and deliver to Parent a joinder letter, substantially in the form attached as Exhibit A (the "Shareholder Letter"), pursuant to which each Company Shareholder irrevocably and unconditionally; (i) approves the Merger and adopts and agrees to be bound by the provisions of this Agreement, including with respect to (A) the appointment, capacity and indemnification of the Shareholders Agent, (B) the deposit into and release from escrow of Merger Consideration, (C) the indemnification of the Parent Indemnified Parties, and representations and warranties with respect to the ownership of, title to, and ability to transfer such Company Shareholder's shares of Company Common Stock, which representations will survive perpetually and with respect to any breach of which such holder will indemnify Parent and the Su"iving Company; (ii) provides a release of claims against Parent and the Company and their directors and officers, including with respect to the transactions contemplated by this Agreement ("Shareholder Release"); and (iii) provides a waiver of such Company Shareholder's right to exercise any dissenters' or appraisal rights under the NCC ("Dissenters' Rights"). (d) Merger Sub Approval. Prior to Closing, Parent shall form Merger Sub as a wholly -owned subsidiary of Parent and shall cause Merger Sub to adopt and approve the Merger and the terms of this Agreement. ARTICLE lI EFFECT OF THE MERGER ON CAPITAL STOCK Section 2.01 Merger Consideration, Subject to the terms and conditions of this Agreement, at the Effective Time, by virtue of the Merger and without any action on the part of Merger Sub, the Company or the holders of any of the following securities, the following shall occur: (a) Conversion of Merger Sub Common Stock. Each share of common stock of Merger Sub ("Merger Sub Common Stock") that is issued and outstanding immediately prior to the Effective Time shall be converted into one validly issued, fully paid and nonassessable share. of Common Stock of the Surviving Company, and the shares of the Surviving Company into which the shares of'Merger Sub Common Stock are so converted shall be the only shares of the Surviving Company that are issued and outstanding immediately after the Effective Time, Following the Effective Time, each certificate evidencing ownership of shares of ]Merger Sub Common Stock shall evidence ownership of such shares of the Surviving Company. Notwithstanding the foregoing, in the event that Parent elects to proceed with the UC Merger, references herein to Merger Sub Common Stock and Common Stock of the Surviving Company shall automatically be deemed to be references to LLC membership interest in Merger Sub and the Surviving Company, as applicable, (b) Conversion of Company Common Stock. Each share of Company Common Stock that is issued and outstanding immediately prior to the Effective Time (ot ier than any shares to be canceled in accordance with this Agreement), shall be automatically converted into 4 m44762-1821124.dos the right to receive an amount in cash equal to (i) the Preliminary Aggregate Merger Consideration as adjusted pursuant to Sections 2.04(c)(ii), (iii) and (iv), minus the payments made by Parent on the Company's behalf pursuant to Section 2.04(c)(i), minus or plus the adjustment pursuant to Section 2.04(f), nlu,s, the Consideration Increase pursuant to Section 2.08 divide by (ii) the number of Outstanding Company Shares (as so adjusted pursuant to Section 2A4(F), the "Merger Consideration"), upon surrender of the certificate representing such share of Company Common Stock in the manner provided in Section 2.02, (c) Cancellation of Company Common Stock owned by the Company, Parent or Merger Sub. Each share of Company Common Stock held by the Company, Parent or Merger Sub immediately prior to the Effective Time shall be canceled and extinguished without any conversion thereof. Section 2.02 Payment Procedures. (a) Exchange Procedures. Promptly after the Effective Time, Parent shall mail (or cause to be mailed) a letter of transmittal, which shall include instructions for use in effecting the surrender of the Certificates in exchange for the Merger Consideration, to each holder of record. of a certificate or certificates ("Certificates") that immediately prior to the Effective Time represented outstanding shares of Company Common. Stock whose shares were converted into the right to receive the Merger Consideration. Upon surrender of Certificates for cancellation to Parent or its designee together with such letter of transmittal, duly completed and validly executed in accordance with the instructions thereto, and such other documents as may reasonably be required by Parent (including any required Form W-9 or Form W-8), the holders of such Certificates shall be entitled to receive in exchange therefor the Merger Consideration, and the Certificates so surrendered shall forthwith be canceled. Until so surrendered, outstanding Certificates will be deemed from and after the Effective Time, for all corporate purposes, to evidence only the right to receive upon surrender the Merger Consideration. No interest will be paid or accrued on any Merger Consideration payable to holders of Certificates. In the event of a transfer of ownership of shares of Company Common Stock that is not registered in the transfer records of the Company, cash may be issued to a transferee if the Certificate representing such shares of Company Common Stock is presented to Parent or its designee, accompanied by all documents required to evidence and effect such transfer and by evidence that any applicable stock transfer taxes have been paid. (b) Lost, Stolen or Destroyed Certificates. In the event that any Certificates shall have been lost, stolen or destroyed, Parent shall pay in exchange for such lost, stolen or destroyed Certificates, upon the making of an affidavit of that fact by the holder thereof, the Merger Consideration for the shares of Company Common Stock represented by such Certificates. (c) No Further Ownership Rights in Company Common Stock. All cash or other distributions paid in respect to shares of Company Common Stock upon the surrender for exchange of Certificates in accordance with the terms hereof shall be deemed to have been paid in full satisfaction of all rights pertaining to such shares of Company Common Stock, and there shall be no further registration of transfers on the records of the Surviving Company of shares of Company Common Stock that were outstanding immediately prior to the Effective Time. From m44762-1 £52112A.dm and after the Effective Time, the holders of Certificates that evidenced ownership of shares of Company Common Stock outstanding immediately prior to the Effective Time shall cease to have any rights with respect to such shares of Company Common Stock, except as otherwise provided for herein or by applicable Law. (d) Liability. Notwithstanding anything to the contrary in this Agreement, neither Parent, the Company, the Surviving Company nor any party hereto shall be liable to a holder of shares of Company Common Stock for any amount properly paid to a public official pursuant to any applicable abandoned property, escheat or similar law. Section 2.03 Escrow Account. (a) Prior to the Closing Date, Parent shall establish an interest bearing escrow account pursuant to the terms of the Escrow Agreement (the "Escrow Account") with an escrow agent to be designated by Parent and approved by the Company prior to the Effective Time (the "Escrow Agent'), and enter into an escrow agreement with the Escrow Agent in substantially the forth attached hereto as Exhibit R with such changes thereto as may be required by the Escrow Agent (the "Escrow Agreement'). The Escrow Account shall consist of the following; (i) the Purchase Price Adjustment Escrow; and (H) the Indemnity Escrow, (b) On the Closing Date, Parent shall deliver, and the Company Shareholders shall -be deemed to have; received and deposited to the Escrow Account, aggregate Merger Consideration equal to the sum of the following (collectively, the "Escrow Amount"): (i) the Purchase Price Adjustment Reserve (the "Purchase Price Adjustment Escrow"); plus (ii) the Holdback Amount (the "Indemnity Escrow"). The Escrow Amowit shall be held by the Escrow Agent pursuant to the terms of the Escrow Agreement to provide for any adjustment to the Merger Consideration pursuant to this Agreement. (c) Releases from the Escrow Account to the Company Shareholders shall be allocated among the Company Shareholders based on their respective Pro Rata Share. (d) Within three (3) Business Days following the Final Accounting Resolution, Parent shall promptly instnict the Escrow Agent in uniting to forthwith promptly remit the amounts determined pursuant to Section 2,04 as provided in such Section. (e) On or prior to each of the Interim Escrow Release Date and the Final Escrow Release Date, Parent shall deliver to the Shareholders Agent a statement as of such date of all outstanding claims of any Parent Indemnified Party pursuant to Section 2.05 to the extent such claims have not already been submitted to the Shareholders Agent pursuant to such Section (each, an "Outstanding Claim" and collectively, the "Outstanding Claims"). Within five (5) Business Days following each of the Interim Escrow Release Date and the Final Escrow Release Date, Parent and the Shareholders Agent shall each instruct the Escrow Agent in writing to take the following actions: (i) The Escrow Agent shall be instructed to retain a portion of the Indemnity Escrow equal to the aggregate Outstanding Claims at such time, if any, or such lesser amount as shall be remaining in the Indemnity Escrow at such time (the "Retained Indemnity Escrow"), m44762-1821124.doc (ii) To the extent the amount remaining in the Indemnity Escrow exceeds the Retained Indemnity Escrow (an "Indemnity Escrow Excess") on the Interim Escrow Release Date, the Escrow Agent shall be instructed to promptly remitiftof such Indemnity Escrow Excess to the Company Shareholders in proportion to their respective Pro Rata Share (subject to any adjustment for Outstanding Shareholder Agent Expenses pursuant to Section 2.06(b)). (iii) To the extent of an Indemnity Escrow Excess on the Final Escrow Release Date, the Escrow Agent shall be instructed to promptly remit the Indemnity Escrow Excess to the Company Shareholders in proportion to their respective Pro Rata Share (subject to any adjustment for Outstanding Shareholder Agent Expenses pursuant to Section 2.96(b)). (f) In the event and to the extent that after the Final Escrow Release Date any Outstanding Claim notice of which is delivered prior to the Final Escrow Release. Date is resolved, each of parent and the Shareholders Agent shall promptly instruct the Escrow Agent in writing to promptly (and, in any event, no later than three (3) Business Days after delivery of such instructions) (i) deliver the amount which such Parent Indemnified Parties are entitled to received from the Retained Indemnity Escrow with respect to such Outstanding Claim and (ii) to the extent that the Retained Indemnity Escrow exceeds the aggregate Outstanding Claims after giving effect to any payment pursuant to the foregoing clause (i) (such excess, if any, the "Retained indemnity Escrow Excess"), distribute all of such Retained indemnity Escrow Excess to the Company Shareholders in proportion to their Pro Rata Share, (g) Any fees and expenses of the Escrow Agent shall be paid 50% by the Surviving Company and 50% from the Escrow Account, The Escrow Amount shall be retained in the Escrow Account until. released pursuant to this Agreement and the Escrow Agreement. Section 2.04 Purchase Price Adjustments. (a) Initial Estimates. Not later than five (5) Business Days prior to the Closing Date, the Company shall deliver to Parent (i) an estimated balance sheet of the Company as of 12:01 a.m. on the Closing Date and without giving effect to any purchase accounting adjustments resulting from the Merger, (ii) a statement in reasonable detail of the estimated closing Adjusted Working Capital derived from such estimated balance sheet, and (iii) a statement in reasonable detail of the estimated average Monthly Recurring Revenue for the three full calendar months prior to Closing. The Company, Parent and Parent's accountants will use all reasonable efforts to consult with one another and cooperate with each other in the monitoring of the Company's financial accounts and preparation of updates on an ongoing basis to such estimated consolidated balance sheet, the estimated closing Adjusted Working Capital, and the estimated average Monthly Recurring Revenue for the three full calendar months prior to Closing, and the Company shall provide access to all working papers and information relating to the preparation thereof to Parent and its accountants, (b) Revised Estimates. On the Business Day prior to the Closing Date, the Company shall deliver to Parent a certificate duly executed by Principal (the "Certificate of Closing Amounts") certifying to (i) a good faith estimate of the balance sheet of the Company (as updated in consultation with Parent and its accountants pursuant to this Section) as of 12:01 a.m. on the. Closing Date and without giving effect to any purchase accounting adjustments resulting m44762-1821124.doc from the Merger (the "Estimated Closing Balance Sheet"), (ii) a statement in reasonable detail of the estimated closing Adjusted Working Capital derived from the Estimated Closing Balance Sheet (the "Estimated Closing Adjusted Working Capital"), (iii) a good faith estimate of the average Monthly Recurring Revenue (as updated in consultation with Parent and its accountants pursuant to this Section) for the three full calendar months prior to Closing (the "Estimated Monthly Recurring Revenue"), (iv) the arnount of the 'Transaction Expenses, specifying the amounts owing to each creditor with respect thereto (together with payinent instructions therefor), and (v) a statement of the Company Debt as of the Closing Date, The Estimated Closing Balance Sheet, Estimated Closing Adjusted Working Capital, Estimated Monthly Recurring Revenue, and statement of Company Debt shall be prepared by the Company in accordance with OAAR (c) Payments and Adjustments. (i) At the Closing, the Parent on behalf of the Company shall: (A) pay to the appropriate creditors of the Company Debt, as specified in payoff letters provided to Parent, which payoff letters shall indicate the amount necessary to repay such creditors in full and that such creditors have agreed to release all Liens in respect of such Company Debt upon receipt of the amounts indicated in such payoff letters; and (B) pay to the appropriate parties the Transaction Expenses to be paid at Closing, as specified in the Certificate of Closing Amounts. (ii) Yf the Estimated Closing Adjusted Working Capital is less than the Minimum Adjusted Working Capital, then the Preliminary Aggregate Merger Consideration shall be reduced by the amount of such shortfall. If the Estimated Closing Adjusted Working Capital exceeds the Adjusted Minimum Adjusted Working Capital, then the Preliminary Aggregate Merger Consideration shall be increased by the amount of such excess. (id) If the Estimated Monthly Recurring Revenue is less than the Target Monthly Recurring Revenue, then the Preliminaryam atMerger Consideration shall be reduced by an amount equal to the product of (A) multby (B) one (1) minus a fraction, the numerator of which is the Estimated Monthly Recurring Revenue and the denominator of which is the Target Monthly Recurring Revenue. For clarification, if the Estimated Monthly Recurring Revenue is greater than. the Target Monthly Recurring Revenue, no adjustment to the Preliminary Aggregate Merger Consideration shall be made. (iv) The Preliminary Aggregate Merger Consideration shall be (A) increased by the amount of the Extraordinary Capital Expenditures or (B) decreased by any shortfall in the Company satisfying the Minimum Capital Expenditures. (d) Post -Closing Calculations. Within sixty (60) days following the Closing Date, Parent shall deliver to the Shareholders Agent a. statement (the "Final Closing Statement") consisting of (i) a balance sheet of the Company as of 12:01 a.m. on the Closing Date and without giving effect to any purchase accounting adjustments resulting from the Merger (the "Final Closing Balance Sheet") and (ii) a statement in reasonable detail of the closing Adjusted Working Capital ("Final Closing Adjusted Working Capital"), (iii) a statement in reasonable detail of the average Monthly Recurring Revenue for the three hull calendar months prior to Closing (the "Final Monthly Recurring Revenue"), (iv) a statement of the Company Debt m44762-1821124.doe derived from the Final Closing Balance Sheet, (v) a statement of Transaction Expenses paid on or after Closing, and (vi) a statement in reasonable detail of the final. Tax Increase and corresponding Consideration Increase (the "Final Consideration Increase"). The Final Closing Balance Sheet and the Final Closing Statement shall be prepared in accordance with UAAP. The Shareholders Agent shall provide, or cause to be provided, to Parent any materials or information in its possession requested by Parent as necessary for the preparation of the Closing Balance Sheet and the computation of Final Closing Adjusted Working Capital, Final Monthly Recurring Revenue, Transaction Expenses, Company Debt, and Final Consideration Increase. (e) Acceptance of Statements; Dispute Procedures, The Final Closing Statement (and the statements of the Final Closing Adjusted Working Capital, Final Monthly Recurring Revenue, Transaction Expenses and Company Debt) delivered by Parent to the Shareholders Agent shall be conclusive and binding upon the parties unless the Shareholders Agent, within ten (10) Business Days after delivery to the Shareholders Agent of the Final Closing Statement, notifies Parent in writing that the Shareholders Agent disputes any of the amounts set forth therein, specifying the nature of the dispute and the basis therefor. The parties shall in good faith attempt to resolve any dispute and, if the parties so resolve all disputes, the Final Closing Statement (and the statements of the Final Closing Adjusted Working Capital, Final Monthly Recurring Revenue, Transaction Expenses and Company Debt), as amended to the extent necessary to reflect the resolution of the dispute, shall be conclusive and binding on the parties. If the parties do not reach agreement in resolving the dispute within ten (10) Business Days after notice is given by the Shareholders AlLent to Parent, the parties shall submit the dispute to the accounting firm o4' or such other independent accounting firm which is mutually agreeable to the parties (the "Accounting Arbiter") for resolution. Within thirty (30) days of such submission, the Accounting Arbiter shall determine (it being understood that in making such determination, the Accounting Arbiter shall be functioning as an expert and not as an arbitrator), based solely on written submissions by Parent and the Shareholders Agent, and not by independent review, only those issues in dispute curd shall render a written report as to the resolution of the dispute and the resulting Final Closing Balance Sheet and computation of Final Closing Adjusted Working Capital, Final Monthly Recurring Revenue, "Transaction Expenses and Company Debt, which shall be conclusive and binding on the parties, in resolving any disputed item, the Accounting Arbiter (x) shall be bound by the provisions of this Section and (y) may not assign a value to any item greater than the greatest value for such items claimed by either party or less than the smallest value for such items claimed by either party. The fees, costs and expenses of the Accounting Arbiter shall be shared equally by Parent and the Shareholders Agent. (0 Final Purchase Price Adjustments. Upon final determination of the Final Closing Balance Sheet, Final Closing Adjusted Working Capital, Final Monthly Recurring Revenue, Transaction Expenses, Company Debt, and Final Consideration Increase as provided in this Section, (such determination, the "Final Accounting Resolution"), the following payments and adjustments will be trade; (i) Adjusted Working Capital Adjustment. To the extent that (A) the Final Closing Adjusted Working Capital exceeds the Estimated Closing Adjusted Working Capital, the aggregate Merger Consideration shall be increased by the difference between (1) the Final m44762-1821124.doc Closing Adjusted Working Capital minus (2) the Estimated Closing Adjusted Working Capital or (B) the Final Closing Adjusted Working Capital is less than the Estimated Closing Adjusted Working Capital, Parent shall instruct the Escrow Agent to promptly release to Parent from the Purchase Price Adjustment Escrow an amount equal to the difference between (1) Estimated Closing Adjusted Working Capital minus (2) the Final Closing Adjusted Working Capital, (either such adjustment, the "Final Adjusted Working Capital Adjustment')_ (ii) Revenue Adjustment. To the extent that (A) (1) the Preliminary Aggregate Merger Consideration was reduced pursuant to Section 2.04(c)(iii) and (11) the Final Monthly Recurring. Revenue is greater than the Estimated Monthly Recurring Revenue, then the Merger Consideration shall be increased by the amount that the Preliminary Aggregate Merger Consideration would not have been reduced if the Estimated Monthly Recurring Revenue had equaled the .Final Monthly Recurring Revenue; or (.B) the Final Monthly Recurring Revenue is less than the Estimated Monthly Recurring Revenue, then Parent shall instruct the Escrow Agent to promptly release to Parent from the Purchase Price Adjustment Escrow the amount that the Preliminary Aggregate Merger Consideration would have been reduced pursuant to Section 2.04(c)(iii) if the Estimated Monthly Recurring Revenue had equaled the Final Monthly Recurring Revenue less any amount the Preliminary Aggregate Merger Consideration was reduced pursuant to Section 2.04(c)(iii) (either such adjustment, the "Final Revenue Adjustment'), (iii) Debt and Transaction Expense Adjustment, To the extent that the actual amount of Company Debt or Trpnsaction Expenses exceed the respective amounts set forth on the Certificate of Closing AmDunts, Parent shall instruct the Escrow Agent to promptly release to Parent from the Purchase price Adjustment Escrow an amount equal to such excess. (iv) Consideration Increase Adjustment, To the extent that (A) the Final Consideration Increase exceeds the Estimated Consideration Increase included in the Merger Consideration at the Effective Date, such amount shall be paid to the Company Shareholders (upon surrender and exchange of their Certificates pursuant to Section 2.02(a)) pursuant to Section 2.09 or (B) the Final Consideration Increase is less the Estimated Consideration Increase included in the Merger Consideration at the Effective Date, the parties shall instruct the Escrow Agent to promptly release such amount to Parent.from the Purchase Price Adjustment Escrow (either such adjustment, the "Final Consideration Increase Adjustment"). (v) Tothe extent there is a remaining balance in the Purchase Price Ad;s,cf,�Pnt Escrow a�rter releasing Rif funds to Parent pursuant to this Section 2.04(f) (1Jr if no - ...... funds are released), then Parent shall instruct the Escrow Agent to relcase the remaining balance of the Purchase Price Adjustment Escrow to the Company Shareholders (upon surrender and exchange of their Certificates pursuant to Section 2.02(a)) based upon each such Company Shareholder's Pro Rata Share of such remaining balance. To the extent that the Purchase Price Adjustment Escrow is insufficient to satisfy the aggregate amount of funds to be released to Parent pursuantto this Section 2.04(t), then Parent shall be entitled to instruct the Escrow Agent to release funds from the Indemnity Escrow in the amount of such shortfall. (vi) 1n the case of any adjustment pursuant to this Section 2.04(f), the Merger Consideration shall be deemed increased or decreased accordingly, E m44762-1821124.doc Section 2.05 Indemnification. (a) Subject to the limitations set forth in this Section, (i) the Principal Shareholders, jointly and severally (which shall not be limited by the several obligation of the Other Company Shareholders), and (ii) each of the other Company Shareholders (the "Other Company Shareholders"), severally (based on their respective Pro Rata Share) and not jointly, shall indemnify and hold hannless Parent and its Affiliates (including the Surviving Company after the Effective `I`ime) and their respective officers, directors, managers, members, partners, employees, agents and representatives, successors and assigns (the "Parent Indemnified Parties") against, and reimburse any Parent Indemnified Party for, all Damages that such Parent Indemnified Party may at any time suffer or incur, or become subject to, arising out of, resulting from or relating to any of the following: (i) any breach of or inaccuracy in any representation or warranty made in Article Ili or any document delivered by the Company or any Company Shareholder; (d) any breach or failure of the Company or any Company Shareholder to perforrn any covenant, obligation or other agreement set forth of -contemplated in this Agreement or any other agreement, instrument or other document entered into in connection with this Agreement; (iii) any Taxes due and owing by the Company (or the Surviving Company) or any Company Shareholder (except as provided in Section 2.08) with respect to any period ending on, or prior to the Closing Gate; (iv) any Franchise Consent Damages; (v) fifty percent (50%) of any Franchise Consent Expenses incurred within one hundred fifty (150) days following the date of this Agreement; or (vi) any fraud or wilifiil misconduct of the Company or any Company Shareholder. ("Indemnifiable Liabilities"). For the purposes of determining whether Indamnifiable Liabilities are subject to indemnification under this Section 2.05 (and the amount of such Indernnifiable Liabilities), the representations and warranties set forth in Article III shall be deemed to have been made without any qualifications as to materiality and, accordingly, for such purposes, all references therein to "material', "in all material respects", "Company Material Adverse Effect" and similar qualifications as to materiality shall be disregarded. Parent and the Surviving Company shall not be entitled to indemnification for Indemnifiable Liabilities pursuant to this Section 2.05(a)(1) until such time as their respective aggregate right to such indemnification exceeds(tlte "Minimum Threshold") (it being agreed that in the event the Minimum Threshold is reached, the Company Shareholders will be liable for all Damages, including the Minimum Threshold). Notwithstanding the foregoing, the Minimum Threshold shall not apply to Indem.nifnable Liabilities arising out of (i) breaches or inaccuracies of any of the Fundamental Representations, (ii) breaches or inaccuracies of any of representations or statements made in any Shareholder Letter or (iii) fraud or willful misconduct of the Company or any Company Shareholder. (b) In the event that any Parent Indemnified Party wishes to make an indemnification claim under this Section, such Parent Indemnified Party shall first provide written notice of such claim (a "Parent Indemnification Notice") to the Escrow Agent and the Shareholders Agent. Any such notice shall, to the extent practicable, set forth the basis For the claim and, to the extent known., the amount of the claim. Thereafter, the Shareholders Agent shall have fif ton (15) Business Days following such party's receipt of the Parent Indemnification Notice in which to deliver notice of objection to such claim to the Parent Indeannified Party and the Esc-rowr Agent. If no objection notice is given, then the claim in the amount alleged by the Parent Indemnified Party in the Parent Indemnification Notice shall be dccmcd to be final, conclusive. And binding on m44762•-182.i t24.doe the Shareholders and indernnifiable pursuant hereto. No offset against the Escrow Account shall be permitted if the relevant claim is timely disputed as set forth above, unless and until its validity is finally resolved. The parties shall in good faith attempt to resolvc any disputes arising under this Section as to the validity or amount of any claim within ten (10) Business Days (or any mutually agreed upon extension thereof) after such dispute arises. If the parties do not resolve any such dispute within such period, the Parent Indemnified Party may seek appropriate legal remedies. In the event that the Parent Indemnified Party is entitled to payment from the Escrow Account as a result of the final resolution of the validity and amount of such claim pursuant to a final, non -appealable decision of a court of competent jurisdiction, such Parent Indemnified Party and the Shareholders Agent shall promptly provide joint written notice (the "Resolved Claim Notice") of such offset to the Escrow Agent. If the Shareholders Agent leas not so provided the Resolved Claim Notice to the Escrow Agent within five (5) Business bays after the demand of the Parent Indemnified Party in writing to the Shareholders Agent, then the Parent Indemni Ced Party will be permitted to unilaterally deliver a Resolved Claim Notice (a "Unilateral Resolved Claim Notice") to the Escrow Agent so long as the Parent Indenuiified Party provides prompt written notice of the delivery to the Escrow Agent of such Unilateral Resolved Claim Notice to the Shareholders Agent. Within two (2) Business Days after receipt of the Resolved Claim Notice or, in the case of a Unilateral Resolved Claim Notice, within three (3 ) after receipt thereof, Escrow Agent shall deliver to such Parent Indemnified Party that portion of the Escrow Amount equal to the amount set forth in the Resolved Claim Notice or the Unilateral Resolved Claim Notice. (c) To the extent that .any Parent Indemnified Party wishes to make an indemnification claim with respect to any Inderrmifiable Liability that is outstanding and unresolved or resolved in whole or in part as of the Interim Escrow Release Date or Final Escrow Release Bate., as applicable, (and for the avoidance of doubt an I.ndemnifiable Liability shall be deemed to be outstanding so long as there has been a written or oral notice, claim, demand, action, suit, complaint, proceeding (arbitration or otherwise), investigation or other communication by .any Person prior to the Interim Escrow Release Date or Final Escrow Release Date relating to such Indemnifiable Liability or the facts and circumstances giving rise to such lndemnifiable Liability), Parent shall have the right to make a claim under this Section based on a good faith estimate of the maximum potential amount of such claim in: the statement of claims to be delivered by Parent pursuant to Section 2.05(b), by providing written notice of such claim (a "Claim Notice") to the Escrow Agent and the Shareholders Agent. The Claim Notice shall, to the extent practicable, set forth the basis for the claim and the amount of the claim, and the amount set forth in the Claim Notice shall be included in the Retained Indemnity Escrow as an Outstanding Claim until resolved in accordance with Section 2.05(b), (d) In the event any Parent Indemnified Party becomes aware of any claim made by any third party against the Parent Indemnified Party (a "Third -Party Claim"), which such Parent Indemnified Party reasonably believes in good faith may result in a clainr for indemnification pursuant to Section 2o05(a), such Parent Indemnified Party shall notify the Shareholders Agent of such claim and such claim shall be included in the Retained Specified Liability Escrow as an Outstanding Claim. The Shareholders Agent (on behalf of the, Company Shareholders) shall be entitled, at its sole expense, to participate in, but not to determine or conduct, the defense of such Third Party Claim. The Parent Indemnified Party shall have the 12 m44762-1821124.doc right in its sole discretion, to conduct the defense of, and to settle, any such claim and the Shareholders Agent shall cooperate fully with Parent in connection with the diligent defense of any such Third -Party Claim; provider4 however, that except with the consent of the Shareholders Agent (which may not be unreasonably withheld, delayed or conditioned), no monetary settlement of any such Third Party Claim with third party claimants shall be determinative of the amount of Damages relating to such matter; provided.further, that the Shareholders Agent shall not have the right to consent or otherwise agree to any non -monetary settlement or relief, including injunctive relief or other equitable remedies, that is not directly binding upon the Shareholders Agent or a Company Shareholder. (e) EXCEPT AS SET FORTH HEREIN, ' `HE PARENT INDEMNIFIED PARTIES' SOLE REMEDY FOR ANY DAMAGES RELATED TO THE INDEMNIFIABLE LIABILITIES SHALL BE AS PROVIDED IN THIS SECTION 2.05 AND THE LIABILITY OF THE COMPANY SHAREHOLDERS FOR ANY SUCH DAMAGES PURSUANT TO THIS SECTION 2.05 WILL. BE LIMITED TO THE ESCROW AMOUNT; PROVIDED, HOWEVER, THAT THE FOREGOING LIMIT SHALL NOT APPLY WITH RESPECT TO (1) THE PRINCIPAL SHAREHOLDERS TO DAMAGES ARISING OUT OF (A) BREACHES OR INACCURACIES OF ANY OF THE FUNDAMENTAL REPRESENTATIONS, (B) BREACHES OR INACCURACIES OF ANY REPRESENTATIONS OR AGRF,EMENTS MADE IN ANY SHAREHOLDERS LETTER OR (C) FRAUD OR WILLFUL, MISCONDUCT OF THE COMPANY OR ANY COMPANY SHAREHOLDER OR (11) EACH OF THE OTHER SHAREHOLDERS WITH RESPECT TO BREACHES OR INACCURACIES OF ANY REPRESENTATIONS OR AGREEMENTS MADE IN THEIR RESPECTIVE SHAREHOLDER LETTER. (i) The amount of Damages required to be paid pursuant to this Section will be reduced to the extent of any amounts a Parent Indemnified Party actually receives (net ofany costs of recovery and increased premiums) pursuant to the terms of the insurance policies (if any) covering such Damages. Section 2.06 Shareholders Agent. (a) is hereby constituted and appointed as agent (the "Shareholders Agent") for and on behalf of the Company Shareholders, and any of them, as their attorney -in -fact with full power and authority in connection with the transactions and agreements contemplated by this Agreement with respect to (i) matters prior to the Closing Date, as specified herein. and (ii) matters subsequent to the Closing Date, and acknowledge that such appointment is coupled with an interest and is irrevocable, which shall include the power and authority: to give and receive notices and communications, to authorize receipt and dispute of any statement delivered pursuant to this Agreement, to authorize delivery to the Parent Indemnified Parties of the Escrow Amount in satisfaction of indemnification claims by the Parent Indemnified Parties pursuant to this Agreement, to object to such deliveries, to object to the retention of amounts in the Escrow Account for claims made by Parent pursuant to this Agreement, to agree to, negotiate, enter into settlements and compromises of, and take legal actions and comply with orders of courts and awards of arbitrators with respect to such claims, to waive or refrain from enforcing any right of the Company Shareholders arising out of or under or 13 m 447G2-1821 124,doc in any man -nor relating to this Agreement or any other agreement contemplated hereby or thereby, to execute and deliver such waivers, consents, amendments, modifications or alterations in connection with this Agreement and the consummation of the transactions contemplated hereby as the Shareholders Agent, in his reasonable discretion, may deem necessary or desirable to give effect to the intentions of this Agreement and the other agreements contemplated hereby and to take all actions necessary or appropriate in the judgment of the Shareholders Agent for the accomplishment of the foregoing. No bond shall be required of the Shareholders Agent, and the Shareholders Agent shall receive no compensation for services rendered. Notices or communications to or from the Shareholders Agent shall constitute notice to or from each of the Company Shareholders. The grant of authority provided for in this Section 2.06 is coupled with an interest and is being granted, in part, as an inducement to the Parent to enter into this Agreement and shall be irrevocable and survive the death, incompetency, bankruptcy or liquidation of any Company Shareholder and shall be binding on any heir or successor thereto. (b) The Shareholders Agent shall not be liable for any act done or omitted hereunder in his capacity as Shareholders Agent, except to the extent he has acted with gross negligence or willful misconduct, and any act done or omitted pursuant to the advice of counsel shall be conclusive evidence that he did not act with gross negligence or willful misconduct. The other Company Shareholders shall severally indemnify the Shareholders Agent and hold him harmless against any loss, liability or expense incurred without gross negligence or bad faith on the part of the Shareholders Agent and arising out of or in connection with the acceptance or administration of the duties hereunder, including any out--of-pocket costs and ;expenses and legal fees and other legal costs reasonably incurred by the Shareholders Agent ("Outstanding Shareholders Agent Expenses"). If not paid directly to the Shareholders Agent by the Company Shareholders, such losses, liabilities or expenses may be recovered by the Shareholders Agent from the Escrow Amount (if any) that otherwise would be distributed to the Company Shareholders following the .Final Accounting Resolution, Interim Escrow Release Date or final Escrow Release bate, as the case may be, in each case after giving effect to, and satisfaction of, all claims for indemnification arcade by the Parent Indemnified Parties pursuant to Section 2.05, and such recovery (if any) of Outstanding Shareholders Agent Expenses from such Escrow Amount will be made from the Company Shareholders according to their respective Pro Rata Share. (c) A decision, act, cohsent or instruction of the Shareholders Agent shall constitute a decision of all the Company Shareholders and shall be final, binding; and conclusive upon each of the Company Shareholders, and the Escrow Agent and Parent may rely upon any decision, act, consent or instruction of the Shareholders Agent as being the decision, act, Consent or instruction of each of the Company Shareholders. I'lie Escrow Agent and Parent are hereby relieved from any liability to any person for any acts done by them in accordance with such decision, act, consent or instruction of the Shareholders Agent. (d) If the Shareholders Agent ceases to function in his capacity as the Shareholders Agent for any reason whatsoever, then the Company Shareholders, by action of the Company Shareholders who formerly held a majority of the Company Common Stock immediately prior to the Effective Time, shall have the right to appoint his successor; provided, however, that if no such successor is appointed within twenty (20) Business Days from the date that the Shareholders Agent ceases to function as such, shall be appointed as the 14 m44752.1921124.doc Shareholders Agent; provided, however, i is unable or unwilling to serve as Shareholders Agent, Parent shall be authorized to appoint the successor Shareholders Agent, Section 2.07 Tax Withholding. Each of Parent and the Surviving Company shall be entitled to deduct and withhold from any consideration payable or otherwise deliverable pursuant to this Agreement to any Company Shareholder such amounts as may be required to be deducted or withheld therefrom under the Code or under any provision of state, Iocal or foreign tax law or under any other applicable law and shall promptly deliver the amounts so withheld to the appropriate tax or other government agencies. To the extent such amounts are so deducted and withheld, such amounts shall be treated for all purposes under this Agreemer as having been paid to the Person in respect of whom such deduction and withholding was made. Section 2.08 Tax Structure; Allocations. (a) (i) if determined by Parent in its sole discretion, the parties agree that they will jointly and simultaneously file Internal Revenue Service forms 8023 and make elections pursuant to Section 338(a) and 338(h)(10) of the Internal Revenue Code of 1986, as amended, and regulations promulgated thereunder, including Treasury Regulation Section 1.338(h)(10)-1 (the "Tax Election"). (ii) If determined by Parent in its sole discretion, as an alternative to a transaction that would qualify for the tax election described in Section 2.08(a)(i), Parent shall form Merger Sub as a limited liability company organized under the laws of the State of Washington and at Closing the Company shall merge with and into Merger Sub, 'A ith the Merger Sub as the Surviving Company in the Merger ("LLC Merger"). (iii) If Parent does not elect either the Tax Election or the LLC Merger, the parties shall proceed with the Merger as described in Article 1, Parent will notify the Company of its applicable election under this Section 2.08(a) within one (1) Business Day prior to the Closing. (b) Parent, at its sole expense, has retained�to perform a valuation of the assets of the Company for the purposes of allocating the Merger Consideration among the assets of the Company for such elections (the "Allocation"). The Allocations will be amended to reflect any post -Closing adjustments to the Merger Consideration pursuant to this Agreement. The parties shall be bound by the Allocation as determined by such independent third -party and, within ninety (90) days after Closing, shall each file as applicable either (i) IRS Form 8883 in connection ,Mth the Tax Election or (ii) IRS Form 8594 in connection with the LLC Merger,_ reflecting the Allocation, with their respective income tax returns for the taxable year which includes the Closing Date. (c) To the extent that (i) Parent, in its sole discretion, elects to proceed with the Tax Election or the LLC Merger and (ii) as a result thereof, the Merger Consideration is allocated such that federal income tax is paid on any part of the Merger Consideration at a rate other than the long-term capital gains rate then in effect (a "Tax Increase"), the Merger Consideration will be increased ("Consideration Increase") such that the aggregate after-tax proceeds (including without limitation amounts received pursuant to this Section 2.08(c)) received by the Company Shareholders will equal the after-tax proceeds they would 1ihve received if all of the gain, realized is 7,n44762-1821 1 "24.doc from the Merger was taxed at the long-term capital gains rate. Notwithstanding the foregoing, the Consideration Increase shall not include any amount attributable to a Tax Increase arising as a consequence of (A) any tax accounting method used by the Company prior to Closing that would not be permitted under any federal tax Law, Treasury Regulation or published IRS ruling, or (B) any action or omission by the Company or any Company Shareholder that would result in a Tax Increase. For purposes of the foregoing, calculations of any Tax Increase shall be (1) determined based on the hypothetical assumption that each Company Shareholder has a zero tax basis in his or her Company Common Stock and (2) in accordance with applicable federal tax Laws, Treasury Regulations and published IRS rulings, (d) Within twenty (20) days fallowing the determination of the Allocation and in any event no later than five (5) Business Days prior to the Closing, Parent shall deliver to the Shareholders Agent a statement reflecting Parent's good faith calculation of the Consideration Increase (thy; "Estimated Consideration Increase"), Section 2.09 Post -Closing Payments to Shareholders. Upon the Final Accounting Resolution, Parent will pay to the Company Shareholders based on their Pro Rata Share (upon surrender and exchange of their Certificates pursuant to Section 2,02(a)) any amounts owed to the Company Shareholders pursuant to Section 2,04(f)(i)(A), Section 2.04(f)(H)(A),or Section 2.04(f)(iv)(A). REPRESENTATIONS AND WARRANTIES OF THE COMPANY Except as set forth in the correspondingly numbered Section of the disclosure schedule delivered by the Company pursuant to Section. 5.14 and accepted by Parent (the "Company Disclosure Schedule") or in another Section of the Disclosure Schedule to the extent it is reasonably apparent on the face of such disclosure that such disclosure is applicable to such Section, the Company hereby represents and warrants to Parent and Merger Sub as follows: Section 3.01 Organization; Standing and Power; Charter Documents; Minutes; Subsidiaries. (a) Organization; Standing and Power, The Company is a corporation duly organized, validly existing and in good standing (with respect to jurisdictions that recognize the concept of good standing) under the Laws of its jurisdiction of organization, and has the requisite corporate power and authority to own, lease and operate .its assets and to carry on its business as now conducted. The Company is duly qualified or licensed to do business as a foreign corporation and is in good standing (with respect to jurisdictions that recognize the concept of good standing) in each jurisdiction where the character of the assets and properties awned, leased or operated by it or the nature of its business makes such qualification or license necessary_, except where the failure to be so qualified or licensed or to be in good standing, would not reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect. (b) Charter Documents. The Company has delivered to Parent a correct and complete copy of the certificate of incorporation (including any certificate of designations), by- laws or like organizational documents, each as amended to date (collectively, the 'Charter Documents"), of the Company. The Company is not in violation of any of the provisions of its lb m44762-1821124.duc Charter Documents. For purposes of this Article 111, the Company shall be deemed to have "delivered" a document to Parent to the extent that, not less than one (1) Business Day prior to the date of the Company's initial delivery of the complete copy of the Disclosure Schedules pursuant to Section 5.14, the Company either provided Parent with a hard or digital copy of such document or hosted a digital copy of such document in the virtual data room to which Parent had access in connection with its due diligence investigation of the Company and notified Parent of the posting of such document. (c) Subsidiaries. The Company has no Subsidiaries. Section 3.02 Capital Structure. (a) Capital Stock, The authorized capital stock of the Company consists of2,500 shares of Company Common Stock. As of the date of this Agreement, (i) 494.9520 Shares of Company Common Stock are issued and outstanding, (ii) 5.0000 shares of Company Common Stock are reserved for issuance upon exercise of an outstanding common stock purchase warrant (the "Stock Warrant") and (iii) 2,005.0480 Shares of Company Common. Stock are unissued. All of the outstanding shares of Company Common Stock are, and all shares of Company Common Stock which may be issued upon exercise of the Stock Warrant will be, if and when issued, duly authorized and validly issued, fully paid and non -assessable and not subject to any pre -eruptive rights. The issued and outstanding shares of Company Common Stock and Stock Warrant are owned, beneficially and of record, by the Persons and in the amounts set forth on Section 3,02 to the Company Disclosure Schedule. (b) Stock Awards. (i) Except for the Stock Warrant, no shares of Company Common Stock are subject to issuance pursuant to (A) an option, warrant or other right to acquire shares of Company Common Stock (each, a "Company Common Stock Option") or (B) a restricted stock unit award or other right, contingent or accrued, to acquire or receive shares of Company Common Stock or benefits measured by the value of such shares, and each award of any kind consisting of shares of Company Common Stock that may be held, awarded, outstanding, payable or reserved for issuance under any Company Common Stock Plan, other than Company Common Stock Options (each, a "Company Common Stock Award"). (ii) There are no Contracts to which the Company is a party obligating the Company to accelerate the vesting of any Company Equity Award as a result of the transactions contemplated by this Agreement (whether alone or upon the occurrence of any additional or subsequent events). There are no outstanding (A) securities of the Company convertible into or exchangeable for Voting Debt or shares of capital stock of the Company, (B) options, warrants or other agreements or commitments to acquire from the Company, or obligations of the Company to issue, any Voting Debt or shares of capital stock of (or securities convertible into or exchangeable for shares of capital stock of) the Company or (C) restricted shares, restricted stock units, stock appreciation rights, performance shares, profit participation rights, contingent value rights, "phantom" stock or similar securities or rights that are derivative of, w provide economic benefits based, directly or indirectly, on the value or price of, any shares of capital stock of the Company, in each case that have been issued by the Company (the items in clauses (A), (B) and 17 m44762-18211.24.doc (C), together with the capital stock of the Company, being referred to collectively as "Company Securities"). All outstanding shares of Company Common Stock have been issued or granted, as applicable, in compliance in all material respects with all applicable securities Laws. (iii) There are no outstanding Contracts requiring the Company to repurchase, redeem or otherwise acquire any Company Securities. The Company is not a party to any voting; agreement with respect to any Company Securities. (c) Voting Debt. No bonds, debentures, notes or other indebtedness issued by the Company (i) having the right to vote on any matters or, which shareholders or equity holders of the Company may vote (or which is convertible into, or exchangeable for, securities having such right), or (h) the value of which is directly based upon or derived from the capital stock, voting securities or other ownership interests of the Company, are issued or outstanding (collectively, "Voting Debt"). Section 3.03 Authority; Non -contravention; Third Party and Governmental Consents. (a) Authority. The Company has all requisite corporate power and authority to enter into and to perform its obligations under this Agreement and to consummate the transactions contemplated by this Agreement. The execution and delivery of this Agreement by the Company and the consummation by the Company of the transactions contemplated hereby has been truly authorized by all necessary corporate action on the part of the Company and no other corporate proceedings on the part of the Company are necessary to authorize the execution and delivery of this Agreement or to consurninate the Merger and the other transactions contemplated hereby, This Agreement has been duly executed and delivered by the Company and the Principal Shareholders and, assuming due execution and delivery by Parent, constitutes the valid and binding obligation of the Company and the Principal Shareholders, enforceable against the Company and the Principal Shareholders in accordance with its terms, except as such enforceability may be limited by bankruptcy, insolvency, moratorium and other similar Laws affecting creditors' rights generally and by general principles of equity. (b) Non -contravention. The execution, delivery and performance of this Agreement by the Company, and the consummation by the Company of the transactions contemplated by this Agreement, including the Merger, do not and will not- (i) contravene or conflict with, or result in any violation or breach of, the Charter Documents of the Company; 6i) subject to compliance with the requirements set forth in clauses (i) through (iv) of Section 3.03(c), conflict with or violate any Law or Order applicable to the Company, or any of its properties or assets; (iii) result in any breach of or constitute a default (or an event that with notice or lapse of time or both would become a default) under, or alter the rights or obligations of any third party under, or give to others any rights of termination, amendment, acceleration or cancellation, or require any Consent under, any Contract or Permit to which the Company is a party or otherwise bound; or (iv) result in the creation of a Lien (other than Permitted Liens) on any of the properties or assets of the Company, except, in the case of each of clauses (ii), (iii) and (iv), for any conflicts, violations; breaches, defaults, alterations, terminations, amendments, accelerations, cancellations or Liens, or where the failure to obtain any Consents, in each case, would not reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect, 18 m44762-182] ]24.doc (c) Third Party and Governmental Consents. No consent, approval, order or authorization of, or registration, declaration or filing with, or notice to (any of the foregoing being a "Consent"), any Person or any supranational, national, state, municipal, local or foreign government, any instrumentality, subdivision, court, administrative agency or commission or other governmental authority, or any quasi -governmental or private body exercising any regulatory or other governmental or quasi -governmental authority (a "Governmental Entity") is required to be obtained or made by the Company or any Company Shareholder in connection with the execution, delivery and performance by the Company of this Agreement or the consummation by the Company of the Merger and other transactions contemplated hereby, except for: (i) the filing of the Certificate of Merger with the Secretary of State of the State of Nevada; and (ii) the Consents listed in Section 3.03(c) of the Company Disclosure Schedule. The execution, delivery and performance by the Company of this Agreement and the consummation by the Company of the Merger and other transactions contemplated hereby do not require the Consent of any Person under any Laws that are designed or intended to prohibit, restrict or regulate actions having the purpose or effect of monopolization or restraint of trade or significant impediments or lessening of competition or creation or strengthening of a dominant position tluough merger or acquisition (the "Antitrust Laws"), in any case that are applicable to the transactions contemplated by this Agreement. (d) Takeover Statutes. No "fair pricey" "moratorium," "control share acquisition," "business combination." or other similar anti-takeover statute or regulation enacted under any federal, state, local or foreign laws applicable to the Company is applicable to this Agreement, the Merger or any of the other transactions contemplated by this Agreement. Section 3.04 Financial Statements; Receivables; Liabilities. (a) Section 3.04(a) of the Disclosure Schedule contains a complete and correct copy of the following: (i) the audited statements of income, stockholders' equity, and cash flows of the Company for the fiscal year ended December 31, 2011, and the audited balance sheet of the Company as of December 31, 2011; and (ii) the unaudited statements of income, stockholders' equity, and cash flows of the Company for the eight (8) months ended August 31, 2012, and the unaudited balance sheet of the Company as of August 31, 2012 (the "Most Recent Balance Sheet") (clauses (i) and (ii) collectively, the "Financial Statements"). The Financial Statements were prepared in accordance with United States generally accepted accounting principles ("GAAP") (except, in the case of the unaudited Financial Statements, for the absence of footnote disclosure) applied on a consistent basis throughout the periods involved and fairly present, in all material respects, the financial position of the Company as at the respective dates thereof and the results of its operations and cash flows for the periods indicated. (b) All accounts receivable of the Company ("Receivables") reflected on the Most Recent Balance Sheet, and all Receivables arising between the date of the Most Recent Balance Sheet, and the Closing Date, are valid and collectible obligations, represent bona fide transactions, arose in the ordinary course of business, and the goods or services involved have been sold and delivered to the account obligor, or are in transit, and no further goods or services are required to be provided in order to complete the sales, and are not subject to discount, counterclaim, reduction, setoff or dispute. Since December 31, 2011, there has been no change 19 ni44162-1821 124.doe in the amount, aging or collectability of the Receivables, or the reserves with respect thereto, As of the Effective Time, no such Receivable will be pledged or assigned to any other Person. No defense or set off to any such Receivable has been asserted in writing by the receivable obligor, or, to the Knowledge of the Company, exists. (c) Since December 31, 2011, the Company has not received or otherwise had or obtained Knowledge of any complaint, allegation, assertion or claim regarding the accounting or auditing practices, procedures, methodologies or methods of the Company or its internal accounting controls, including any written complaint, allegation, assertion or claim that the Company has engaged in questionable accounting or auditing practices. (d) Section 3.04(d) of the Disclosure. Schedule sets forth a complete and correct list of all outstanding Company Debt. (e) Except as set forth on Section 3.04(d) of the Disclosure Schedule or on the Most Recent Balance Sheet. the Company has no Liabilities other than trade payables and accrued expenses incurred in the ordinary course of business and consistent with past practice since dune 30, 2012 (atone of which results from, arises of, relates to, is in the nature of or was caused by any breach of contract, breach of warranty, tort, infringement or violation of Law). (f) Section 3.04(f) -of the'Disclosure Schedule sets ,forth a complete and correct list of all notes or other obligations owing by or to the Company from any officer, director, employee, Company Shareholder or Affiliate ("Related Party Obligations"), Prior to Closing, all Related Party Obligations shall be paid in full and satisfied, Section 3.05 Absence of Certain Changes or Events. Since December 31, 2011, except in connection with the execution and delivery of this Agreement and the consummation of the transactions contemplated hereby, the business of the Company has been conducted in the ordinary course of business and there has not been or occurred: (a) any Company 1Vlatorial Adverse Effect or any event, condition, change or effect that could reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect; or (b) any event, condition, action or effect that, if taken during the period from the date of this Agreement through the Effective Time, would constitute a breach of Section 5.01, Section 3.O6 Taxes. (a) ']fax Returns and Payment of Taxes. The Company has duly and timely filed or caused to be filed (taking into account any valid extensions) all Tax Returns required to be filed. Such Tax Returns are true, complete and correct in all material respects. The Company is not currently the beneficiary of any extension of time within which to file any Tax Return other than extensions of time to file Tax Returns obtained in the ordinary course of business consistent with past practice. All Taxes due and owing by the Company (whether or not shown on any Tax Return) have been timely paid or, where payment is not yet due, the Company has made an adequate provision for such Taxes in the Financial Statements (in accordance with GAAP). The 20 m44762-1821124.doc amount of the Company's liability for unpaid Taxes for all periods ending on or before the date of this Agreement do not, in the aggregate, exceed the amount of the current liability accruals for Taxes (excluding reserves for deferred Taxes) with respect to the Company as of the date of this Agreement, and the amount of the Company's liability for unpaid Taxes for all periods ending on or before the Closing Date shall not, in the aggregate, exceed the amount of the current liability accruals for Taxes (excluding reserves for deferred Taxes) as such accruals are reflected on the Final Closing Balance Sheet, The Company has not incurred any liability far Taxes since the date of the Company's most Financial Statements outside the ordinary course of business or otherwise inconsistent with past practice. The Company has disclosed on its federal income tax returns all positions taken therein that could give rise to a substantial understatement penalty within the meaning of Code Section 6662. (b) Availability of Tax Returns. The Company has delivered to Parent complete and correct copies of all federal, state, local and foreign income, franchise and other Tax Returns filed by or on behalf of the Company for any Tax period ending on or before December 31, 2011. The Company shall promptly provide Parent copies of all Tax Returns that are filed by the Company after the date of this Agreement and prior to the Closing Date. (c) Withholding. The Company has withheld and paid all Taxes required to have been -,Nrithheld and paid in connection with amounts paid or owing to any Employee, independent contractor, creditor, customer, shareholder or other patty, and materially complied with all information reporting and back-up withholding provisions of applicable Law. (d) Liens. There are no Liens for Taxes upon the assets of the Company other than for current Takes not yet due and payable or for "faxes that are being contested in good faith by appropriate proceedings and for which adequate reserves in accordance with GAAP has been made in the Financial Statements. (c) Tax Deficiencies and Audits. No deficiency for any Taxes exists or has been asserted (either in writing or verbally, formally or informally) or is expected to be asserted with respect to the Company or its operations. There are no waivers or extensions of any statute of limitations currently in effect with respect to Taxes of the Company. The Tax Returns of the Company have never been audited by a government or taxing authority, nor are any audits, suits, proceedings, investigations, claims, examinations or other administrative or judicial proceedings ongoing, pending or threatened (either in writing or verbally, formally or informally) with respect to any Taxes of the Company. The Company is neither a party to any action or proceeding for assessment or collection of Taxes, nor has such event been asserted or threatened (either in writing or verbally, formally or informally) against the Company or any of its assets. The Company shall notify Parent promptly if the Company receives notice of any Tax audit, the assessment of any Tax, the assertion of any Tax Lien, or any request, notice: or demand for Taxes by any Taxing authority. (f) Tax Jurisdictions, No claim has ever been made in writing by any taxing authority in a jurisdiction where the Company does not file Tax Returns that the Company is or may be subject to Tax in that jurisdiction. The Company does no business in and derives no income from any state, local, territorial or foreign taxing jurisdiction other than those for which all Tax Returns have been furnished to Parent. 21 t7A4762-1821124.doe (g) Tax Rulings. The Company has not requested and is not the subject of or bound by any private letter niling, technical advice memorandum or similar ruling or memorandum with any taxing authority with respect to any Taxes, nor is any such request outstanding. (h) Consolidated Groups, Transferee Liability and Tax Agreements. The Company (i) has not been a member of a group filing Tax Returns on a consolidated; combined, unitary or similar basis, (ii) has no liability for Taxes of any Person (other than the Company) under 'Treasury Regulation Section 1.1502-6 (or any comparable provision of local, .state or foreign Law), as a transferee or successor, by Contract, or otherwise, or (iii) is not a party to or bound by nor has any liability under any Tax sharing, allocation or indemnification agreement or arrangement. (i) Change in Accounting Method. The Company has not made, agreed to snake, nor is it required to snake, any adjustment under Sections 481(a) of the Code or any comparable provision of stab, local or foreign Tax Laws by reason of a change in accounting method or otherwise. 0) Post -Closing Tax Items. The Company will not be required to include any itern of income in, or exclude any item of deduction from, taxable income for any taxable. period (ot' portion thereof) ending after the Closing Date as a result of any (i) "closing agreement" as described in Section 7121 of the Code (or any corresponding or similar provision of state, local or foreign income Tax Law) executed on or prior to the Closing Date, (ii) installment sale or open transaction disposition .made on or prior to the Closing Date, or (iii) prepaid amount received on or prior to the Closing Date. (k) Ownership Changes. Without regard to this Agreement, the Company has not undergone an "ownership charge",xithin the meaning of Section 392 of the Code. (1) US Real Property Holding Corporation, The Company is not a United States real property holding corporation (as defined in Section 897(c)(2) of the Code) during the applicable period specified in Section 897(c)(1)(a) of the Code. (m) Section 355. The Company has not been a "distributing corporation" or a "controlled corporation" in connection with a distribution described in Section 355 of the Code. (n) Reportable 'Transactions. The Company has not been a party to, or a promoier of, a "reportable transaction" within the meaning of Section 6707A(c)(1) of the Code and Treasury Regulations Section 1.6011-4(b). (o) Tax Basis and Tax Attributes, Section 3.06 to the Disclosure Schedule contains a correct and complete description of the Company's basis in its assets, the Company's current and accumulated earnings and profits, and the Company's tax carryovers_ Section. 3.07 Intellectual Property, (a) Certain Owned Company IP. Section 3.07(a) of the Company Disclosure Schedule contains a complete and correct list of all: (i) Company -Owned IP that is the subject of 22 nA4762.1821124,dn any issuance, registration, certificate, application or other filing by, to or with any Governmental Authority or authorized private registrar, including registered Trademarks, registered Copyrights, issued Patents, domain name registrations and pending applications for any of the foregoing ("Registered Intellectual Property"); and (ii) material unregistered Company -Owned IP. All fees and filings with respect to any material Registered Intellectual Property have been timely submitted to the relevant Governmental Authorities and Internet domain name registrars as required to maintain such Registered Intellectual Property in full force and effect. (b) Right to Use; Title, The Company is the sole and exclusive owner of all ri ght, title and interest in and to, or has the valid right to use all Intellectual Property used or held for use in or necessary for or that are otherwise material to the conduct of the business of the Company as currently conducted and contemplated ("Company IP"), free and clear of all Liens other than Permitted Liens. Section 3.07(h) of the Company Disclosure Schedule contains a complete and correct list of all Company IP. (c) Validity and Enforceability, The Company's rights in the Company IP are valid, subsisting and enforceable, The Company has taken reasonable steps to maintain the Company IP and to protect and preserve the confidentiality of all Trade Secrets included in the Company IP, except where the failure to take such actions would not reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect, (d) Company TP Agreements, Section 3.07(b) of the Company Disclosure Schedule contains a complete and correct list of all Company IP Agreements other than licenses for shrink-wrap, click wrap or other similar commercially available off -the -shelf Software thathas not been modified or customized by a third party for the Company. The consummation of the transactions contemplated hereunder will not, conflict with, or result in any violation or breach of, or default (with or without notice or lapse of time, or both) under, or give rise to a right of, or result in, termination, cancellation or acceleration of any obligation or to the loss of a benefit under, or result in the creation of any Lien, other than Permitted Liens, in or upon, any Company IP, (e) Non -Infringement. The Company has not received any written claim from any Person (i) alleging any infringement, misappropriation, misuse, dilution or violation of any Intellectual Property or unfair competition, (ii) inviting the Company to take a license under any Intellectual Property or consider the applicability of any Intellectual Property to any products or services of, or the conduct of any business by, the Company or (iii) challenging the ownership, use, validity, scope of right or enforceability of any Company IP. Except as would not be reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect, (i) the conduct of the business of the Company has not infringed, misappropriated, misused, diluted or otherwise violated, and is not infringing, misappropriating, misusing, diluting or otherwise violating, any Intellectual Property of any other Person and (ii) to the Knowledge of the Company, no third party is infringing upon, violating, misusing, diluting or misappropriating any Company IP, (f) IP Legal Actions and Orders. There are no Legal Actions pending or, to the Knowledge of the Company, threatened: (i) alleging any infringement, misappropriation, misuse, dilution or violation of the Intellectual Property of any Person by the Company; (ii) challenging 23 m44762-1821 t24 due the validity, enforceability or ownership of any Company IP. The Company is not subject to any outstanding Order that restricts or impairs the use of any Company IP. The Company has not received any notice or request from any person for indemnification with respect to any claim of infringement, misappropriation, misuse, dilution or violation of any Intellectual Property of any other Person. (c) Privacy. To the extent required by Law, the Company has provided sufficient disclosure with respect to privacy to its customers, The Company's privacy policies and related practices are, in all material respects, consistent with standards that are customary in the dark fiber industry, The Company has not collected, used or shared and does not collect, use or share personally identifiable information (including name, address, telephone number, email address or precise location information) with respect to natural persons ("PIV). 'I'he Company has complied in all material respects with applicable Law and Contracts regarding the collection, use, protection and /or non -dissemination of PH (including with respect to any Contractual obligations regarding the Health Insurance Portability and Accountability .Act). To the Knowledge of the Company, no claims have been asserted or threatened, or reasonably expected to be asserted or threatened, with respect to P1I possessed by or otherwise subject to the control of the Company. For the avoidance of doubt, the term "privacy" as used in this Section 3.07(g) includes the concepts of data protection and data security. (h) Security, The Company has taken reasonable measures to preserve and maintain the performaner, security and integrity of the Company's information tLOu ology systerns (Wnd all Software, information or data stored thereon) (the "IT Systems"). The Company has a commercially reasonable disaster recovery and security plans, procedures and facilities for the business of the Company as currently conducted and contemplated, There has been no failure with respect to any IT Systems that has had a material effect on the operations of the Company and has not been fully remedied and (ii) to the Knowledge of the Company, there has been no unauthorized access to or use of any IT Systems (or any Software, information or data stored thereon). Section 3,08 Compliance; Permits. (a) Compliance. The Company is in compliance with, all Laws or Orders applicable to the Company or by which the Company or its business or properties is bound, except for such non-compliance that would not reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect. No Governmental Entity has issued any notice or notification stating that the Company is not in compliance with any Law, except where such non- compliance would not reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect. (b) Permits. The Company holds, to the extent legally required to operate its business as currently conducted and as such business is being operated as of the Effective Date, all pern-iits, licenses, clearances, authorizations and approvals from Governmental Entities (collectively, "Permits"), except for any Permits for which the failure to obtain or bold would not reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect. No suspension or cancellation of any Permits of the Company is pending or, to the Knowledge of the Company, threatened, except for any such suspension or cancellation 24 m44752-1821124,doe. which would not reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect, The Company is in compliance with the terms of all Permits, except where the failure to be in such compliance would not reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect. Section 3.08(b) of the Company Disclosure Schedule contains a complete and correct list of all material Permits, and complete and correct copies of all material Permits have been delivered to Parent. There is no Legal Action pending or the Company's Knowledge threatened, to terminate, suspend or modify any Permit. Section 3.09 Litigation, There is no claim, action, suit, arbitration, proceeding or, to the Knowledge of the Company, governmental investigation (each, a "Legal Action"), pending, or to the Knowledge of the Company, threatened against the Company or any of its properties or assets or, to the Knowledge of the Company, any executive officer or director of the Company in (heir capacities as such, in each case by or before any Governmental Entity, The Company is not subject to any order, writ, assessment, decision, injunction, decree, ruling or judgment of a Governmental Entity ("Order"), whether temporary, preliminary or permanent, which would reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect. There are no governmental inquiries or investigations or internal investigations pending or, to the Knowledge of the Company, threatened, in each case regarding any accounting practices of the Company or any malfeasance by any executive officer of the Company, Section 3.10 Brokers' and Finders' Fees. Except for fees payable to and , the Company has not incurred, nor will it inour, directly or indirectly, any liability for brokerage or finders' fees or agents' commissions or any similar charges in connection with this Agreement or any transaction contemplated hereby. Section 3.11 Related Party Transactions. Except as may beset forth in Section 3.11 of the Company Disclosure Schedule, no executive officer or director of the Company or any Company Shareholder (or any of such person's immediate family members or Affiliates or associates) is a party to any Contract with or binding upon the Company or any of its assets, rights or properties or has any interest in any property owned by the Company or has engaged in any transaction with any of the foregoing within the last twelve (12) months. Section 3.12 Employee Matters. (a) Schedule. Section 3.12(a) of the Company Disclosure Schedule contains a complete and correct list of each plan, program, policy, agreement, collective bargaining agreement or other arrangement providing for compensation, severance, deferred compensation, performance awards, stock or stock -based awards, fringe, retirement, death, disability or medical benefits or other employee benefits or remuneration of any kind, including each employment, severance, retention, change in control or consulting plan, program arrangement or agreement, in each case whether written or unwritten or otherwise, funded or unfunded, including each "employee benefit plan," within the meaning of Section 3(3) of ERISA, whether or not subject to ERISA, which is or has been sponsored, maintained, contributed to, or required to be contributed to, by the Company for the benefit of any current or former employee, independent contractor, consultant or director of the Company (each, a "Company Employee"), or with respect to which the Company has or may have any Liability (collectively, the "Company Employee Plans"). 25 m44762- l 821 124.doc (b) Documents, The Company has delivered to Parent correct and complete copies (or, if a plan is not written, a written description) of all Company Employee Plans and amendments thereto in each case that are in effect as of the date hereof, and, to the extent applicable, (i) all related trust agreements, funding arrangements and insurance contracts now in effect or required in the future as a result of the transactions contemplated by this Agreement or otherwise, (ii) the most recent determination letter received regarding the tax -qualified status of each Company Employee Plan, (iii) the most recent financial statements for each Company Eniployce Plan, (iv) the Form 5500 Annual Returns/Reports for the most recent plan year for each Company Employee Plan, (v) the current summary plan description for each Company Employee Plan and (vi) all actuarial valuation reports related to any Company Employee Plaits, (c) Employee flan Compliance, (i) Each Company Employee Plan has been established, administered, and maintained in all material respects in accordance with its terms and in material compliance with applicable haws, including but not limited to ERISA and the Code; (ii) all the Company Employee Plans that are intended to be qualified tinder Section 401(a) of the Code are so qualified and have received timely determination letters from the IRS and no such determination letter has been revoked nor, to the Knowledge of the Company, has any such revocation been threatened, and to the Knowledge of the Company, no circumstance exists that is likely to result in the lass of such qualified status under Section 401(a) of the Code; (iii) the Company has timely made all material contributions and other material payments required by and due under the terms of each Company Employee Plan and applicable Law, and all benefits accrued under any unfunded Company Employee Plan have been paid, accrued or., otherwise adequately reserved to the extent requited by, and in accordance wi6GAAP; (iv) t:xeept to the extent limited by applicable Law, each Company Employee Plan can be amended, terminated or otherwise discontinued after the Effective Time in accordance with its terms, without material liability to Parent or the Company; (v) there are no material audits, inquiries or Legal Actions pending or, to the Knowledge of the Company, threatened by the IRS or the U.S. Department of Labor, or any similar Governmental Entity with respect to any Company Employee Plan; (vi) there are no material Legal Actions pending, or, to the Knowledge of the Company, threatened with respect to any Company Employee Plan (in each case, other than routine claims for benefits), and (vii) to the Knowledge of the Company, the Company has not engaged in a transaction that could subject the Company to a tax or penalty unposed by either Section 4975 of the Code or Section 502(i) of ERISA, (d) Neither the Company nor any Company ERISA Affiliate has incurred or reasonably expects to incur, either directly or indirectly, any material liability under Title 1 or Title IV of ERISA, or related provisions of the Code or foreign Law or regulations relating to employee benefit plans, (e) Certain Company Employee Plan& With respect to each Company EmployeePlan: (i) no such plan is a "multi -employer plan" within the meaning of Section 3(37) of ERISA or a "multiple employer plan" within the meaning of Section 413(c) of the Code (each, a "Multi -employer Plan") and neither the Company nor any of its ERISA affiliates has at 26 m44762-1821124.dor any time contributed to or had any liability or obligation in respect of any such Multi -employer Plan or multiple employer plan; (ii) no Legal Action has been initiated by the Pension Benefit Guaranty Corporation to terminate any such plan or to appoint a trustee for any such plan; (iii) except as may be set forth in Section 3.12(e) of the Company Disclosure Schedule, no such plan is subject to the minimum funding standards of Section 302 of ER.ISA or Section 412 of the Code, and no plan listed in Section 3.12(e) of the Company Disclosure Schedule has failed to satisfy the minimum funding standards of Section 302 of ERISA or Section 412 of the Code; and (iv) no "reportable event," as defined in Section 4043 of ERISA, has occurred with respect to any such plan. (f) No Yost -Employment Obligations. No Company Employee Plan provides post - termination or retiree welfare benefits to any person for any reason, except as may be required by COBRA or other applicable Law, and neither the Company nor any Company RRISA Affiliate has any Liability to provide post -termination or retiree welfare benefits to any person or ever represented, promised or contracted to any Company Employee (either individually or to Company Employees as a group) or any other person that such Company Employe(s) or other person would be provided with post -termination or retiree welfare benefits, except to the extent required by COBRA or other applicable Law. (g) No Company Employee Plan has within the three (3) years prior to the date hereof, been the subject of an examination or audit by a Governmental Entity or is the subject of an application or filing under, or is a participant in, an amnesty, voluntary compliance, self - correction or similar program sponsored by any Governmental Entity, (h) Section 409A Compliance. Each Company Employee Plan that is subject to Section 409A of the Code has been operated in compliance with such section and all applicable regulatory guidance (including proposed regulations, notices, rulings, and final regulations). (i) Health Care Compliance. The Company complies in all material respects with the applicable requirements of COBRA or any similar state statute with respect to each Company Employee Plan that is a group health plan within the meaning of Section 5000(b)(1) of the Code or such state statute. 0) Effect of Transaction. Except as may be set forth in Section 3.126)of the Company Disclosure Schedule, neither the execution of this Agreement, the consummation of the Merger, nor any of the transactions contemplated by this Agreement will (either alone or -upon the occurrence of any additional or subsequent events): (i) entitle any current or former director, employee, contractor or consultant of the Company to severance pay or any other payment; (ii) accelerate the time of payment, funding, or vesting, or increase the amount of compensation due to any such individual, (iii) limit or restrict the right of the Company to merge, amend or terminate any Company Employee Plan without any Liability to the Company or Parent, (iv) increase the amount payable or result in any other material obligation pursuant to any 27 m44762-1821124.doe Company Employee flan, or (v) result in `excess parachute payments" within the meaning of Section 28O (b) of the Code. (k) Employment Law Matters, The Company; (i) is in compliance with all applicable Laws and agreements respecting hiring, employment, termination of employment, plant closing and mass layoff, employment discrimination, harassment, retaliation and reasonable accommodation, leaves of absence, terms and conditions of employment., wages and hours of work, employee health and safety, leasing and supply of temporary and contingent staff, engagement of independent contractors, including proper classification of same, payroll taxes, and immigration with respect to Company Employees and contingent workers; and (ii) is in, compliance with all applicable Laws relating to the relations between it and any labor organization, trade union, work council or other body representing Company Employees, except, in the case of clauses (i) and (ii) immediately above, where the failure to be in compliance with the foregoing would not reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect, (1) Labor. The Company is not a party to, or subject to, any collective bargaining agreement or other agreement with any labor organization, work council or trade union with respect to any of its or their operations. No material work stoppage, slowdown or labor strike against the Company with respect to employees who are employed within the United States is pending, threatened or has occurred. None of the Company Employees are represented by a labor organization, work council or trade union and, to the Knowledge of the Company, there is no organizing activity, Legal Action, election petition, union card signing or other union activity or union corporate campaigns of or by any labor organization, trade union or work council directed at the Company or any Company Employees. `)'here are no Legal Actions, goverrunent investigations, or labor grievances pending, or, to the Knowledge of the Company, threatened relating to any employment related matter involving any Company Employee or applicant, including, but not limited to, charges of unlawful discrimination, retaliation or harassment, failure to provide reasonable accommodation, denial of a leave of absence, failure to provide compensation or benefits, unfair labor practices, or other alleged violations of Law, except for any of the foregoing which would not reasonably be expected to have, individually or in the aggregate, a Company )Material Adverse Effect. (m) Section 3.12(m) of the Company Disclosure Schedule contains a complete and correct list of all'current Company Employees, their respective hire daces, current positions and rates of cnmpensation (Including date of last in, ease of compensation), rate type (dourly or salary) and scheduled hours per week, and whether the employee is subject to an employment agreement (whether written or oral), a collective bargaining agreement or represented by a labor organization. The Company has delivered to Parent correct copies of all written employment agreements or summaries of any oral employment agreements. The Company shall deliver to Parent updates to such list as necessary to reflect new hires or other personnel changes. All of the Company Employees are "at will" employees, To the Knowledge of the Company, no Company Employee intends to terminate his or her employment relationship (i) with the Company at any time prior to Closing or (ii) with the Surviving Company or Parent at any time. following Closing. 28 m44752-1821124.doc Section 3.13 Real Property and Personal Property Matters. (a) heal Property. The Company does not own any real estate, The Company has real property interests that give the Company the legal right to use specified real property in the operations of Company's business and that include leasehold interests in real estate; easements, rights to access, utility rights of way easements, pole attachment agreements, rights of use, underground conduit agreements, crossing agreements, railroad agreements, subleases, licenses and sublicenses ("heal Property .Interests"), Section 3,13(a) of the Company Disclosure Schedule contains a complete and correct list of the Real Property Interests. Except as would not reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect, (i) all heal Property Interests are valid and in full force and effect except as set forth on Section 3.13(a) of the Company Disclosure Schedule to the extent they have previously expired or terminated in accordance with their terms, (ii) the Company has the valid and enforceable right to use all such Real Property Interests and (iii) neither the Company nor, to the Knowledge of the Company, any third parry, has violated any provision of, or committed or failed to perform any act which, with or without notice, lapse of time or both would constitute a default under the provisions of, any Real Property Interest, The Company has delivered to Parent complete and correct copies of all documents that evidence the Real Property Interests. The Company has not received any written notice of termination, material breach or material impairment of any heal Property Interest. (b) Personal Property. Section 3,13(b) of the Company Disclosure Schedule contains a complete and correct list of all other material personal property that includes the Network Assets, as well as the Franchises and the Contracts, that are used in connection with the conduct the Company's business ("Personal Property")- (c) Network Assets. (i) The property, plant, cable, conduits and other equipment owned, leased or otherwise contracted for by the Company for use in its fiber network (collectively, the "Network Assets"): (A) are in a state of good maintenance and repair (ordinary wear and tear excepted) and are adequate and suitable for the purposes for which they are presently being used; (B) have been installed, operated and maintained in accordance with the general standards employed in the telecommunications industry and satisfy, in all material respects, (I) the requirements of the Permits, Contracts and applicable Law, and (II) technical standards and rules, regulations and Orders of any Governmental Entity; and (C) are located pursuant to and in compliance with the Real Property Interests, (ii) Section. 3.13(e) of the Company Disclosure Schedule sets forth a complete and correct statement of the following information with respect to the Company's fiber network: (A) the approximate number of aerial and underground miles of plant and fiber; (E) the number of optical fibers per cable and the number of fibers in use; and (C) a detailed map of the Company's fiber network. Other than the conduit use agreements disclosed pursuant to Section 3.13(c) of the. Company Disclosure Sehedule, the Company owns all conduit related to the business of the Company and no Person other than the Company has any right to use any conduit that is used in such business except as would not reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect, 29 m44762-1821 124.doa (iii) Section 3.13(c) of the Company Disclosure Schedule sets forth a complete and correct list of all material network outages and material network service unavailability and customer service credits at any time since December 31, 20t0. (d) Title and Sufficiency of Assets. Except as disclosed in applicable subsections of Section 3.13 of the Company Disclosure Schedule, or as would not reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect, the Company has good title to, or a valid and binding interest in, all the Real Property Interests and Personal Property used in the operation of the business of the Company, free and clear of all Liens, other than Permitted Liens, The Real Property Interests, Personal Property, Company IP and other tangible and intangible assets owned or leased by the Company constitute all of the assets necessary to conduct the business of the Company in the manner conducted immediately prior to the Closing. Section 3.14 Environmental Matters. Except for such matters as would not reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect, (a) The Company is, and has been, in compliance with all Environmental haws, which compliance includes the possession, maintenance of, compliance with, or application for, all Permits required under applicable Environmental Taws for the operation of the business of the Company as currently conducted. (b) The Company has not (i) produced, processed, manufactured, generated, transported, treated, handled, :used, stored, disposed of or released any Hazardous Substances, except in compliance with Environmental Laws, on or at any real property underlying any Real Property Interests, or (ii) exposed any employee or any third party to any hazardous Substances under circumstances reasonably expected to give rise to any material Liability or obligation under any Environmental Law, (c) The Company has not received written notice of and there is no Legal Action pending, or to the Knawledge of the Company, threatened against the Company, alleging any Liability or responsibility under or nor. -compliance with any Environmental Law or seeking to impose any financial responsibility for any investigation, cleanup, removal, contaimnent or any other remediation or compliance under any Environmental Law. The Company is not subject to any Carder or written agreement by or with any Governmental Entity or third party imposing any material Liability or obligation with respect to any of the foregoing, Section 3.15 Material Contracts. (a) Material Contracts, For purposes of this Agreement, "Company Material Contract" shall mean the following to which the Company is a party or any of its assets is bound; (i) any employment or consulting Contract (in each case with respect to which the Company has continuing obligations) with any current or former (_A) executive ofticcr of the Company, (B) member of the Company Board or (C) Company Employee providing for an annual base salary in excess of 30 m44762-1821124.doe (ii) any Contract providing; for indemnification or any guaranty by the Company that is material to the Company other than any Contract providing for indemnification of customers or other Persons pursuant to Contracts entered into in the ordinary course of business; (iii) any Contract that purports to limit in any material respect the right of the Company (or, at any time after the consummation of the Merger, Parent or the Surviving Company) (A) to engage in any line of business or (B) to compete with any Person or operate in any geographical location; (iv) any Contract relating to the disposition or acquisition, directly or indirectly (by merger or otherwise), by the Company after the date of this Agreement of assets; (v) any Contract that contains any provision that requires the purchase of all of the Company's requirements for a given product or service from a given third party, which product or service is material to the Company; (vi) any Contract that obligates the Company to conduct business on an exclusive or preferential basis with any third party or upon consummation of the Merger will obligate Parent or the Surviving Company to conduct business on an exclusive or preferential basis with any third party; (vii) any partnership, joint venture or similar Contract that is material to the Company; (viii) other than accounts receivables and payables, any mortgages, indentures, guarantees, -loans or credit agreements, security agreements or other Contracts, in each case relating to Company Debt, whether as borrower or Iender; (ix) any employee collective bargaining agreement or other Contract with any labor union; (x) any Contract that does not terminate by its terms or is not cancelable by the Company without liability or, penalty to the Company on no more than thirty (30) days' notice; (xi) the Franchises; (xii) the Permits; (xiii) Contracts with the current largest 25 customers of the Company, as measured by gross revenue on an annual basis; (xiv) any Contract relating to the use of any public utility facilities, including all pole line, joint pole or master contracts for pole attachment rights and the use of conduits (each, a "Pole Attachment Agreement"); 31 m44762-1821124.doc (xv) ;any other Contract under which the Company is obligated to make payment or incur casts in excess of $25,000 in any year and which is not otherwise described in clauses (i)—(xiv) above; (xvi) the Federal Broadband Technology opportunity Program contract, as an underlying network provider in the award given to NoaNet, and the related Participation Agreements by and among Northwest Open Access Network, the Company and the other participants named therein (collectively, the "BTOP"); (xvii) any Company IP Agreement; (xviii) all powers cif attorney given by the Company; and (xix) any Contract which is not othenvise described in clauses (0-(xviii) above that is material to the Company, (b) Schedule of Material Contracts; Documents, Section 3.15(h) of the Company Disclosure Schedule sets forth a complete and correct list of all Company Material Contracts. The Company has delivered to Parent correct and complete copies of all Company MV jtenial Contracts, including any amendments thereto, (c) No Breach. (i) All the Company Material Contracts are valid and binding on the Company, enforceable against it in accordance with its terms, and is in full force and effect, 00 neither the Company nor, to the Knowledge of the Company, any third party has violated any provision of, or failed to perform any obligation required Under the provisions of, any Company Material Contract, and (iii) neither the Company nor, to the Knowledge of the Company, ally third party is in breach, or has received written notice of breach, of any Company Material Contract. Section 3,16 Franchises, Section 3.16 of the Company Disclosure Schedule contains a correct and complete list Of all (including any current or expired) Franchises authorizing the Company to provide service in the areas in which the Company operates, including the: expiration dates for any current Franchises and a list of any expired Franchises. Correct and complete copies of the Franchises Iisted in Section 3.16 of the Company Disclosure Schedule have been delivered to Parent, Except as set forth in Section 3.16 of the Company Disclosure Schedule, (a) the Company is in compliance with all Franchises, (b) each of the Franchises is in full force and effect: and (c) a valid request for renewal has been duly and timely filed under Section 626 of the Communications Act with the proper Goverm ental Entity with respect to each of the Franchises that has expired or will expire within six (6) months after the date of this Agreement. Neither the Company nor any of its Affiliates has received notice that any Franchise will not be renewed or that the applicable Governmental Entity has challenged or raised any objection to or otherwise questioned the Company's request for any such renewal, and Companyand its Affiliates have duly and timely complied in all iaterial respects with any and all inquiries and demands by any and all Crovernment Entities made with respect to the Company's requests for any such renewal. Complete and correct copies of all correspondence between the Company and ally Governmental Entity concerting the renewal of any !'ranch se have been and will he delivered to Parent in a timely manner. To the Knowledge of the Company, there exist no facts 32 m44762-1821124.doc. or circumstances that make it likely that any Franchise will not be renewed or extended on commercially reasonable terms. No Governmental Entity has commenced, or given notice that it intends to commence, a proceeding to revoke or suspend a Franchise, Section 3.17 Bonds; Letters of Credit. Section 3.17 of the Company Disclosure Schedule sets forth a list of all franchise, construction, fidelity, performance and other bonds, guaranties in lieu of bonds and letters of credit posted by the Company or any Affiliate of the Company, and all certificates of insurance of the Company in connection with the business. Section 3.18 Accuracy of Statements. Neither this Agreement, the Disclosure Schedule, the Confidential information Memorandum dated .tune 2012, nor any other certificate, document, or information furnished or to be furnished by or on behalf of the Company or any Company Shareholder to Parent or any representative or Affiliate of Parent in connection with this Agreement or any of the transactions contemplated hereby contains or will contain an untrue statement of material fact or, to the Company's Knowledge, omits or will omit to state a material fact necessary to make the statements contained herein or therein, in light of the circumstances in which they are made, not misleading. ARTICLE 1V RE,IPRESENTATION5 AND WARRANTIES OF PARENT Parent hereby represents and warrants to the Company as follows: Section 4.01 Organization. Parent is a limited liability company duly organized, validly existing and in good standing under the Laws of the jurisdiction of its formation. At Closing, Merger Sub will be either a corporation or a limited liability company duly organized, validly existing and in good standing under the Laws of the jurisdiction of its formation. Section 4.02 Authority; Non -contravention; Third Party and Governmental Consents. (a) Authority. Parent has, and at Closing Merger Sub will have, all requisite limited liability company or corporate power and authority to enter into and to perform its obligations under this Agreement and to consummate the transactions contemplated hereby. The execution and delivery of this Agreement by Parent and Merger Sub and the consummation by Parent and Merger Sub of the transactions contemplated hereby have been duly authorized by all necessary corporate action on the part of Parent and Merger Sub and no other corporate proceedings on the part of Parent or Merger Sub are necessary to authorize the execution and delivery of this Agreement or to consummate the Merger and the other transactions contemplated hereby, subject only to the tiling of the Certificate of Merger pursuant to the NCC. This Agreement has been duly executed and delivered by Parent and Merger Sub and, assuming due execution and delivery by the Company, constitutes the valid and binding obligation of Parent and Merger Sub, enforceable against Parent and Merger Sub in accordance with its terms, except as such enforceability may be limited by bankruptcy, insolvency, moratorium: and other similar Laws affecting creditors' rights generally and by general principles of equity. 33 m44762-1821124,doc (b) Non -contravention, The execution, delivery and performance of this Agreement by Parent and Merger Sub and the consummation by Parent and Merger Sub of the transactions contemplated by this Agreement, do not and will not: (i) contravene or eant7ict with, or result in any violation or breach of, the certificate of incorporation or by-laws of Parent or Merger Sub; (ii) subject to compliance: with the requirements set forth in clauses (i)-(iv) of Section 4.42(c), conflict with or violate any Law applicable to Parent or.Merger Sub or any of their respective properties or assets; (iii) result in any breach of or constitute a default (or an event that with notice or lapse of time or both would become a default) under, or give to others any rights of ternnination, amendment, acceleration or cancellation, or require any Consent under any Contract to which Parent or its Subsidiaries, including Merger Sub, are a party or otherwise bound; or (iv) result in tine creation of any Lien (other than Permitted Liens) on any of the properties or assets of Parent or Merger Sub, except, in the case of each of clauses (h), (iii) and (iv), for any conflicts, violations, breaches, defaults; terminations, amendment?, accelerations, cancellations or Liens, or where the failure to obtain any Consents, in each case, would not reasonably be expected to have, individually or in the aggregate, a material adverse effect can Parent's and Merger Sub's ability to consummate the transactions contemplated by this Agreement, (c) Governmental Consents. No Consent Of any Governmental Entity is required to be Obtained or made by Parent or Merger Sub in connection with the execution, delivery and performance by Parent and Merger Sub of this Agreement or the consummation by Parent and Merger Sub of die Merger and other transaction:> contemplated hereby, except for: (i) the filing of the Certificate of Merger with the Secretary of State ofthc State of Nevada, and appropriate documents with the relevant authorities of other states in which the Company aindlor Parent are qualified to do business; (ii) the Franchise Consents; and (iii) such Consents which if not obtained or made would not, individually or in the aggregate, reasonably be expected to have a material adverse effect oil Parent's and Merger Sub's Ability to consummate the transactions contemplated .by this Agreement. Section 4.03 Financial Capability. Subject to closing of the Acquisition, Parent (or its perruitted assigns) and Merger Sub, collectively, have or will have, prior to the Effective T'inie, sufficient funds to pay the Preliminary Aggregate Merger Consideration contemplated by this Agreement and to perfonn the other obligations of Parent and Merger Sub contemplated by this Agreement. Section 4.04 Legal Proceedings. As of the date hereof, there is no pending or, to the Knowledge of Parent, threatened, Legal Action against Parent or any of its Subsidiaries, including Merger Sub, nor is there any injunction, order, judgment, ruling or decree imposed upon Parent or any of its Subsidiaries, including Merger Sub, in each case, by or before any Governmental Entity, tha# would, individually or in the aggregate, reasonably be expected to have a material adverse effect on Parent's and Merger Sub's ability to consummate the transactions contemplated by this Agreement. ARTICLE V COVENANTS Section 5.01 Conduct of Business of the Company, The Company shall, during the period from the date of this Agreement until the Effective Time, except as expressly 34 M44762-1821d24 doe contemplated by this Agreement or as required by applicable Law or with the prior written consent of Parent, conduct its business in the ordinary course of business consistent with past practice, and, to the extent consistent therewith, the Company shalt use its best efforts to preserve substantially intact its business organization, to keep available the services of its current officers and employees, to preserve its present relationships with customers, suppliers, distributors, licensors, licensees and other Persons having business relationships with it. Without limiting the generality of the foregoing, between the date of this Agreement and the Effective Time, except as otherwise expressly contemplated by this Agreement or as set forth on Schedule 5.01 or as required by applicable Law, the Company shall, without the prior written consent of Parent (which consent shall not be unreasonably NNithheld or delayed): (a) not amend or propose to amend its certificate of incorporation or by-laws (or other comparable organizational documents); (b) not (i) split, combine or reclassify any Company Securities, (ii) repurchase, redeem or otherwise acquire, or offer to repurchase, redeem or otherwise acquire, any Company Securities, (iii) declare, set aside or pay any dividend or distribution (whether in cash, stock, property or otherwise) in respect of, or enter into any Contract with respect to the voting of, any shares of its capital stock; (c) not issue, sell, pledge, dispose of or encumber any Company Securities, other than the issuance of shares of Company Common Stock upon any exercise of the Stock Warrant; (d) not, except as required by applicable Law or by any Company Employee Plan or Contract in effect as of the date of this Agreement and disclosed on ;Section 3.12(a) of the Company Disclosure Schedule, (i) increase the compensation payable or that could become payable by the Company to directors, officers or employees, other than increases in compensation made in the ordinary course of business consistent with past practice, (ii) enter into any new or amend in any material respect, any existing employment, severance, retention or change in control agreement with any of its past or present officers or employees, (iii) promote any officers or employees, except in connection with the Company's annual or quarterly compensation review cycle or as the result of the termination or resignation of any officer or employee, or hue any new employee except in the ordinary course of business consistent with past practice or (iv) establish, adopt, enter into, amend, terminate, exercise any discretion under, or take any action to accelerate rights under any Company Employee Plans or any plan, agreement, program, policy, trust, fund or other arrangement that would be a Company Employee Plan if it were in existence as of the date of this Agreement, or make any contribution to any Company Employee Plan, other than contributions required by Law, the terms of such Company Employee Plans as in effect on the date hereof or that, are made in the ordinary course of business consistent with past practice; (e) not acquire, by merger, consolidation, acquisition of stock or assets, or otherwise, any business or Person or division thereof or make any loans, advances or capital contributions to or investments in any Person; (t) not (i) transfer, license, sell, lease or otherwise dispose of any assets (whether by way of merger, consolidation, sale of stock or assets, or otherwise), provided, that the foregoing 35 m44762.1821124.doe shall not prohibit the Company from (A) entering into agreements with customers for the provision of services in the ordinary course of business consistent with past practices either pursuant to the Company's standard form of customer contract with a term of not more than 36 months or pursuant to an addendum to an existing master fiber lease agreement with an existing customer on terms consistent with such master fiber lease agreement. or (B) transferring, licensing, selling, leasing or disposing of obsolete equipment or assets being replaced, in each case in the ordinary course of business consistent with past practice or (ii) adopt or effect a plan of complete or partial liquidation, dissolution, restructuring, recapitalization or other reorganization; (g) not (i) repurchase, prepay or incur any indebtedness for borrowed money or guarantee any such indebtedness of another Person, issue or sell any debt securities or options, warrants, calls or other rights to acquire any debt securities of the Company, guarantee any debt securities of another Person, or enter into any arrangement having the economic effect of any of the foregoing, other than in connection with the financing of ordinary course trade payables consistent with past practice or (ii) forgive, compromise, waive or settle any Receivables or Related Party Obligations; (h) not enter into or amend or modify in any material respect, or consent to the termination of (other than at its stated expiry date), any Company Material Contractor any material Real Property Interest or any other Contract or Real Property Interest that, if in effect as of the date. hereof would constitute a Company Material Contract or material Real Property Interest hereunder-, (i) not enter into any Contract with a terra in excess of twelve (12) months or providing for payments by or to the Company in excess of $50,000, provided, that the foregoing shall not prohibit the Company from entering into agreements with customers in the ordinary course of business as described in Section 5,01(f)(i)(A); 0) not implement any material increase or decrease in the rates charged to customers of the Company's business or make any commitment regarding changes in or continuation of rates: (k) not mortgage, pledge, encumber or otherwise subject to any Lien other than Permitted Lions, any of the Company's assets; (1) not institute, settle or compromise any Legal Actions pending or threatened before any arbitrator, court or other Governmental Entity; (m) not make any change in any method of financial accounting principles or practices, in each case except for any such change required by a change in GAAP or applicable Law; (n) not (i) settle or compromise any Tax claim, audit or assessment, (ii) make or change any Tax election, change any annual Tax accounting period, adopt or change any method of Tax accounting, (iii) amend any Tax Returns or file claims for Tax refunds, or (iv) enter into any closing agreement, surrender in writing any right to claim a Tax refund, offset or other ?6 m44762-1821124.doe reduction in Tax liability or consent to any extension or waiver of the limitation period applicable to any Tax claim or assessment relating to the Company; (o) not enter into any agreement, agreement in principle, letter of intent, memorandum of understanding or similar Contract with respect to any joint venture; strategic partnership or alliance; (p) not abandon, encumber, convey title (in whole or in part), exclusively license or grant any right or other licenses to Company IP; (q) maintain inventories of fiber optic cable, equipment and supplies of a quality consistent with the Company's ordinary course of business and in quantities at no more than $ ess than normal historical levels (based upon an average over the two most recently completed calendar quarters prior to the Effective Date); (r) comply in all respects with and perform all of its obligations under the BT©P; (s) (i) make monthly capital expenditures consistent with past practice and in an amount not less than (the "Minimum Capital Expenditures"), ralculated as a monthly average from the date of this Agreement through the Closing Date; (ii) promptly notify Parent of any opportunities for material business development or expansion of which it becomes aware; Provided, however•, that the Company shall have no obligation to pursue any such opportunity for material business development or expansion unless and until the details of such development or expansion are mutually agreed upon by Parent and the Company and Parent has delivered to the Company prior written approval of any such Extraordinary Capital Expenditure, and (iii) undertake Extraordinary Capital Expenditures; or (t) not agree or commit to do any action prohibited by this Section 5.01- Section 5.02 Other Actions. From the date of this Agreement until the earlier to occur of the Effective Time or the termination of this Agreement in accordance with the terms set forth in Article'VIT, the Company and Parent shalt not, and Parent shall not permit any of its Subsidiaries to, take, or agree or commit to take, any action that would reasonably be expected to, individually or in the aggregate, prevent, materially delay or materially impede the consummation of the Merger or the other transactions contemplated by this Agreement. Section 5.03 Access to Information; Confidentiality. (a) From the date of this Agreement until the earlier to occur of the Effective Time or the termination of this Agreement in accordance with the terms set forth in Article'VII, the Company shall afford to Parent and Parent's directors, officers; employees, advisors and investment bankers (with respect to any Person, the foregoing Persons are referred to herein as such Person's "Representatives") reasonable access, at reasonable times and in a manner as shall not unreasonably interfere with the business or operations of the Company, to the officers, employees, accountants, agents, properties, offices and other facilities and to all books, records, contracts and other assets of the Company, and the Company shall furnish promptly to Parent such other information concerning the business and properties of the Company as Parent may 37 m44762-18211.24,dw reasonably request from time to time. The Company shall not be required to provide access to or disclose information where such access or disclosure would jeopardize the protection of attorney -client privilege or contravene any Law (it being; agreed that the parties shall use their reasonable best efforts to cause such information to be provided in a manner that would riot result in such;eopardy or contravention), (b) The Company shall deliver to Parent, (i) as promptly as practicable, and in any event within twenty (20) days of the completion of each calendar month, between the date hereof f and the Closing Date, (i) the Company's consolidated unaudited balance sheet as of the end of such calendar month, and the Company's related consolidated statements of operations and cash Bows for the period from the end of the Company's most recently completed fiscal year to the ' end of such calendar month (the "Monthly Financial Statements"), which Monthly Financial Staternails shall be prepared from the Company's books and records in accordance with GAAP and in a majiner consistent with the preparation of the Financial Statements, and (ii) as promptly as practicable, and in any event within thirty (30) days of the completion of each fiscal quarter of the Company, the Company's consolidated unaudited balance sheet as of the end of such fiscal quarter, and the Company's related consolidated statements of operations and cash bows for the period from the end of the Company's most recently completed fiscal year to the end of such fiscal quarter, which financia1.'lnformation shall be prepared from the Company's books and records in accordance with GAAP and in a manner consistent with the preparation of the Financial Statements. (c) Parent and the Company shall comply with, and shall cause their respective Representatives to comply with, all oftheir respective obligations imder the Confidentiality Agreement, dated June 5, 2012, between Parent and the Company (the "Confidentiality Agreement"), which shall survive the termination of this Agreement in accordance with the terms set .forth therein. ,Section 5.04 No Solicitation. From the date of this Agreement until the earlier to occur of the Effective Time or the tennination of this Agreement in accordance with the terms set forth in Article Vil, the Company will not, directly or indirectly, solicit, initiate discussions, engage in or encourage discussions or negotiations with, or enter into any agreement, including any non- disclosure agreement, with, any party relating to or in connection with (a) the passible acquisition of the Company (by way of merger, stock purchase, asset purchase, lease or. otherwise), (b) the possible acquisition of a material portion of the Company's capital stock (iilCludiilg� ilic iSSilariC� of new shares) or ail"y' of the Transferri4 t—1 Ls, �r (Cj any GuTier transaction outside of the ordinary course of business that could materially impair the value of the Company or its assets actor the Effective Time (collectively, a. "Restricted Transaction"). Upon execution of this Agreement, the Company shall immediately terminate all existing discussions or negotiations with any Persons with respect to a Restricted Transaction, Furthemiore, the Company will not disclose any non-public information relating to the Company, or Afford access to its properties, books or records to any Person concerning a Restricted Transaction. Upon its receipt of any offer or proposal with respect to a Restricted 'transaction, the Company must within one Business Day provide Parent with a copy of any written Restricted Transaction proposal, request or inquiry received and a written statement with respect to any non -written restricted Transaction proposal request or inquiry received, which 38 m44762-1821124.d(w statement must include the identity of the parties making the proposal and the terms thereof, and will within one Business Day advise Parent of any material modification or proposed modification, and any other information necessary to keep Parent informed in all material respects regarding the status and details of the Restricted Transaction proposal. Section 5.05 Notices of Certain Events. The Company shall notify Parent and Merger Sub, and Parent and Merger Sub shall notify the Company, promptly of (i) any notice or other communication from any Person alleging that the Consent of such Person is or may be required in connection with the transactions contemplated by this Agreement, (ii) any notice or other communication from any Governmental Entity in connection with the transactions contemplated by this Agreement, (iii) any Legal Actions commenced, or to such party°s knowledge, threatened, against the Company or Parent or its Subsidiaries, as applicable, that are related to the transactions contemplated by this Agreement, and (iv) any event, change or effect between the date of this Agreement and the Effective Time which causes or is reasonably likely to cause the failure of the conditions set forth in Section 6.02(a), Section 6.02(b) or Section 6.02(c) of this Agreement (in the case of the Company) or Section 6.03(a) or Section 6.03(b) of this Agreement (in the case of Parent and Merger Sub), to be satisfied. In no event shall the delivery of any notice by a party pursuant to this Section 5.05 limit or otherwise affect the respective rights, obligations, representations, warranties, covenants or agreements of the parties or the conditions to the obligations of the parties under this Agreement. Section 5.06 Employees. Parent (or its Affiliates) intends, subject to the pre -hire evaluations permitted by this Section 5,06, to retain the employment of the Company Employees (other than Principal), effective as of the Effective Time. The Company will cooperate in all reasonable respects with Parent to allow Parent or its Affiliates to make such appropriate prc-hire investigation of the Company Employees as it deems necessary, including the right to review personnel files and the right to interview such employees during normal working hours so long as such interviews are conducted after notice to the Company and do not unreasonably interfere with the Company's operations. Parent may, if it wishes, condition any offer of employment upon the employee's being an active employee at Closing, performance and conduct remaining at a satisfactory level or above through Closing, passing a pre -employment drug screening test, the completion of a satisfactory background check and, if the employee is on Approved Leave of Absence, upon. the employee's return to full-time active service (with or without reasonable accommodations) within 12 weeks after the Closing Date or, if earlier, on the first Business Day following expiration of the employee's Approved Leave of Absence. For purposes of. this Agreement, employees on "Approved Leave of Absence" means employees absent from work on the Closing Date and unable to perform their regular job duties by reason of illness or injury under approved plans or policies of the employer (other than an employee's absence for fewer than 7 calendar days due to short term illness or injury not requiring written approval by the employer) or otherwise absent from. Nvork under approved or unpaid leave policies of the employer. Section 5.07 Directors' and Officers' Indemnification and Insurance. (a) Parent and Merger Sub agree that all rights to indemnification:, advancement of expenses and exculpation by the Company now existing in favor of each Person who is now, or 39 m44762-1 B21124 doc has been at any time prier to the date hereof or who becomes prior to the Effective Time an officer or director of the Company (each an "Indemnified Party") as provided in the Company Charter Documents, in each case as in effect on the date of this Agreement, shall be assumed by the Surviving Company in the Merger, without further action, at the Effective Time and shall survive the Merger and shall remain in full force and effect in accordance with their terms, and, in the event that any proceeding is pending or asserted or any claim made during such period, until the final disposition of such proceeding or claim. (b) }prior to the Effective Time, the Company shall have the right to obtain and pay for in full a "tail" coverage directors' and officers' liability insurance policy covering the period after the Effective Time. The premiums for such tail coverage shall be paid in full prior to the Closing, and such amount shall be deemed to be a Transaction Expense. (c) Notwithstanding anything to the contrary herein, the provisions of this Section 5.07 shall not apply with respect to (0 any claitu by or in connection with any Company Shareholder, any former Company Shareholder or any Person claiming or alleging to be or to have any rights as a Company Shareholder, (ii) any claim for which any Parent Indemnified Party may have a right to indemnification hereunder or (iii) any claim against Parent or the Surviving Company. Section 5.08 Reasonable Best Efforts. (a) Upon the terms and subject to the conditions set forth in this Agreement (including those contained in this Section 5.08), each of the parties hereto shall use its reasonable best efforts to take, or cause to be taken, all actions, and to do, or cause to be done, and to assist and cooperate with the other parties in doing, all things necessary, proper or advisable to consummate and make effective, and to satisfy all conditions to, in the most expeditious manner practicable, the transactions contemplated by this Agreement, including (i) the obtaining of all necessary permits, waivers, Consents, approvals and actions or nonactions from Governmental Entities and the making of all necessary registrations and filings (including filings with Governmental Entities) and the taking of all steps as may be necessary to obtain an approval or waiver from, or to avoid an action or proceeding by, any Governmental Entities, (ii) the obtaining of all necessary Consents or waivers from third parties, and (iii) the execution and delivery of any additional instruments necessary to consummate the Merger and to fully carry out the purposes of this Agreement. Parent will take all action necessary to cause Merger Sub to perform its obligations under this Agreement and to consummate the Merger on the terms and conditions set forth in this Agreement. The Company and Parent shall, subject to applicable Law, promptly (x) cooperate and coordinate with the other in the taking of the actions contemplated by clauses (i), (H) and (iii) immediately above and (y) supply the other with any information that may be reasonably required in order to effectuate the taking of such actions. Each party hereto shall promptly inform the other party or parties hereto, as the case may be, of any communication from any Governmental Entity regarding any of the transactions contemplated by this Agreement. If the Company or Parent receives a request for additional information or documentary material from any Govenunental Entity with respect to the transactions contemplated by this Agreement, then it shall use reasonable best efforts to make, or cause to be made, as soon as reasonably practicable and after consultation with the other party, an 40 m44762-1821 124.doc appropriate response in compliance with such request, and, if permitted by applicable Law and by any applicable Governmental Entity, provide the other party's counsel with advance notice and the opportunity to attend and participate in any meeting with any Governmental Entity in respect of any filing; made thereto in connection with the transactions contemplated by this Agreement. Neither Parent nor the Company shall commit to or agree with any Governmental Entity to stay, toll or extend any applicable waiting period under any applicable Antitrust Laws, without the prior written consent of the other (such consent not to be unreasonably withheld or delayed). (b) Without limiting the generality of the undertakings pursuant to Section 5.08(a) hereof, the parties hereto shall (i) provide or cause to be provided as promptly as reasonably practicable to Governmental Entities with jurisdiction over the Antitrust Laws information and documents requested by any such Governmental Entity as necessary, proper or advisable to permit consummation of the transactions contemplated by this Agreement, and thereafter to respond as promptly as practicable to any request for additional information or documentary material that may be made under any applicable Antitrust Laws and (ii) subject to the terms set forth in Section 5.08(c) hereof, use their reasonable best efforts to take such actions as are necessary or advisable to obtain prompt approval of the consummation of the transactions contemplated by this Agreement by any Governmental Entity or expiration of applicable waiting periods. (c) In the event that any administrative or judicial action or proceeding is instituted (or threatened to be instituted) by a Governmental Entity or private party challenging the Merger or any other transaction contemplated by this Agreement, or any other agreement contemplated hereby, the Company shall cooperate in all respects with Parent and Merger Sub and shall use its reasonable best efforts to contest and resist any such action or proceeding and to have vacated, lifted, reversed or overturned any Order, whether temporary, preliminary or permanent, that is in effect and that prohibits, prevents or restricts consummation of the transactions contemplated by this Agreement. Notwithstanding anything in this Agreement to the contrary, none of Parent, Merger Sub or any of their Affiliates shall be required to defend, contest or resist any action or proceeding, whether judicial or administrative, or to take any action to have vacated, lifted, reversed or overturned any Order, in connection Arith the transactions contemplated by this Agreement. (d) Notwithstanding anything to the contrary set forth in this Agreement, none of Parent, Merger Sub or any of their Subsidiaries shall be required to, and the Company may not, without the prior written consent of Parent, become subject to, consent to, or offer or agree to, or otherwise take any action with respect to, any requirement, condition, limitation, understanding, agreement or order to (i) sell, license, assign, transfer, divest, hold separate or otherwise dispose of any assets, business or portion of business of the Company, the Surviving Company, Parent, Merger Sub or any of their respective Subsidiaries, (ii) conduct, restrict, operate, invest or otherwise change the assets, business or portion of business of the Company, the Surviving Company, Parent, Merger Sub or any of their respective Subsidiaries in any manner, or (iii) impose any restriction, requirement or limitation on the operation of the business or portion of the business of the Company, the Surviving Company, Parent, Merger Sub or any of their respective Subsidiaries, provided, that, if requested by Parent, the Company will become subject 41 rn44762-1821124.d9e to, consent to, or offer or agree to, or otherwise take any action with respect to, any such requirement, condition, limitation, understanding, agreement or order so long as such requirement, condition, limitation, understanding, agreement or order is only binding on the Company in the event the Closing occurs. Section 5.09 Public Announcements. The initial press release with respect to this Agreement and the transactions contemplated hereby shall be a release mutually agreed to by the Company and parent. Thereafter, each of the Company, Parent and Merger Sub agrees that no public release or announcement concerning the transactions contemplated hereby shall be issued by any party without the prior written consent of the Company and Parent (which consent shall not be unreasonably withheld or delayed), except as required by applicable Law or the rules or regulations of any applicable United States securities exchange or Governmental Entity to which the relevant party is subject, wherever situated, in which case the party required to make the release or announcement shall consult with the other party about, and allow the other party reasonable time to commerit on such release or announcement in advance of such issuance. Section 5.10 Franchise Consents. (a) Following the date of this Agreement, Parent shall seek to obtain Consent fi-om each applicable Governmental Entity with respect to each current Franchise and each expired Franchise in connection with the transactions contemplated by this Agreement to (i) the assignment to the Surviving Company of the Company's rights under such Franchise and/or (ii) the grant of a new or renewed Franchise for the right to provide services in the areas covered by such Franchise (collectively, the"Franchise Consents"), principal and the Company shall cooperate with Parent and work together in good faith using their reasonable best efforts to assist Parent to obtain the Franchise Consents, including, as requested by Parent, preparing and filing applications with any Governmental .Entity (including FCC Form 394 or other appropriate forms, to the extent necessary or appropriate) to obtain Franchise Consent, providing to Parent such information regarding the Company that is reasonably necessary for such applications and that is available to the Company without unreasonable effort and expense, and arranging and participating with Parent in meetings with representatives of any Goverrunental Entity. (b) The Company shall pay and be responsible for (i) any Franchise Consent Damages; and (ii) fifty percent (50%) of any Franchise Consent Expenses incurred within one hundred fifty (150) days following the date of this Agreement. To the extent any of the Franchise Consent Damages or Francltrse Consent Expenses are determined prior to Closing, such Franchise Consent Damages and fifty percent (50%) of such Franchise Consent Expenses shall be deemed to be Transaction Expenses at Closing, Any (i) Franchise Consent Damages; or (ii) any Franchise Consent Expenses that are incurred within one hundred fifty (150) days following the date of this Agreement, shall be an lndemnifiable Liability pursuant to Section 2.05(a). Except as provided herein with respect to the Franchise Consent Damages and Franchise Consent Expenses, the parties shall bear their own costs and expenses in connection with the franchise Consents. 42 m44752-+821124.doe Section 5.11 Further Assurances, (a) At and after the Effective Time, the officers and directors of the Surviving Company shall be authorized to execute and deliver, in the name and on behalf of the Company or Merger Sub, any deeds, bills of sale, assignments or assurances and to take and do, in the name and on behalf of the Company or Merger Sub, any other actions and things to vest, perfect Or confirm of record or otherwise in the Surviving Company any and all right, title and interest in, to and under any of the rights, properties or assets of the Company acquired or to be acquired by the ;Surviving Company as a result of, or in connection with, the Merger. (b) Following Closing, Principal shall cooperate fully with Parent and the Surviving Company, as and to the extent reasonably requested by Parent or the Surviving Company, in connection with the filing of, or any amendments to, any Tax Returns with respect to the Company or the Surviving Company and any audit, litigation or other proceeding with respect to Taxes. Such cooperation shall include making himself reasonably available to provide information and explanation and the provision of records and information reasonably relevant to any such audit, litigation, or other proceeding. Section 5.12 Additional Covenants, At or prior to the Closing, the Company shall cause the following to have occurred: (a) all belated Party Obligations shall be discharged and satisfied in full; (b) all credit agreements, loan agreements, interest rate swap agreements and any other Contracts with Wells Fargo or any other lending or financial institution ("Loan Agreeincnts") shall be terminated and of no firther force or effect, and all obligations owing thereunder shall have been paid and satisfied in full; (c) that certain Shareholders' Agreement, dated July 11, 2003, among the Company and the Company Shareholders shall be tenminated and of no f eher force or effect; and (d) that certain employment letter with ated September 30, 2006, including all severance obligations thereunder, shall be terminated and of no further force or effect. Section 5.13 Non -Competition Agreement. At Closing, Principal shall enter into a non -competition agreement, in form and substance acceptable to Parent and Principal (the "Non - Competition Agreement"), which shall provide for standard non -competition, non -solicitation and other restrictive covenants for a period of three years following Closing. For avoidance of doubt, no additional consideration shall be due or payable in connection with the Non - Competition Agreement. Section 5.14 Company Disclosure Schedules, Within five (5) Business Days following the date of this Agreement, or such longer period as agreed by Parent and the Company in writing, the Company shall deliver to Parent a complete and correct copy of the Company Disclosure Schedules. Parent shall have a period of five (5) Business Days (the "Diligence Period") following receipt of the Company Disclosure Schedules to review and, in its sole discretion, accept the Company Disclosure Schedules. The Company and Principal shall promptly respond to and use their good faith efforts to resolve any inquiries, disagreement or dispute by Parent regarding any matter on the Company Disclosure Schedules, In the event the Company delays or fails to fully respond to any inquiry, disagreement or dispute with respect to the Company Disclosure Schedules within twenty-four (24) hours following inquiry from the Company, the Diligence Period shall be extended for one (1) additional Business Day for each 43 m44762-1821124. doc day of delay. After resolution of any inquiries, disagreements or disputes, the final revised Company Disclosure Schedules as reviewed a.nd accepted by Parent shall constitute the Company Disclosure Schedules for purposes of this Agreement, ARTICLE VI CONDITIONS Section 6.01 Conditions to Each Party's Obligation to Effect the Merger. The respective obligations of each party to this Agreement to effect the Merger is subject to the satisfaction or waiver on or prior to the Closing Date of the following condition: (a) No Injunctions, Restraints or Illegality. No Governinental Entity having jurisdiction over any party hereto shall have enacted, issued, promulgated, enforced or entered any Laws or Orders, whether temporary, preliminary or permanent, that make illegal, enjoin or otherwise prohibit consummation of the Merger or the other transactions contemplated by this Agreement, Section 6.02 Conditions to Obligations of Parent and Merger Sub. The obligations of Parent and Merger Sub to effect the Merger are also subject to the satisfaction or waiver by Parent and Merger Sub on or prior to the Closing Date of the following conditions: (a) Representations and Warranties. Each of the representations and warranties of the Company contained in this Agreement shall be true and correct, in each case as of the date hereof and as of the Closing Date as if made as of the Closing Date (except for those representations and warranties which address matters only as of a particular date, which representations and warranties shall be true and correct as of such date). (b) Performance of Covenants, The Company and Principal shall have performed in all material respects all obligations, and complied in all material respects with the agreements and covenants, required to be performed by or complied with by them hereunder, (c) Company Material Adverse Effect, Since the date of this Agreement, there shall not have been any Company Material Adverse Effect or any event, change or effect that would; individually or in thee aggregate, reasonably be expected to have a Company Material Adverse Effect. (d) Officer's Certificate. Parent will have received a certificate, signed by the chief executive officer of the Company, certifying as to the matters set forth in Section 6.02(a), Section 5.02(b) and Section 6.02(c) hereof. (e) Shareholder Letter. All of the Company Shareholders shall have executed a Shareholder Letter and delivered it to Parent. (f) Dissenters' Rights, No Person shall have exercised any Dissenters' Rights v✓ith respect to the any shares of Company Common Stock. 44 m44752- IS? I 124.doc (g) Consents, The Company shall have obtained all of the Consents set forth on Section 6,02(g) of the Disclosure Schedule (collectively, the "Required Consents"). The parties shall review and agree on the list of Required Consents in connection with review of the Company Disclosure Schedules during the Diligence Period, (h) Closing of Acquisition. The Acquisition shall have closed pursuant to the terms of the Acquisition Agreement. Section 6.03 Conditions to Obligation of the Company. The obligation of the Company to effect the Merger is also subject to the satisfaction or waiver by the Company on or prior to the Closing Date of the following conditions; (a) Representations and Warranties. Each of the representations and warranties of the Parent and Merger Sub contained in this Agreement shall be true and correct, in each case as of the date hereof and as of the Closing Date as if made as of the Closing Date (except for those representations and warranties which address matters only as of a particular date, which representations and warranties shall be true and correct as of such date). (b) Performance of Covenants. Parent and Merger Sub shall have performed in all material respects all obligations, and complied in all material respects with the agreements and covenants, required to be performed by or complied with by thern hereunder, (c) Officer's Certificate. The Company will have received a certificate, signed by an officer of Parent, certifying as to the matters set forth in Section 6.03(a) and Section 6.03(b) ARTICLE, V11 TERMIN/MON, AMENDMENT AND WAIVER Section 7.01 Termination by Mutual Consent. This Agreement maybe terminated at any time prior to the l ffective Time by mutual written consent of Parent, Merger Sub and the Company. Section 7.02 Termination by Either Parent or the Company. 'This Agreement may be terminated by either Parent or the Company at any time prior to the Effective Time: (a) if the Closing has not occurred by the End Date; provided, however, that the right to tenninate this Agreement pursuant to this Section 7.02(a) shall not be available to any party whose breach of any representation, warranty, covenant or agreement set forth in this Agreement has been the cause of, or resulted in, the failure of the Merger to be consummated on or before the End Date; (b) if any Governmental Entity of competent jurisdiction shall have enacted, issued, promulgated, enforced or entered any Law or Order making illegal, permanently enjoining or otherwise permanently prohibiting the consummation of the Merger or the other transactions contemplated by this Agreement, and such Law or Order shall have become final and nonappealable; provided, however, that the right to terminate this Agreement pursuant to this Section 7.02(b) shall not be available to any party whose breach of any representation, warranty, 45 m44762-1821124,4oc covenant or agreement set forth in this Agreement has been the cause of; or resulted in, the issuance, promulgation, enforcement or entry of any such Law or order; or (c) if within ten (10) Business Days (or such longer period as agreed by Parent and the Company in writing) of the Company's initial delivery of the complete copy of the Disclosure Schedules pursuant to Section 5A4, (i) the Company Disclosure Schedules have not been accepted by Parent or (ii) Parent shall not have otherwise satisfied itselfwith respect to its due diligence review of the Company with respect to or arising from any new or updated information obtained by or provided to Parent after the date of this Agreement (including pursuant to the Company Disclosure Schedules or otherwise), Section 7.03 Termination by Parent. This Agreement maybe terminated by Parent at any time prior to the Effective Time: (a) if the Acquisition has not closed pursuant to the terms of the Acquisition Agreement; (b) if there shall have been a breach of arty representation, warranty, covenant or agreement on the part of the Company or Principal set forth in this Agreement such that the conditions to the Closing of the Merger set forth in Section. 6.02(a) or Section 6.02(b), as applicable, would not be satisfied and, in either such case, such breach is not cured within ten (10) Business Days after delivery by Parent of a written notice specifying such breach; provided that Parent shall have given the Company at least ten (10) Business Days' written notice prior to such termination stating Parent's intention to terminate this Agreement pursuant to this Section 7.03, Section 7.04 Termination by the Company. This Agreement may be terminated by the Company at any time prior to the Effective Time; (a) if the Acquisition has not closed as of the End Date, provided that all of the other conditions provided for in Sections 6.01 and 6.02 have been satisfied as of such date (other than those conditions that by their nature are to be satisfied at the Closing, but subject to the satisfaction or, to the extent permitted hereunder, waiver of all such conditions); (b) if there shall have been a breach of any representation, warranty, covenant or agreement on the part of Parent or Merger Sub set forth in this Agreement such that the conditions to the Closing of the Merger set forth in Section 6.03(a) or Section 6,03(b), as applicable, would not be satisfied and, in either such case, such breach is not cured within ten (10) Business Days after delivery by the Company of a written notice specifying such breach; .provided that the Company shall have given Parent at least ten (10) Business Days' days written notice prior to such termination stating the Company's intention to terminate this Agreement pursuant to this Section 7.04(b). Section 7.05 Notice of Termination; Effect of Termination, The party desiring to terminate this Agreement pursuant to this .Article VI I (other than pursuant to Section 7.01) shall deliver written notice of such termination to each other party hereto specifying with particularity the reason for such termination, and any such termination in accordance with Section 7.05 shall 46 m44752-1821124.daz be effective immediately upon delivery of such written notice to the other party. If this Agreement is terminated pursuant to this Article V11, it will become void and of no further force and effect, with no liability on the part of any party to this Agreement (or any shareholder, director, officer, employee, agent or Representative of such party) to any other party hereto, except (i) with respect to Section 5.03(c), this Section 7.05, Section 7.06 and Article V111(and any related definitions contained in any such Sections or ArticIe), which shall remain in fill] force and effect and (ii) with respect to any liabilities or damages incurred or suffered by a party, to the extent such liabilities or damages were the result of fraud or the breach by another party of any of its representations, warranties, covenants or other agreements set forth in this Agreement. Section 7.06 Termination Fee; Expenses Following Termination. (a) In the event that this Agreement is terminated (i) by the Company pursuant to Section 7.04(a) or (ii) by Parent pursuant to Section 7.03(a), Parent will pay the Company the Termination Fee within five (5) Business Days of the effective date of such termination, which will be the Company's sole and exclusive remedy. (b) The parties acknowledge and agree that the provisions of this Section 7.06 are an integral part of the transactions contemplated by this Agreement (including the Merger), and that, without such provisions, the Company would not have entered into this Agreement. If Parent shall fail to pay in a timely manner the amounts due pursuant to this Section 7.06, and, in order to obtain such payment, the Company makes a claim against Parent that results in a judgment pursuant to a final, non -appealable decision of a court of competent jurisdiction, Parent shall pay the Company the Company's reasonable costs and expenses (including its reasonable attorneys' fees and expenses) incurred or accrued in connection with such suit, (c) Notwithstanding any termination of this Agreement, all Expenses incurred in connection with this Agreement and the transactions contemplated hereby will be paid by the party incurring such Expenses. Section 7.07 Amendment. At any time prior to the Effective Time, this Agreement may be amended or supplemented in any and all respects by written agreement signed by each of the parties hereto. Section 7.08 Extension; Waiver. At any time prior to the Effective Time, Parent or Merger Sub, on the one hand, or the Company, on the other hand, may (a) extend the time for the performance of any of the obligations of the other party(ies), (b) waive any inaccuracies in the representations and warranties of the other party(ics) contained in this Agreement or in any document delivered under. this Agreement, or (c) unless prohibited by applicable Law, waive compliance with any of the covenants, agreements or conditions contained in this Agreement. Any agreement on the pail of a party to any extension or waiver will be valid only if set forth in an instrument in writing signed by such party. The failure of any party to assert any of its rights under this Agreement or otherwise will not constitute a waiver of such rights. 47 m44762-1821124,doc ARTICLE ViIl MISCELLANEOUS Section 8.01 Definitions. For purposes of this Agreement, in addition to the capitalized terms defined elsewhere in this Agreement, the following terns will have the following meanings when used herein with initial capital letters: "Acquisition" means the acquisition by Parent of WaveDivision Holdings, LLC ("Moldings") as a result of which Holdings will become a wholly -owned subsidiary of Parent, pursuant to the terms of that certain Unit Purchase Agreement, dated as of May 30, 2012, by and among holdings, the members of Holdings and Parent (the "Acquisition Agreement"), "Active Customer" means any non -Affiliated Person that, as of the Closing Date; is paying; for and leasing dark fiber from the Company, and whose account is less than 90 days past due (except for past due amounts of $25 or less, provided such account is otherwise current), with the determination of the number of days an account is past due being counted from the issuance date of 'die applicable invoice; provided, however, that Active Customer shall not include any Person that as of the Closing Date; (i) has not paid in full the regular monthly lease rate without discount for at least one (1) month; (ii) has not paid in full all installation Fees or other non -recurring charges related to the lease of dark fiber (other than such amounts that have been discounted or waived pursuant to selling or marketing campaigns or promotional activities engagcd in by the Company in the ordinary course of business consistent with past practices); (iii) has had its account (or any part thereof) compromised or written off for reasons such as service interruptions and waiver of late charges other than in the ordinary course of business consistent with past practices and not for the purpose of making such Person as an Active Customer; or (iv) is pending cancelation or termftiation of services (not to include circuit transfers). "Adjusted Working Capital" rneans an amount (expressed as apositive, if positive, or a negative, if negative) equal to (i) the Current Assets, excluding Shareholder loans if any, of the Company, plus (ii) the "Material on (land"(as reflected on the Company's balance sheet) minus (iii) the Current Liabilities, excluding the current portion of any payments included in Section 2,04(e)(i). An example Adjusted Working Capital Calculation for the months of June, 2012 through August, 2012, as well as the average Adjusted Working Capital for such period is shown on Schedule 8.01. "Affiliate" means, with respect to any Person, any other Person that directly or indirectly controls, is controlled by or is under common control with, such first Person. For the purposes of this definition, "control" (including, the terms "controlling," "controlled by" and "under common control with"), as applied to any Person, means the possession, directly ar indirectly, of the power to direct or cause the direction of the management and policies of that Person, whether through the ownership of voting securities, by Contract or otherwise. "Agreement" has the meaning set forth in the Preamble, "Antitrust Laws" has the meaning set forth in Section 3.03(c). 48 m44762-1821 124.doc "Business Day" means any day, other than Saturday, Sunday or any day on which banking institutions located in New York, New York are authorized or required by Law or other governmental action to close. "Certificate" has the meaning set forth in Section 2.02(a). "Certificate off Merger" has the meaning set forth in Section 1.03. "Charter Documents" has the meaning set forth in Section 3.01(b). "Closing" has the meaning set forth in Section 1,02. "Closing Date" has the meaning set forth in Section 1.02. "COBRA" means the Consolidated Omnibus budget Reconciliation Act of 1985, as amended, and as codified in Section 4980E of the Code and Section 601 et. seq. of ERISA, "Code" means the Internal Revenue Code of 1986, as amended, and applicable Treasury Regulations issued pursuant thereto. "Communications Act" means the Communications Act of 1934, as amended, including, but not limited to, by the Cable Communications Policy Act of 1984, the Cable Television Consumer Protection and Competition Act of 1992 and the Telecommunications Act of 1996, and the rules, regulations, policies and published decisions of the Federal Communications Commission thereunder. "Company" has the meaning set forth in the Preamble. `-Company Board" has the meaning set forth in the Recitals "Company Board Recommendation" has the meaning set forth in Section 1.07(a). "Company Common Stock" has the meaning set forth in the Recitals. "Company Common Stock Award" has the meaning set forth in Section 3.02(b). "Company Common Stock Option" has the ineaning set forth in Section 3.02(b). "Company Common Stock Plans" plans pursuant to which Company Common Stock Options or Company Common Stock Awards may be issued, "Company Debt" means the aggregate amount of all liabilities (including principal, accrued interest, pre -payment penalties, if any, and lender fees and expenses) of the Company for: (a) all indebtedness (including relating to deferred purchase price for assets or services and conditional sales or title retention agreements) or other obligations of the Company for borrowed money or evidenced by a note, debenture or similar instrument; (b) letters of credit issued for the account of the Company; (c) capitalized lease obligations; (d) bankers' acceptances and overdrafts; (e) liabilities and obligations under any interest rate swap, hedging or similar 49 m44762-1 921 124.doc arrangement; and (i) guaranties by the Company of indebtedness of any third parties of the type referenced in clauses (a) through (e). "Company Disclosure Schedule" has the meaning set forth in the introductory language in Article '1=11. "Company Employee" has the meaning set forth in Section 3.12(a). "Company .Employee flans" has the meaning set forth in Section 3.12(a). "Company Equity Award" means a Company Common Stack Option or a Company Common Stock Award or a phantom stock award, as the case may be. "Company ERISA Affiliate" means, with respect to any Person, any other Person that, together Adth such first Person, would be treated as a single employer within the meaning of Section 414(b), (c), (m) or (o) of the Code, "Company I1'" has the meaning set forth in Section 3.07(b). "Company IP Agreements" means all licenses, sublicenses, consent to use agreements, covenants not to sue, non -assertions and permissions and other Contracts, including the right to receive royalties or any other consideration, whether written or oral, relating to Intellectual Property and to which the Company is a party or under which the Company is a licensor or licensee. "Company Material Adverse Effect" means any event, occurrence, fact, condition or change that is, or would reasonably be expected to become, individually or in the aggregate, materially adverse to (i) the business, results of operations, prospects, condition (.financial or otherwise), or assets of the Company, taken as a whole, or (ii) the ability of the Company to consummate the transactions contemplated hereby on a timely basis; provided, however, that, for the purposes of clause (i), a Company Material Adverse Effect shall not be deemed to include events, occurrences, facts, conditions or changes arising out of, relating to or resulting from the announcement of the transactions contemplated by this Agreement;. ",Company Material Contract" has the meaning set forth in Section 3.15(a), "Company -Owned IT' means all Intellectual Property owned or purported to be owned by the Company. "Company Securities" has the meaning set forth in Section 3.02(b). "Confidentiality Agreement" has the meaning set forth in Section 5.03. "Consent" has the meaning set forth in Section 3.03(c). "Contracts" means any contracts, agreements, licenses, notes, bonds, mortgages, indentures, leases or other binding instruments or binding commitments, whether 'written or oral. s0 m44752-1 R21124.doe "Current Assets" means the amount of all current assets of the Company listed as separate line items on the Company's balance sheet and determined in accordance with CTAAP, but excluding any Related Party Obligations, as set forth on Schedule 8.01 hereto. "Current Liabilities" means the amount of all current liabilities of the Company and as determined in accordance with GAAP, but excluding any Related Party Obligations, "Damages" means all damages, losses, Liabilities, payments, amounts paid in settlement, obligations, fines, penalties and expenses and other costs (including fees and expenses of attorneys, accountants and other professional advisors and including any such fees, costs and expenses incurred in connection with investigating, defending against or settling any action or proceeding), "Effective Time" has the meaning set forth in Section 1.03. "End Date" ineans November 30, 2012. "Environmental Laws" means any applicable Law, and any Order or binding agreement with any Governmental Entity: (a) relating to pollution (or the cleanup thereof) or the protection of natural resources, endangered or threatened species, human health or safety, or the environment (including ambient air, soil, surface water or groundwater, or subsurface strata); or (b) concerning the presence of, exposure to, or the management, manufacture. use, containment, storage, recycling, reclamation, reuse, treatment, generation, discharge, transportation, processing, production, disposal or remediation of any Hazardous Materials. The term "Environmental Law" includes the following (including their implementing regulations and any state analogs): the Comprehensive Environmental Response; Compensation, and Liability Act of 1980, as amended by the Superfund Amendments and Reauthorization Act of 1986, 42 U,S.C,§ 9601 et seq_; the Solid Waste Disposal Act, as amended by the Resource Conservation and Recovery Act of 1976, as amended by the Hazardous and Solid Waste Amendments of 1984, 42 U.S.C. §§ 6901 et seq.; the Federal Water Pollution Control Act of 1972, as amended by the Clean Water Act of 1977, 33 U,S.C. §§ 1251 et seq,; the Toxic Substances Control Act of 1976, as amended, 15 U.S.C. §§ 2601 et seq.; the Emergency Planning and Community Right -to -Know Act of 1986,42 U.S.C. §§ 11001 et sect.; the Clean Air Act of 1966, as amended by the Clean Air Act Amendments of 1990, 42 U.S.C. §§ 7401 et seq.; and the Occupational Safety and Health Act of 1970, as amended, 29 U.S.C. §§ 651 et seq. "El SA" means the Employee Retirement Income Security Act of 1974, as amended. "Expenses" means, with respect to any Person, all reasonable and documented out-of- pocket fees and expenses (including all fees and expenses of attorneys, accountants, advisors and investment bankers of such Person and its Affiliates), incurred by such Person or on its behalf in connection with or related to the authorization, preparation, negotiation, execution and performance of this Agreement and any transactions related thereto, any litigation with respect thereto, the filing of any required notices under any Antitrust Laws, or in connection with other regulatory approvals, and all other matters related to the Merger other transactions contemplated hereby. 51 m44752-1821 124.due "Extraordinary Capital Expenditures" shall mean capital expenditures in excess of the Minimum Capital Expenditures for (i) the amounts in the column titled ' I's Capital Spend" for those projects described in Schedule 8.01 that are either approved or not rejected by Parent in writing prior to the expiration of the Diligence Period, and (ii) additional projects described in reasonable detail by the Company in writing to Parent following the date of this Agreement and either approved or not rejected by Parent in writing within the later of the expiration of the Diligence Period or three (3) Bwiness Days of the date of Parent's receipt of such description. "Final Escrow Release Date" means the date that is eighteen (18) months following the Closing Date. "Franchise" means the .respective franchise as defined by the Communications Act, and any renewal thereof, entered into, issued or otherwise granted by a Governmental Entity for the construction, installation, upgrade, maintenance and operation of any part of the Company's business, and all rights thereunder. For the elimination of doubt, for purposes of this Agreement the term "Franchise" shall include current Franchises pursuant to which the Company is providing service and any expired Franchise for each geographic area in which the Company is providing service without a current Franchise. "Franchise Consent Damages" means any Damages related to any breach or failure of the Company prior to Closing to perform any covenant, obligation or other agreement of any Franchise (which Damages may include costs and expenses incurred by Parent to complete any commercially reasonable remediation project required by any Governmental Entity an sing from a breach by the Company of any Franchise, including payments to contractors and other professionals lured or retained by Parent). "Franchise Consent Expenses" means, solely with respect to obtaining Consent from any Governmental Entity in connection with the assigm-nent of any Franchise (but not in connection with Parent seeking a new Franchise), (i) any application fee or transfer or Consent fee, and (ii) all costs and expenses incurred by the Governmental Entity (to the extent such costs and expenses are required to be reimbursed by the Governmental Entity), including professional fees for attorneys, auditors, consultants or other professionals retained by the Governmental Entity and costs and expenses in connection with any inspection or financial audit to determine the Company's compliance with Franchise provisions. "Fundamental Representations" means those representations and warrantie-s set forth in Section 3.01(Orgaxnization-, Standing and Power; Charter Documents; Minutes; Subsidiaries), Section 3.02 (Capital Structure), Section 3.03(a) (Authority), Section 3.06 (Taxes), Section 3.13(e) (Title and Sufficiency of Assets) and Section 3.14 (Environmental Matters). "GAAP" has the meaning set forth in Section 3.04(a). "Governmental Entity" has the meaning set forth in Section 3.03(c). "Hazardous Substance" shalh mean (a) any material, substance, chernical, waste, product, derivative, compound, mixture, solid, liquid, mineral or gas, in each case, whether naturally occurring or man-made, that is hazardous, acutely hazardous, toxic, or words of similar 52 m44762-1 R21124.doc import or regulatory effect under Environmental Laws, and (b) any petroleum or petroleum - derived products, radon, radioactive materials or wastes, asbestos in any form, lead or lead - containing materials, urea formaldehyde foam insulation and polychlorinated biphenyls. "Holdback Amount" means "Intellectual Property" means all intellectual property and other similar proprietary rights in any jurisdiction worldwide, whether registered or unregistered, including such rights in and to: (a) patents (including all reissues, divisions, provisionals, continuations and continuations -in -part, re-examinations, renewals, substitutes and extensions thereof), patent applications, patent disclosures or other patent rights ("Patents"); (c) copyrights, design, design registration, and all registrations, applications for registration, and renewals for any of the foregoing, works of authorship and any "moral" rights ("Copyrights"), (d) trademarks, service marks, trade names, business names, logos, trade dress, certification (narks and other indicia of commercial source or origin together with all goodwill associated with the foregoing, and all registrations, applications and renewals for any of the foregoing ("Trademarks"); (e) trade secrets and business, technical and know-how information, databases, data collections and other confidential and proprietary information, designs, formulae, compositions, algorithms, procedures, methods, specifications, processes, inventions (whether patentable or not and whether reduced to practice or not) and improvements, in each case, excluding any of the foregoing that comprise or are protected by issued Patents or published Patent applications and all rights therein ("Trade Secrets"); (f) software, including data files, source code, object code. application programming interfaces, architecture, files, records, schematics, computerized databases and other software -related specifications and other work product used to design, plan, organize and develop any of the foregoing and documentation, including user manuals and other training documentation ("Software"), and (g) Internet domain name registrations, "Interim Escrow Release Date" means the date that is one (1) year following the Closing hate. "IRS" means the Utxited States Internal Revenue Service. "Knowledge" means, when used with respect to the Company, the knowledge of the Principal Shareholders and and that each such Person has reviewed the specific representation and warranty and the related Section to the Disclosure Schedule to which such knowledge statement is made, and, in so doing, has exercised reasonable due diligence (due diligence for this purpose meaning that he or she has made inquiry of the officers and employees of the Company or outside adviser(s) familiar with the subject matter of such representations and warranties to confirm the accuracy thereof), and based upon his or her actual knowledge and such reasonable due diligence, he or she is not aware of any inaccuracies in such specific representation and warranty and related section of the )disclosure Schedule with respect to which such knowledge statement is made. "Law" or "Laws" means any domestic or foreign laws, common law, statutes, ordinances, rules, regulations, codes, Orders or legally enforceable requirements enacted, issued, adopted, promulgated, enforced, ordered or applied by any Governmental Entity. 53 m44752-1821124.doe "Legal Action" has the meaning set forth in Section 3,09. "Liability" shall mean any liability, indebtedness or obligation of any kind (whether accrued, absolute, contingent, matured, unmatured or otherwise, and whether or not required to be recorded or reflected on a balance sheet under GAAP). s rr "Liens" means all pledges, liens, mortgages, charges, claims, encumbrances, hypothecations, options, rights of first refusal, rights of first offer and security interests of any kind or nature whatsoever. "Merger" has the meaning set forth in Section 1.01, "Merger Consideration" has the meaning set forth in Section 2..01(b). "Merger Sub" has the meaning set forth in the Preamble. "Minimum Adjusted Working Capital" means ($ which equals the Company's historical average Adjusted Working Capital for the months from June 2012 to August 2012. "Monthly Recurring Revenue" for any calendar month means the Company's monthly recurring revenue from Active Customers for such month, calculated in accordance with GAAR An example calculation for the July 2012 Monthly Recurring Revenue is shown on Schedule 8.01. "Multi -employer Plan" has the meaning set forth in Section 3,12(c). "Order" has the meaning set forth in Section 3.09. "Outstanding Company Shares" means the total number of shares of Company capital stiock outstanding immediately prior to the Effective Time. "Parent" has the meaning set forth in the Preamble, "Permits" has the meaning set forth in Section 3.08(b), "Permitted Liens" means the following, none of which individually or in the aggregate materially interfere with the right or ability to own, use, dispose of or operate the business of the Company and which do not materially impair the value or marketability of any of the assets of the business: (a) statutory Liens for current Taxes or other governmental charges not yet due and payable or the amount or validity of which is being contested in good faith (provided appropriate reserves required pursuant to GAAP have been made in respect thereof), (b) mechanics', carriers', workers', repairers' and similar statutory Liens arising or incurred in the ordinary course of business for amounts which are not delinquent or which are being, contested by appropriate proceedings (provided appropriate reserves required pursuant to GAAP have been made in respect thereof), (c) 7oning, entitlement, building and other land use regulations imposed by Governmental Entities having jurisdiction over such Person's owned or leased real property, which are not violated by the current use and operation of such real property, (d) covenants, 54 m44762-1821124.4oc conditions, restrictions, easements and other similar non -monetary matters of record affecting title to the Company's owned or leased real property, which do not materially impair the occupancy or use of such real property for the purposes for which it is currently used in connection with the Company's business, (e) any public right of way or easement related to public roads and highways, which. do not materially impair the Company's occupancy or use of such real property for the purposes for which it is currently used in connection with the Company's business, and (t) Liens arising under workers' compensation, unemployment insurance, social security, retirement and similar legislation, "Person" means any individual, corporation, limited or general partnership, limited liability company, limited liability partnership, trust, association, joint venture, Governmental Entity and other entity. "Preliminary Aggregate Merger Consideration" means "Pro Rata Shure" means, with respect to any Company Shareholder in such capacity, the quotient obtained by clivicli (i) the total number of shares of Cornpahy Common Stock owned of record by such Company Shareholder immediately prior to the Effective Time by (5) the Outstanding Company Shares. "Purchase Price Adjustment Reserve" lrleans "Representatives" has the meaning set forth in Section 5.03(a). ",Subsidiary" means, when used with respect to any party, any corporation or other organization, whether incorporated or unincorporated, a majority of the securities or other interests of which having by their terms ordinary voting power to elect a majority of the board of directors or others performing similar functions with respect to such corporation or other organization is directly or indirectly owned or controlled by such party or by any one or more of its subsidiaries, or by such party and one or more of its subsidiaries. "Surviving Company" has the meaning set forth in Section 1,01. "Target Monthly Recurring Revenue" means the average of the target Monthly Recurring Revenue amounts set forth on Schedule 2.04 for the three full calendar months prior to Closing. "Taxes" nneans all federal, state, local, foreign and other income, gross receipts, sales, use, production, ad valorem, transfer, franchise, registration, profits, license, lease, service, service use, withholding, payroll, employment, unemployment, estimated, excise, severance, environmental, stamp, occupation, premium., property (real or personal), real property gains, windfall profits, customs, duties or other taxes, fees, assessments or charges of any kind whatsoever, together with any interest, .additions or penalties with respect thereto and any interest in respect of such additions or penalties. "Tax Returns" means any return, declaration, report, claim for refund, information return or statement or other document required to be bled with or provided to any taxing 55 m44762-1S21124.doc authority in respect of Taxes, including any schedule or attachment thereto, and including any amendment thereof, "Termination Fee" means "Transaction Expenses" mean means all Expenses incurred or accrued at or prior to Closing by the Company or the Company Shareholders in connection with the consummation of � z the transactions contemplated hereby, including, but not limited to, any such costs and expenses incurred by any party in connection with the negotiation, preparation and performance of and compliance with the terms of this Agreement (including the fees and expenses of legal counsel, accountants, investment bankers, brokers or other representative and consultants), D&O insurance. premiums, Franchise Consent Damages incurred prior to Closing, fifty percent (SO%) of Franchise Consent Expenses incurred prior to Closing, early termination fees or penalties under any Loan Agreement, and any change of' control, success fee,ye-tention, stay -put or other `. bonus or severance payments due to employees, officers or consultants of the Company as a result of or in connection with the consummation of the transactions contemplated hereby, "Treasury Regulations" means the 'Treasury regulations promulgated under the Code, "Voting Debt" has the meaning set forth in Section 3.02(c). Section 8.02 Interpretation; Construction. (a) The table of contents and headings herein are for convenience of reference only, do not constitute part of this Agreement and shall not be deemed to limit or otherwise affect any of the provisions hereof; Where a reference in this Agreement is made to a Section, Exhibit or Schedule, such reference shall be to a Section of, Exhibit to or Schedule of this Agreement unless otherwise indicated, Whenever the words "include," "includes" or "including" are used in this Agreement, they shall be deemed to be followed by the words "without limitation," A reference in this Agreement to $ or dollars is to U.S, dollars. The words "hereof," "herein" and "hereunder" and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement. References to "this Agreement" shall include the Company Disclosure Schedule.. (b) The parties have participated jointly in negotiating and drafting this Agreement. In the event that an ambiguity or a 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. Section 8.03 Survival. Each representation and warranty contained in Article 3 and Article 4 will survive the.; Effective 'rime and terminate as of as of the Final Escrow Release Date, except to the extent related to any Outstanding Claims. Notwithstanding the foregoing, to the extent the Indemnifiable Liabilities include: (a) the fraud or willful misconduct of the Company or Principal, such representations and warranties will survive indefinitely; (b) the Fundamental Representations or breaches or inaccuracies of any of representations or statements made in any Shareholder Letter, such representations and warranties will survive for the longer 56 m44742-1821124.doc of (1) the applicable statutes of limitations (giving effect to any waiver, mitigation or extension thereof) plus sixty (60) days or (ii) five years from the Effective Time, and (c) Sections 3.06 (Taxes) or 3.12 (Ernployee Matters), such representations and warranties will survive the applicable statutes of limitations (giving effect to any waiver, mitigation or extension thereof) plus sixty (60) days. Section 8.04 Governing Law. This Agreement shall be governed by and construed in accordance with the internal laws of the State of Washington without giving effect to any choice or conflict of law provision or rule (whether of the State of Washington or any other jurisdiction) that would cause the application of Laws of any jurisdiction other than those of the State of Washington. Section 8.05 Submission to Jurisdiction. Each of the parties hereto irrevocably agrees that any legal action or proceeding, with respect to this Agreement and the rights and obligations arising hereunder, or for recognition and enforcement of any judgment in respect of this Agreement and the rights and obligations arising hereunder brought by any other party hereto or its successors or assigns shall be brought and determined exclusively in state or federal court located in King, County, Washington. Each of the parties hereto agrees that mailing of process or other papers in connection vtidth any such action or proceeding in the manner provided ill Section 8.07 or in such other manner as may be permitted by applicable Laws, will be valid and sufficient service thereof: Each of the parties hereto hereby irrevocably submits with regard to any such action or proceeding for itself and in respect of its property, generally and unconditionally, to the personal jurisdiction of the aforesaid courts and agrees that it will not bring any action relating to this Agreement or any of the transactions contemplated by this Agreement in any court or tribunal other than the aforesaid courts. Each of the parties hereto hereby irrevocably waives, and agrees not to assert, by way of motion, as a defense, counterclaim or otherwise, in any action or proceeding with respect to this Agreement and the rights and obligations arising hereunder, or for recognition and enforcement of any judgment in respect of this Agreement and the rights and obligations arising hereunder (i) any claim that it is not personally subject to the jurisdiction of the above named courts for any reason other than the failure to serve process in accordance with this Section 8.05, (ii) any claim that it or its property is exempt or immune from jurisdiction of any such court or from any legal process commenced in such courts (whether through service of notice, attachment prior to judgment, attachment in aid of execution of judgment, execution of judgment or otherwise), and (iii) to the fullest extent permitted by the applicable Law, any claim that (x) the suit, action or proceeding in such court is brought in an inconvenient forum, (y) the venue of such suit, action or proceeding is improper, or (z) this Agreement, or the subject matter hereof, may not be enforced in or by such courts. Section S.06 Waiver of Jury Trial. EACH PARTY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LEGAL ACTION ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT. EACH PARTY TO THIS AGREEMENT CERTIFIES AND ACKNOWLEDGES THAT (A) NO REPRESENTATIVE OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, `111AT SUCH OTHER PARTY WOULD NOT SEEK TO ENFORCE THE FOREGOING WAIVER IN TI1E EVENT OF A LEGAL ACTION, (B) SUCf-I PARTY HAS 57 m44762-152112,4.doc CONSIDERED THE I1v1PLICATIONS Ole THIS WAIVER, (C) SUCH PARTY MAKLS THIS WAIVER VOLUNTARILY, AND (D) SUCH PARTY HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 8.06, Section 8.07 Notices. All notices, requests, consents, claims, demands, Nvaivers and other communications hereunder shall be in writing and shall be deemed to have been given (a) when delivered by hand (with written confirmation of receipt), (b) when received by the addressee if sent by a nationally recognized overnight courier (receipt requested), (c) on the date sent by facsimile or e-mail of a PDT document (with confirmation of transmission) if sent during normal business hours of the recipient, and on the next Business Day if sent after normal business hours of the recipient, or (d) on the third day after the date mailed, by certified or registered mail, return receipt requested, postage prepaid. Such communications must be sent to the respective parties at the following addresses (or at such other address for a party as shall be specified in a notice given in accordance with this Section 8.07): If to Parent or Merger OH WDH HOLDCO, LLC Sub, to: 201 Main Street, Suite 1018 Fort Worth, Texas 76102 Email:%keystonefftm.com Attention: with a copy (which will Cairncross & Hempelrnann, P.S, not constitute notice to 524 Second Avenue, Suite 500 Parent or Merger Sub) Seattle, WA 98104 to. Email: twoodland@caimeross.com Attention: Timothy M, Woodland If to the Company, to: with a copy (which will not constitute notice to the Company) to: Black Rock Cable, Inc. 1512 Fairview Drive Bellingham, WA 98229 Email: blackrockcable.com Attention: Graham & Dunn PC Pier 70 2801 Alaskan Way Suite 300 Seattle, WA 98121 Email: pfrankeCgrahamdunn.com Attention: Pat Franke or to such other Persons, addresses or facsimile numbers as may be designated in writing by the Person entitled to receive such communication as provided above, Section 8.08 EntireAgreement. This Agreement (including the Exhibits and Schedules to this Agreement), the Company Disclosure Schedule and the Confidentiality Agreement constitute the entire agreement among the parties with respect to the subject matter of 58 aO47o2-1321124.doc: this Agreement and supersede all other prior agreements and understandings, both written and oral, among the parties to this Agreement with respect to the subject matter of this Agreement. In the event of any inconsistency between the statements in the body of this Agreement, the Confidentiality Agreement and the Company Disclosure Schedule (other than an exception expressly set forth as such in the Company Disclosure Schedule), the statements in the body of this Agreement will control. Section 8.09 No Third Party Beneficiaries. Except as provided in Section 5.07 hereof and Section 2,07 with respect to the Parent Indemnified Parties (which shall be to the benefit of the parties referred to in such section), this Agreement is for the sole benefit of the parties hereto and their permitted assigns and respective successors and nothing herein, express or implied, is intended to or shall confer upon any other Person or entity any legal or equitable right, benefit or remedy of any nature whatsoever under or by reason of this Agreement. Section 8.10 Severahility. if any term or provision of this Agreement is invalid, illegal or unenforceable in any jurisdiction, such invalidity, illegality or unenforceability shall not affect any other term or provision of this Agreement or invalidate or render unenforceable such term or provision in any other jurisdiction. Upon such determination that any term or other provision is invalid, illegal or unenforceable, the parties hereto shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in a mutually acceptable manner in order that the transactions contemplated hereby be consutninated as originally contemplated to the greatest extent possible. Section 8.11 Assignment. This Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective successors and permitted assigns, Effective immediately and automatically upon closing of the Acquisition, and without any further action of any party, Moldings shall be deemed substituted for 014 WDH Holdco, LLC as "Parent" for all purposes of this Agreement (including all rights and obligations of 01`1 WDH Holdco, LLC as Parent hereunder) and OH WDH Holdco, LLC shall cause Holdings to assume CH WDH Holdco, LLC's rights and obligations under this Agreement. Following closing of the Acquisition. Holdings may assign this Agreement (and all rights and obligations of Holdings hereunder) to an Affiliate of Holdings. The Company may not assign any of its rights or obligations hereunder, Section 8.12 Remedies. Subject to Section 2.05(e) and Section 7,06, and except as otherwise provided in this Agreement, any and all remedies expressly conferred upon a party to this Agreement will be cumulative with, and not exclusive of, any other remedy contained in this Agreement, at Law or in equity. The, exercise by a party to this Agreement of any one remedy will not preclude the exereise by it of any other remedy. Section 8.13 Specific Performance. The parties hereto agree that irreparable damage would occur if any provision of this Agreement were not performed in accordanee with the terms hereof and that the parties shall be entitled to an injunction or injitrictions to prevent breaches or threatened breaches of this Agreement or to enforce specifically the performance of the terms and provisions hereof in any state or federal court located in King County, Washington, in addition to any other remedy to which they are entitled at Law or in equity. 59 m44762-1821 124. dac Scctiun S.14 Counterparts; Effectiveness. This Agreement may he executed in any number of counterparts, all of which will be cme and the same agmement. This Agreemom All became effective when cash party to this Agreement yvill have received wunterparts siCga d by all of the other parties. [SIGNATURE PAGE FOLLOWS] 60 m44762-I821124.doc IN VnTNBSS V43EIMF, the Pa+ hereto have camed-this Agra z=l to be executed as of the date first written above by their Te*rctive officers theremato daly authorized. OH WDH HOLDCO, LLC By Name; Tim PRINCIPAL SHAREHODLD SIGNATURE PAQir TO AGREF�MENT A24D PLAN OF MERGER D4 WPTNESS WHEREOF, theparfies iaereto haw sed Us Agreement to be executed ias of the slate first written abcr" their wVm &c aff'icen thercunto duly authorized. BLACK ROCK CABLE, INC. Fay Name: Title: OH WDH HOLDCO, LLC liy Name: Title: VIC,�%R�SI DEnrT PRINCIPAL SHAREHOLDERS SIGNATURE F AUR TO AGUEMBINT AND PLAN DF MERGER 7N Y► RNLSS WIMEOF, tho parties hereto have caused tbis Agreement to be; excemod as offt date first wrinen above by heir respective officers thereunto duly authorized. BLACK ROCK CABLE, INC. By. — Name: Ti fie; OR WDH. HOLDCO, LLC ]3y _ NammeV Title: PRINCIPAL SHAREHOLDERS 'Plalpa"M SMA,TURE PAGE TO AGRERMIENT AND PLAN O.P NSRQER SHAREHOLDERLDER LETTER SHAREHOLDER LETTER THIS SHAREHOLDER LETTER (this "Letter") is being entered into by the undersigned holder of capital stock ("Company Shareholder") of BLACK ROCK. CABLE, INC., a Nevada corporation (the "Company"). The undersigned Company Shareholder is executing and delivering this Letter to and for the benefit of OH WDH HOLDCO, LLC, a Delaware limited liability company ("Parent"), in accordance with, and as a condition to closing udder, that certain Agreement and Plan of Merger (such agree'Ment, together with all Exhibits and Schedules thereto, the "Merger Agreement"), dated as of September [ 1, 2012, by and among the Company, Parent and the Principal Shareholders named therein. Capitalized terms used in this Letter that are not specifically defined shall have the respective meanings as set forth in the Merger Agreement. t. Approval of the Merger and Merger Agreement. (a) The undersigned Company Shareholder confirms that he or she has received a complete copy of the Merger Agreement and has had the opportunity to review the Merger Agreement with his or her professional advisors, including legal counsel and tax advisers, and that all of his or her questions regarding the Merger Agreement have been answered to his or her full satisfaction. By execution of this Letter, the undersigned Company Shareholder confirms his or her approval of the Merger and the Merger Agreement pursuant to the Unanimous W limm Consent of the Shareholders of Black Rock Cable, Inc., dated j , 2012, and agrees to, and shall be bound by, all of the terms and conditions of the Merger and the Merger Agreement. (b) By approving the Merger and the Merger Agreement, the undersigned Company Shareholder hereby irrevocably waives his or her right to exercise appraisal or dissenters' rights with respect to his or her shares of capital stock of the Company under the Nevada Corporations Code. 2, Representations and Warranties. (a) The undersigned Company Shareholder represents and warrants to Parent, the Company and the Surviving Company as follows: (i) he or she is the sole record and beneficial owner of the number of shares of Company Common Stock set forth opposite his name on the signature page below (the "Shares"), and other than the Shares, he or she does not have any interest or rights in or to any other capital stock or other equity interest in the Company whatsoever, or any right to acquire or receive any equity interest in the Company, including without limitation any warrants, options, rights, cornmitments, understandings or arrangements of any land to acquire or receive any equity interest in the Company; (ii) he or she holds good and valid title to the Shares, free and clear of all Liens; (iii) he or she has the sole power and authority to vote the Shares and no consent, authorization or approval of any other Person is required in connection with this Letter; and (iv) he or she has the full right, power and authority to enter into and perform his or her obligations in this Letter. t02081437.DUC2 ) m44762-16202.34.doc (b) The undersigned Company Shareholder acknowledges that the foregoing representations and wartaanties will survive in perpetuity, and he or. she shall indemnify and hold harmless Parent and Surviving Company for any breach or inaccuracy of any of the foregoing representations and warranties. 3. Merger Consideration. The undersigned Company Shareholder acknowledges that pursuant to the Merger Agreement (a) he or she will be entitled will receive Merger Consideration based on his or her respective Pro Rata Share, (b) at Closing a portion of the Merger Consideration will be deposited into the Escrow Account for purposes of the Purchase Price Adjustment Escrow and the indemnity Escrow, to satisfy certain potential adjustments to the Merger Consideration and for indemnification of the Parent indemnified Parties, and (c) the total Merger Consideration will be reduced by any claims- made on the Escrow Account. 4. Indemnification of Parent Indemnified Parties. The undersigned Company Shareholder acknowledges and agrees to and shall be bound by the previsions of Section 2.05 of the Merger Agreement, pursuant to which he or she shall severally (based on his or her Pro Rata Share) indemnify the Parent Indemnified Parties, which obligation will be limited to the Escrow Amount except with respect to certain matters identified in Section 2.5(e) of the Merger Agreement, 5. Appointment of Shareholders Agent. (a) The undersigned Company Shareholder hereby confuTus and approves the irrevocable appointment of the Shareholders Agent pursuant to Section 2,06 of the Merger Agreement, with the authority and for the purposes set forth in the Merger Agreement. The authority of the Shareholders Agent shall also apply to any successor Shareholders Agent. The appointment of the Shareholders Agent is coupled with an interest and is being granked, in part, as an inducement to the Parent to enter into this Agreement and shall be irrevocable and survive the death, incompetency, bankruptcy or liquidation of any Company Shareholder and shall be binding on any heir or successor thereto, (b) Without limiting the broad authority of the Shareholders .Agent under the Merger Agreement, the undersigned Company Shareholder acknowledges and agrees that the Shareholders Agent shall have the authority, on behalf of the undersigned Company Shareholder and in his or her name, to do the following. (i) give and receive all notices and communications that may be given by or to Company Shareholders pursuantto the Merger Agreement; (ii) authorize receipt and dispute of any statement delivered pursuant to the Merger Agreement; (iii) authorize delivery to the Parent Indemnified Parties of the Escrow Amount in satisfaction of indemnification claims by the Parent Indemnified Parties pursuant to this Agreement, to object to such deliveries, to object to the retention of amounts in the Escrow Account for claims wade by Parent pursuant to the Merger; (iv) agree to, negotiate, enter into settlements and compromises of, and take legal actions and comply with orders of courts and awards of arbitrators with respect to such claims; (v) to waive or refrain from enforcing any right of the Company Shareholders arising out of or under or in any manner relating to the Merger Agreement or any other agreement contemplated by the Merger; (vi) execute and deliver such waivers, consents, amendments, modifications or alterations in connection with the Merger Agreement and the (02081437.DOC;2 ) m44762-1820234.doe consummation of the transactions contemplated by the Merger Agreement as the Shareholders Agent, in his reasonable discretion, may deem necessary or desirable to give effect to the intentions of the Merger Agreement; and (vii) take all actions necessary or appropriate in the judgment of the Shareholders Agent for the accomplishment of the foregoing. (c) With respect to Outstanding Shareholders Agent Expenses, the undersigned Company Shareholder acknowledges that, at the direction of Shareholders Agent, the Company Shareholders will be requested in the letter of transmittal referenced in Section 2.02(a) of the Merger Agreement to authorize Parent to deposit an aggregate of�Wthe Merger Consideration to be received by Company Shareholders into a separate escrow account that will be subject to claims by the Shareholders Agent for Outstanding Shareholders Agent Expenses pursuant to a separate set of escrow instructions to be executed by the Company Shareholders. 6. Release of Claims; Covenant Not to Sue. Effective as of the Closing, the undersigned Company Shareholder, for himself or herself (and his or her heirs, executors, administrators, successors, and assigns), hereby fully, irrevocably and unconditionally releases and forever discharges and shall defend and hold harmless the Company, parent and the Surviving Company and their respective members, managers, officers, directors, affiliates, successors, and assigns from any and all claims, demands, losses, costs, expenses (including reasonable attorneys' fees and expenses), obligations, liabilities, and/or damages (collectively, "Claims") of every kind and nature whatsoever, whether or not now known or existing as of the date of this Letter, that such Company Shareholder may now have or may hereafter claim against the Company, Parent or the Surviving Corporation or any of their employees, officers, directors, successors, and assigns, relating in any way to the Company arising out of the period prior to and including the Closing, including without limitation with respect to the Merger, the Merger Agreement and the transactions contemplated thereby. For clarification, the foregoing release shall not release Parent of any obligation to pay the Merger Consideration pursuant to the terms of the Merger Agreement. The undersigned Company Shareholder, for himself or herself (and his or her heirs, executers, administrators, successors, and assigns), hereby waives any and all provisions, rights, and benefits conferred by any law of the United States or any state or territory of the United States, or principle of common law, which may have the effect of limiting the release set forth above. The undersigned Company Shareholder acknowledges that he or she may discover facts in addition to or different from those now known or believed to be true with respect to any Claims but that it is the intention of the undersigned Company Shareholder, for himself or herself (and his or her heirs, executors, administrators, successors, and assigns) to hereby completely, fully, finally, and forever compromise, settle, release, discharge, and extinguish any and all Claims whether known or unlmown, suspected or unsuspected, which now exist, or heretofore existed, or may hereafter exist, and without regard to the subsequent discovery or existence of additional or different facts. The undersigned Company Shareholder, for himself or herself (and his or her heirs, executors, administrators, successors, and assigns), hereby represents and covenants that he or she shall not initiate, institute, commence, continue, file, or otherwise further prosecute, whether directly or indirectly, any actions, lawsuits, causes of action, claims, demands, or legal proceedings, before any court, tribunal, governmQnt agency, or arbitral body, against the other Party for any right that has been released by this Letter. {02481437_DM;2 } 3 m44762-1=234.doo 7. Voluntary Agreement. The undersigned Company Shareholder acknowledges and agrees that he or she has not been forced or pressured in any manner whatsoever to sign this Letter and that the undersigned Company Shareholder is executing this Letter voluntarily. 8. Binding Effect of Letter; Perpetual Existence; Further Efforts. `lids Letter shall be binding on the undersigned Company Shareholder and on his or her heirs, executors, administrators, successors, and assigns. This Letter shall have perpetual existence and effect. The undersigned Company Shareholder represents and covenants that he or she shall execute and deliver from time to time hereafter, upon reasonable request of the other Party, all such further documents and instruments, and shall do and perform all such acts as may be necessary or reasonably requested by the Company, Parent or the Surviving Company, to give full effect to the intent and meaning of this Letter. 9. Governing Lawn, Jurisdiction. This Letter shall, be governed by and construed in accordance with the laws of the State of Washington, without application of conflict of law provisions. Any action regarding this Letter shall be subject to the exclusive jurisdiction and venue of the Superior Court of the State of Washington in King County or the United States District Court for the Western District of Washington, 10. Signatures. Signature pages delivered via facsimile, electronic mail or other means of electronic transmission shall be treated as originals, jRemainder of Page Intentionally Left Blank; Signature Page Follows] {02081437.DOC;2 } 4 m44762-1820234.doo PLEASE READ CAREFULLY. TMS LETTER INCLUDES A RELEASE OF ALL KNOWN AND UNKNOWN CLAWS. THE UNDERSIGNED FULLY UNDERSTANDS THR FINAL AND BINDING EMCT Of THS LET ER AND ACKNOWLEDGLS THAT HE OR SHE I$ SIGNING IT VOLUNTARILY. EXECUTED this _ day of 2.12 C.OWANY SHAREHOLDER: No. of Shares: Signature Print Name Address: (Second signature f Shares i, :;' by married couple EVROS) Signature Print Name - Address: (02081437.DOC;2 ) -S- CONSENT OF SPOUSE I, , am the spouse of I acknowledge that I have read the foregoing Letter and that I know its contents. I am aware that by the provisions of the Letter or otherwise, my spouse has approved the Merger and the terms of the Merger agreement, including without limitation with respect to: (a) the appointment, capacity and indemnification of the Shareholders Agent; (b) the deposit into and release from escrow of Merger Consideration; (c) the indemnification of the Parent Indemnified Parties by the Company Shareholders, and (d) a release of all claims. I agree to be bound by the provisions of the Letter to the extent I have any rights or interest in the Shares or obligations -under the. Letter under the community property laws or similar laws relating to the marital property in effect in the state of our residence as of the. date of this Agreement, I hereby waive and agree not to assert any claim or to take any other action based on such community interest or lien or charge which would frustrate the purposes sought to be achieved by the Agreement. I know I am free- to seek independent professional counsel with respect to this Consent. I have either sought such counsel or determined, after reviewing the Letter carefully, to waive that right. EXECUTED this _ day of 2012. Signature Print Name (02081437.DOC:;2 ) -6- I DON 111No) ESCROW AGREEMENT ESCROW AGREEMENT (Black hock Agreement and Plan of Merger) TIiiS ESCROW AGREEMENT, dated as of [-], 2012 ("Agreement" , is by and amour OH WDHHOLDCO, LLC, a Delaware limited liability company ("Parent"), , an individual and principal of Black Rock Cable, Inc., aNevada corporation ("Company"), for himself and in his capactity as the appointed agent for and on behalf of the Company's shareholders as their attorney - in -fact ("Shareholders Agent"), and U.S. BANK NATIONA1 ASSOCIATION (the. "Escrow Agent")_ RECITALS W`H1 REAS, the Company, Parent and Shareholders Agent are parties to that certain Agreement and plan of Merger dated as of September [•], 2012 (the "Merger Agreement"), pursuant to which the parties intend that Parent acquires the Company pursuant to a merger by which a a v4holly-ownod subsidiary of Parent ("Merger Sub"), will merge with the Company, oil the terms and subject to the conditions set forth in the Merger Agreement. Capitalized terms used herein and not otherwise defined herein sball have the meanings ascribed to them in the Merger Agreement, unless the context othem ise requires, and the terms of the Merger Agreement am incorporated in this Agreement by this reference; and WIMREAS, Section 2.03 of the Merger Agreement describes the manner by which Parent, at Closing, will deposit into an interest bearing escrow account (the "Escrow Account") with the Escrow Agent an a gate amount equal to (i) (the "Purchase Price Adjustment Escrow Amount") plus 09 (the "Indemnity Escrow Amount"). NOW, THEREFORE, in consideration of the foregoing and of the promises contained herein, tine parties, intending to be legally bound, hereby agree as follows: SECTION 1 ESCROW ACCOUNTS 1.1 Purchase Price Adjustment Escrow. On the Closing Date, Parent will deposit the Purchase Price Adjustment Escrow Amount with the Escrow Agent, which the Escrow Agent acknowledges receipt thereof, to be held and disbursed by the Escrow Agent pursuant to the terms and conditions of this Agreement. The Escrow Agent has established a segregated escrow account (the "Purchase _Price Adjustment Escrow Account"), into which the Escrow Agent shall deposit the Purchase Price Adjrsttnent Escrow Amount prior to the investment thereof pursuant to Section 1.3. For purposes hereof, the terra "Purchase Price Adjustment Escrow Funds" shall refer to the Purchase Price Adjustment Escrow Amount, together with all interest; income, dividends and other earnings (collectively, "Earnings") with respect thereto, which shall be added to the Purchase :Price Adjustment Escrow Account and held -and disbursed in accordance with the terms and conditions of this Agreement, 1.2 - Indemnity Escrow Amount. On the Closing Date, parent will deposit the Indemnity Escrow Amount with the Escrow Agent, to be held and disbursed by the Escrow Agent pursuant to the terms and conditions of this Agreement. The ,Escrow Agent will establish a segregated escrow account (the "Indemnity Escrow Account"), into which the Escrow Agent shall deposit the Indemnity Escrow Amount prior to the investment thereof pursuant to Section 1.3. For purposes hereof, the terra "Indemnity Escrow Funds" shall refer to the Indemnity Escrow Amount, together with all Earnings with respect thereto, which shall be added to the Indemnity Escrow Account and held and disbursed in accordance with the terms and conditions of this Agreement. {02102434.DoC;l } 81 TI iA VF H P ro 15 .+ N 1.3 Investment of Escrowed Funds. (a) For as long as any portion of the Purchase Price Adjustment Escrow Funds or Indemnity Escrow Funds (collectively, the "Escrowed Funds") continue to be held by the Escrow Agent and pending the disbursement thereof pursuant to this Agreement, Escrow Agent is hereby directed to`dtposit and invest the Escrowed Funds in accordance with joint vvxitten instructions of Parent and the Shareholders Agent in (a) direct obligations of, or obligations fully guaranteed by, the United States of America or any agency thereof; (b) certificates of deposit issued by a commercial bank having a combined capital surplus and undivided profits of not less than $100,000,000, (c) money market funds investing solely in any of the above or (d) other investments of equal .or greater security as instructed in writing by Parent and the Company. Notwithstanding the foregoing, Parent and the Shareholders Agent understand and agree that the Escrow Agent will not act as a securities broker or intermediary and that the Escrow Agent shall not be directed to snake any investment of the Escrowed Funds in deposit products or sweep products not currently offered by the Escrow Agent. Such investments shall be held in the name of Escrow Agent, for and on behalf of Parent and the Company Shareholders. (b) If Parent and the Shareholders Agent do not provide written investment instructions to the Escrow Agent, the Escrow Agent shall invest the Escrowed Funds in the U.S. Bank Money Market Savings Account, Parent and the Shareholders Agent acknowledge that the U, S. Bank Money Market account is a U. S. Bank National Association (for purposes of this Section 1.3, "U.S. Bank") interest - bearing money market deposit account designed to meet the needs of U.S. Bank's Corporate Trust Services Escrow Group and other Corporate Trust customers of U.S. Barak. Selection of this investment includes authorization to plane funds on deposit with U.U. Bank. U, S. Bank uses the daily balance inothod to calculate interest on this account (actual 36S or 366). This method applies a daily periodic rate to the principal balance in the account each day. Interest is accrued daily and credited monthly to the account. Interest rates currently offered on the accounts are determined at U, S,13ank's discretion and maybe tiered by customer deposit amount. The owner of the accounts is U. S. Bank as Escrow Agent for its trust customers. U.S. Bank's trust department performs all account deposits and withdrawals. Each customer's deposit is insured by the Federal Deposit Insurance Corporation as determined under FDIC Regulations, up to applicable FDIC limits. (c) Escrow Agent shall hold, maintain and utilize the Escrowed Funds pursuant to the terms and conditions of this Escrow Agreement. Parent and the Company Shareholders shall provide Escrow Agent with a NV-9 or original W-8 IRS tax form prior to the disbursement of Eamings and Escrow Agent will file the appropriate 1099 or other required forms pursuant to Federal and applicable state laws, A statement of citizewhip will be provided if requested by Escrow Agent. Escrow Agent shall not be responsible for maxiiuizin.gthe yield on the Escrowed Funds. Escrow Agent shall not be liable for losses, penalties or charges incurred upon any sale or purchase of any such investment. SECTION 2 DISBURSEMENT OF ESCROWED FUNDS 2.1 Disbursement of Purchase Price Adjustment Escrow Funds. (a) Within three (3) Business bays following the Final Accounting Resolution, Parent shall promptly instruct the Escrow Agent in writing to forthwith promptly remit the Purchase Price Adjustment Escrow Funds as determined pursuant to Section 2.04 of the Merger Agreement. (42J024A.D()C;1 � (b) In the event that the Purchase Price Adjustment Escrow Funds are not sufficient to return to Parent all amounts to which Parent is entitled under Section 2.04 of the Merger Agreement, any shortfall shall be funded from the Indemnity Escrow Account. (a) To the extent there is a remaining balance in tite Purchase Price Adjustment Escrow Account after releasing to Parent all amounts to which Parent is entitled under Section 2.04 of the Merger Agrminent (or if no fiinds are released), then Escrow Agent shall, upon Parent's instructions, release the remaining balance of the Purchase Price Adjustment Escrow Funds to jthe Shareholders Agent on behalf of the Company Sharcholdersl [the Company Shareholders based upon each such Company Shareholder's Pro Rata Share of such remaining balance]. 2.2 )disbursement of Indemnity Escrow Funds. The procedure set forth in this Section 2.2 shall govern the application of the Indemnity Escrow funds to satisfy any claims by Parent and/or its Affiliates (including the Surviving Company after the Effective 'Time) and any other Parent Indemnified Party that may, be brought pursuant to Section 2.05 of the Merger Agreement, 'Me basis for claims to indemnification shall be governed by the Merger Agreement, which shall be Controlling among the parties for all purposes of this Agreement and shall be applicable between the parties to the extent inconsistent with any provisions of this Agreement, (a) In the event that any Parent Indemnified Party wishes to make an indemnification claim, such Parent Indemnified Party shall first provide written police of such claim (a "Parent Indemnification Notice") to the Escrow Agent and the Shareholders Agent. Any such notice shall, to the extent practicable, set forth tite basis for the claim and, to the extent known, the amount of the Claim. Thereafter, the Shareholders Agent shall have fifteen (15) Business Days following such party's receipt of the Parent Indemnification Notice in which to deliver notim of objection to such claim to the Parent Indemnified Party sand the Escrow Agent. Uno objection notice is given, then the claim in the amount alleged by the 1'arcnt Indemnified Party in the Parent Indemnification Notice shall be deemed to be final, conclusive and binding on the Company Shareholders and indamnifiable pursuant to the Merger Agreement. No offset against life Indemnity Escrow Account shall be permitted if the relevant claim is timely disputed as set forth above, unless and until its validity is finally resolved. The parties shall in good faith attempt to resolve any disputes arising under this Section as to the validity or atnotult of any claim within ten (10) Business Days for any mutually agreed upon extension thereof) after such dispute arises. If the parties do not resolve any such dispute within such period, the Parent Indemnified Tarty may seek appropriate legal remedies. In the event that the Parent Indemnified Party is entitled to payment from the Indemnity Escrow Account as a result of the final resolution of this validity and amount of such claim pursuant to a final, non -appealable decision of a court of cam petcni jurisdiction, such parent Indemnified Party and the Shareholders Agent shalt promptly provide joint written notice (the "Resolved Claim Notice") of such offset to the Escrow Agent. If the Shareholders Agent has not so provided the Resolved Claim Notice to the Escrow Agent within five (5) Business Days sifter the demand of the Parent Indemnified Party in writing to the Shareholders Agent, then the Parent Indemnified Party will be permitted to unilaterally deliver a Resolved Claim Notice (a "Unilateral Resolved Claim Notice') to the Escrow Agent so lung as the Parent Indemnified Party provides promptwritten notice of the delivery to the Escrow Agent of such Unilateral Resolved Claim Notice to the Shareholders Agent. Within two (2) Business Days after receipt of the Resolved Clain Notice or, in the case of a Unilateral Resolved Claim Notice, within three (3) Business Days after receipt thereof, Escrow Agent shall deliver to such. Parent ludeninified Party that portion of the Indemnity Escrow Amount equal to the amount set forth in the Resolved CIaim Notice or ilic Unilateral Resolved Claim Notice. (b) To the extent that any Parent Indemnified Party wishes to make an indemnification claim with respect to any Indamnifiabls Liability that is outstanding and unresolved or resolved in whole or in {02102434.DOCJ ) part as of the Interim Escrow Release Date or Final Escrow Release .Date, as applicable, (and for the avoidance of doubt an Indemnifiable Liability shall be deemed to be outstanding so long as there has been a written or oral notice, claim, demand, action, suit, complaint, proceeding (arbitration or otherwise), investigation or other communication by any Person prior to the Interim Escrow Release Date or Final Escrow Release Date relating to such Indernnihable Liability or the facts and circumstances giving rise to such Indemnifuable Liability), Parent shall have the right to make a claim under Section 2.05 of the Merger Agreement based on a good faith estimate of the maximum potential amount of such claim in the statement of claims to be delivered by Parent pursuant to Section 2,2(a), by providing written notice of such claim (a "Claim Notice") to the Escrow Agent and the Shareholders Agent. The Claire Notice shall, to the extent practicable, set forth the basis for the claims and the amount of the claim, and the amount set forth in the Claim Notice shall be included in the Retained Indemnity Escrow as an Outstanding Clair. until resolved in accordance with Section 2.2(a). (c) In the event any Parent Indemnified Party becomes aware of any claim made by any third party against the Parent Indemnified Party (a "Third -Party Claim"), which such Parent Indemnified Party reasonably believes in good faith may result in a claim for indemnification pursuant to Section 2.05(a) of the Merger Agreement, such Parent lildemnified Party shall notify the Shareholders Agent of such claim and such claim shall be included in the Indemnity Escrow Account as an Outstanding Claim, The Shareholders Agent (ou behalf of the Company Shareholders) shall be entitled, at its sole expense, to participate in, but not to determine or conduct, the defense of such Third Party Claim. The Parent Indemnified Party shall have the right in its sole discretion to conduct the defense of, and to settle, any such claim and the Shareholders Agent shall cooperate fully with Parent in connection with the diligent defense of any such Third -Party Claim, provided, however, that except with the consent of the Shareholders Agent (which may not be unreasonably withheld, delayed or conditioned), no monetary settlement of any such Third Parry Claim with third party claimants shall be determinative ofthe arnount of Damages relating to such matter, provided further, that the Shareholders Agent shall not have the right to consent or otherwise agree to any non -monetary settlement or relief, including injunctive relief or other equitable remedies, that is not directly binding upon the Shareholders Agent or a Company Shareholder. (d) On or prior to each of the Interim Escrow Release Date and the Final Fscrow Release. Date, Parent shall deliver to the Shareholders Agent a statement as of such date of all outstanding claims of any Parent Indernnified Party to the extent such claims have not already been submitted to the Shareholder, Agent (each, an "Outstanding Claim" and collectively, the "Outstanding Claims"). Within five (5) Business Days following cacti of the Interim Escrow Release Date and the Filial Escrow Release Date, Parent and the Shareholders Agent shall each instruct the Escrow Agent in writing to take the following actions, (i) The Escrow Agent shall be instructed to retain a portion of the Indemnity Escrow Acwunt equal to the aggregate Outstanding Claims at such time; if any, or such lesser amount as shall be remaiaing its the Indemnity Escrow Account at such time (the "Retained Indemnity Escrow"), (ii) To the extent the amount remaining in the Indemnity Escrow Account exceeds the Retained Indemnity Escrow (an "indemnity FA -crow Excess") on the Interim Escrow Release mate, the Escrow .Agent shall be instructed to promptly remit 100of such Indemnity Escrow Excess to [the Shareholders Agent on behalf of the Company Shareholders] [the Company Shareholders in proportion to their respective Pro Rata Share] (subject to any adjustment for Outstanding Shareholder Agent Expenses pursuant to S ection 2.06(b) of the Merger Agreement). (iii.) To the extent of an Indemnity Escrow Excess on the Final Escrow Release Date, the Escrow Agent shall be instructed to promptly remit the Indemnity Escrow Excess to [the Shareholders (02102434.DOC;1 ) 4 Agent on behalf of the Company Shareholders] [the Company Shareholders in proportion to their respective Pro Rata Share] (subject to any adjustment for Outstanding Shareholder Agent Expenses pursuant to Section 2,06(b) of the Merger Agreement). (e) In the event and to the extent that afterthe Final Escrow Release Date any Outstanding Claim notice of which is delivered prior to the Final Escrow Release Date is resolved, each of Parent and the Shareholders Agent shall promptly instruct the Escrow Agent in writing to promptly (and, in any event, no later than three (3) Business Days after delivery of such instructions) (i) deliver the amount which such Parent Indemnified Parties are entitled to receive from the Retained Indemnity Escrow with respect to such Outstanding Claim and (ii) to the extent that the Retained Indemnity Escrow exceeds the aggregate Outstanding Claims after giving effect to any payment pursuant to the foregoing clause (i) (such excess, if any, the "Retained Indemnity ]Escrow Excess"), distribute all of such Retained Indemnity Escrow Excess to [the Shareholders Agent on behalf of the Company Shareholders] [the Company Sharebolders in proportion to their Pro Rata Share]. 2.3 Disbursement to Shareholders Agent. (8) If not paid directly to the Shareholders Agent by the Company Shareholders, any loss, liability or expense incurred without gross negligence or bad faith on the part of the Shareholders Agent and arising out of or in connection with the acceptance or administration of his duties under the Merger Agreement, including say out-of-pocket costs and expenses and legal fees and other legal costs reasonably incurred by the Shareholders Agent may he recovered by the Shareholders Agent from either the Purchase Price Adjustment Escrow Account or the Indemnity Escrow Account (if city) that otherwise would be distributed to the Company Shareholders following the Final Accounting Resolution, Interim Escrow Release Date or Final Escrow Release Date, as the case may be, in each case only after giving effect to, and satisfaction of, all claims for indemnification made by the Parent Indemnified Parties pursuant to Section 2.05 of the Merger Agreement, and such recovery (if any) of outstanding Shareholders Agent Expenses from such applicable Escrow Amount will be made from the Company Shareholders according to their respective Pro Rata Share. (b) A decision, act, consent or instruction of tho Shareholders Agent shall constitute a decision of all the Company Shareholders and shall be final, binding and conclusive upon each of the Company Shareholders; and the Escrow Agent and Parent may rely upon any decision, act, consent or instruction of the Shareholders Agent as being the decision, act, consent or instruction of each of the Company Shareholders. 'rho Escrow Agent and Parent are hereby relieved from any liability to any person for any acts done by them in accordance with such decision, act, consent or instruction of the Shareholders Agent, 2.4 Disbursement of Earnings. In the event that the Escrow Agent shall disburse any portion of the Purchase Price Escrow Amount to Parent or the Company Shareholders pursuant to this Agreement, the Escrow Agent shaft disburse to Parent or the Company Shareholders, as the case may be, all Earnings attributable to the portion of the Purchase Prim Adjustment Escrow disbursed to such party. All Earnings within the Indemnity Escrow Funds shall be held and disbursed upon termination and final disbursement of the Indenituty Escrow Account, 2.5 Dispute. In the event of any dispute among any of the parties to this Agreement, the Escrow Agent shall not comply with any claim or demands from any of tbo patties as long as any such dispute may continue, and the Escrow Agent shall make no delivery or other disposition of arty Portion of the Escrowed Funds until (a) the Escrow Agent receives a final non -appealable court order from a court of competent jurisdiction directing disposition of the Escrowed Funds, (b) the Escrow Agent has received a final non -appealable order of an arbitrator designated in writing jointly by Parent and Shareholders 102102434.DOCJ ) Agent directing disposition of the Escrowed Funds or any portion thereof or (c) the Escrow Agent has received uTitten instructions signed by Parent and Shareholders Agent directing disposition of the Escrowed Funds, Upon receipt of the order or instructions referred to in (a), (b) or (c) the Escrow Agent shall deliver the Escrowed Funds, or a portion thereof, as the case may be, in accordance with such order or instructions and shall comply in all respects with such order or instructions. Z.5 Disbursement of Escrowed Funds in Accordance with Joint Written instructions or an Order. If at any time the Escrow Agent receives (a) joint written instructions signed by Parent and Shareholders Agent regarding disposition of any or all of the Adjustment Escrow Funds or Indemnity Escrow Funds, (b) a final and non -appealable court order from. a court of competent jurisdiction regarding disposition of any or all of the Adjustment Escrow Funds or Indemnity Escrow Funds, or (c) a final and non -appealable order of an arbitrator designated in writing jointly by Parent and Shareholders Agent regarding disposition of any or all of the Adjustment Escrow Funds or Indemnity Escrow Funds, the Escrow Agent shall disburse such Escrowed Funds in accordance with, and shall otherwise comply with, such instructions or order. All payments to be made to Parent, the Company Shareholders or Shareholders Agent hereunder shall be paid by wire transfer of immediately available funds to the accounts) designated by ]Parent, the Company Shareholders, or Shareholders Agent, as applicable, by written instructions to the Escrow Agent, 2.7 Remaining Balance in Escrow Account. If the Escrow Agent disburses a portion of, but less than all of, any of the Adjustment Escrow Funds or Indemnity Escrow Funds pursuant to any order or instructions in accordance with this Agreement, that portion of such Escrowed Funds not disbursed shall continue to be held in escrow by the Escrow Agent subject to the terms of this Agreement. 2.8 Interpleader. In the event that any dispute should arise hereunder, the Escrow Agent shall be entitled to deposit the Escrowed Funds with the cleric of any court of competent jurisdiction and to interplead Parent and the shareholders Agent, and upon doing so, the Escrow Agent sball promptly give notice thereof to Parent and the Shareholders Agent. SECTION 3 ESCROW AGENT 3.1 Appointment. Parent and the Shareholders Agent hereby appoint the Escrow Agent to serve hereunder, and the Escrow Agent hereby accepts such appointment and agrees to perform all duties expressly set forth in this Agreement, 3.2 Compensatiou. In consideration of the Escrow Agent's acceptance of its appointment hereunder, the Escrow Agent shall be paid the fees set forth in xl ibit A, hereto, which shall be paid 50% by the Surviving Company and 50% from the Escrow Account. Such sum is intended as compensation for the Escrow Agent's ordinary services as contemplated by this Agreement, including without limitation (i) the investment of the Adjustment Escrow Funds and indemnity Escrow ]Funds, and (ii) the disbursement thereof pursuant to the terms of this Agreement. 3.3 Indemnification. (a) Parent and the Shareholders Agent, jointly and severally, shall be liable for and shall reimburse and indemnify the Escrow Agent and hold it harmless from and against any and all claims, losses, liabilities, costs, damages or expenses (including reasonable attorneys' fees and expenses) (collectively, "Losses") arising from or in connection with or related to this Agreement or from its position as Escrow Agent hereunder (including without limitation Lasses incurred by the Escrow Agent (02102434DOC.1 ) in connection with its successful defense, in whole or in part, of any claim of gross negligence or willful misconduct on its part); RLov'd that nothing contained herein shall require indemnification of the Escrow Agent for Losses caused by its gross negligence or willful misconduct or breach of this Agreement. (b) The Escrow Agent will act in good faith and use due care in performing its duties and responsibilities hereunder. The Escrow Agent shall not be liable for any action taken, or omitted or for any loss or injury resulting from its actions or its performance or lack of performance of its duties hereunder in the absence of gross negligence or willful misconduct or a breach of this Agreement on its part. In no event shall the Escrow Agent be liable (i) for acting in good faith in accordance with or relying in good faith upon any instruction, notice, demand, certificate or document from Parent or the Shareholder Agent or any entity the Escrow Agent believes in good faith to be acting on behalf of Parent or the Shareholder Agent, so long as its actions are wnsistent with the teens of this Agreement, (5) for any consequential, punitive or special damages, other than any such damages resulting from the Escrow Agent's gross negligence or willful misconduct or breach of this Agreement, (iii) for the acts or omissions of its nominees, correspondents, designees, subagents or sub -custodians, other than any such acts or omissions that result from the Escrow Agent's gross negligence or willful misconduct or breach of this Agreement, (iv) for an amount in excess of the value of the Escrowed Funds, valued as of the date of deposit thereof pursuant to this Agreement, so long as its actions are consistent with the terms of this Agreement, or (v) with respect to any action taken or omitted in good faith upon the advice of its counsel given with respect to any question relating to the Escrow Agent's duties and responsibilities under this Agreement in the absence of gross negligence or willful misconduct or a breach of this Agreement on its part. 3.4 Resignation. (a) The Escrow Agent may resign at any time upon giving Parent and the Shareholders Agent at least 30 days' prior written notice, and in such event, the successor Escrow Agent shall be Stich person, firm or corporation as shall be, mutually agreed to by Parent and the Shareholder Agent. It is understood and agreed that the Escrow Agent's resignation shall not be effective until a successor escrow agent agrees to act hereunder, l2rovi that if no successor is appointed and acting hereunder within 30 days after such notice is given, the Escrow Agent may, in. its sole discretion, apply to a court of competent jurisdiction for the appointment of a successor escrow agent or for other appropriate relief. The cost and expenses (including reasonable attorneys' fees and expenses) incurred by Escrow Agent in connection with such proceeding shall be paid 50% by the Surviving Company and 50% from the Escrow Account. (b) Upon receipt of the identity of the successor escrow agent appointed pursuant to Section 3.4(a), the Escrow Agent shall either deliver the Escrowed Funds then held hereunder to such successor escrow agent (less the amount of any fees, costs and expenses or other obligations then owed to the Escrow Agent), or hold such Escrowed Funds (or any portion thereof) pending distribution, until ail such fees, costs and expenses or other obligations are paid. (c) Upon delivery of the Escrowed Funds to a successor escrow agent, the Escrow Agent shall have no further duties, responsibilities or obligations hereunder, other than liabilities resulting from the Escrow Agent's willful misconduct or gross negligence or breach of this Agreement. 3.5 Collateral Agreements. The Escrow Agent shall not be bound in any way by any contract or agreement between the other parties hereto, regardless of whether the Escrow Agent bas knowledge of such contract or agreement or of its terms or conditions (other than this Agreement and any amendment to this Agreement). {02102434.DOCJ ) SECTION 4 TERMINATION 4.1 Termination. This Agreement shall be t=inated upon the earliest to occur of (a) disbursement or release of the entire amount of the Escrovr cd Funds by the Escrow Agent in accordance with the terms hereof, (b) written consent signed by Parent and the Shareholders Agent, or (c) payment of the amount of all Escrowed Funds then held into a court of competent jurisdiction in accordance with Sectiou 2.8. This Agreement shall not be otherwise terminated, The provisions of Sections 3.3 and 5.5(b) shall survive termination of this Agreement or the resignation or removal of the Escrow Agent. SECTION 5 OTHER PROVISIONS 51 Notices. (a) Any notice, demand or request required or permitted to be given under the provisions of this Agreement shall be in writing and shall be deemed to have been duly delivered (i) on the date of personal delivery, (ii) on the date of the receipt of the appropriate printed or electronic confirmation, if sent by facsimile or email transmission, (iii) upon receipt, if mailed by registered or certified mail, postage prepaid and return receipt requested or (iv) in the case of notices delivered to the Escrow Agent, when actually received by Escrow Agent's Corporate Trust Department. Any such notices shall be sent to the following addresses, or to such other address as any party may request in a notice delivered ill accordance with this Section 5.1 to the other parties hereto: If to Parent, to: OH WDH HOLDCO, LLC 201 Main Street, Suite 1018 Fort Worth, Texas 76102 Email: Attention: with a copy (which. will Cairncross & Hempelmann, P.S. not constitute notice to 524 Second ,Avenue, Suite 500 Parent) to: Seattle, WA 98104 Email: twoodland@caimeross.com Attention: Timothy M_ Woodland if to the Shareholders Agent, to: with a copy (which will not constitute notice to the Shareholders Agent) to: (02102434J=;l 1 Bellingham, WA. 98^ Email: Graham & Dunn PC Pier 70, 2801 Alaskan Way Suite 300 Seattle, WA 98121 Email: pfranke@grahamdunn.com Attention: Pat Franke If to the Escrow Agent: U.S. Bank Corporate Trust Services 60 Livingston Avenue EP-MN-WS3T Attu: Scott Kjar Telephone: (651) 495-3808 Email: scott.kiaiQusbank.com With a faxed copy to: Ryan Brennan Telephone: (206) 344-4648 Facsimile: (206) 344-4630 (b) The Escrow Agent is authorized to comply with and rely upon any notice, instruction or other communicatioa believed in good faith by it to have been sent or given by Shareholders Agent or Parent or by a person or persons believed in good faith by the Escrow Agent to be authorized to so act by the parties, so long as its actions are consistent with the terms of this Agreement. Whenever under the terms hereof the time for c;iving a notice or performing an act falls on a Saturday, Sunday or banking holiday, such time shall be extended to the next Business Day, 5.2 Benefit and Assignment. This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective suss essors and panuitted assigns. Neither this Agreement nor any of the rights, interests or obligations hereunder shall be assigned by any of the parties hereto without the prior written consent of the others; gro id that if a successor escrow agent is appointed pursuant to Seation 3.qa) hereof, upon. written instructions by Parent and the Shareholder Agent, the Escrow Agent shall assign its rights, interests and obligations hereunder to such successor; and p o� Vid4 further. that Parent may freely assign any or ttll of its rights and obligations under this Agreement to any of its affiliates or to any of its lenders to the extent required by such lenders, so long as Parent continues to be bound by die terms of this Agreement. 5.3 Entire Agreement; Amendment. This Agreement contains all the terms agreed upon by the parties with respect to the subject matter hereof. This Agreement may be amended only by a written instrument signed by the party against which enforcement of any waiver, change, modification, extension or discharge is sought. Nothing in this Agreement shall impair the rights and remedies of the parties hereto under the Merger Agreement, which shall be controlling among the patties for all purposes of this Agreement and shall be applicable to the parties to the extent of any inconsistency with any provisions of this Agreement_ 5A Headings. The headings of the sections and subsections of this Agreem ent are for ease of reference only and do not evidence theiintentions of the parties. 5.5 Tax Reporting. (a) For tax reporting purposes, all Earnings attributable to any portion of the Escrowed Funds shall be deemed to be for the account of the Compaxty Shareholders, unless such Earnings are disbursed otherwise in accordance with the terms of this Agreement. (b) The Escrow Agent has no interest in the Escrowed Funds but is serving as escrow holder only and has only possession of the Escrowed Funds. Parent and Shareholders Agent shall pay or reimburse the Escrow Agent upon the Escrow Agent's request for any transfer taxes or other taxes (02102434,DOC;1 ) 9 relating to the Escrowed Funds incurred in connection herewith, and shall indemnify and hold harmless the }escrow Agent for any amounts the Escrow Agent is obligated to pay in respect of such taxes. Any payments of income from the Escrow Account shall be subject to withholding regulations then in force with respect to United States taxes. Parent will provide the Escrow Agent wish appropriate W-9 forms for tax J.D. number certifications for itself, and the Shareholders Agent will provide the. Escrow Agent with appropriate W-9 forms for tax I.D. number certifications for the Company Shareholders. It is understood that the Escrow Agent shall be responsible for income reporting only with respect to Earnings on any portion of the Escrowed Funds and shall not be responsible for any other reporting. 5.6 fees, Expenses and Indemnification. All amounts payable to the Escrow Agent by Parent and the Shareholders Agent pursuant to this Agreement, including all fees, expenses and indemnification payable pursuant to Sections 3.2(a) and 3.3, shall be shared equally by Parent and the Shareholders Agent; provided, however, that any Losses incurred by the Escrow Agent as a result of participating in any proceeding brought by Parent against the Shareholders Agent or by the Shareholders Agent against Parent shall be paid by the p�wty against whom judgment it relydered in such proceeding. Nothing in this Agreement shall constitute a waiver of any claim which Parent or the Shareholders Agent may have against the other party for contribution arising from their joint obligation to indemnify and hold. the Escrow Agent harmless hereunder. 5.7 Shareholders Agent. If ceases to function in his capacity as the Shareholders Agent for any reason whatsoever, then a successor Shareholders Agent shall be appointed pursuant to Section 2.06(d) of the Merger Agreement, and following written notice of such appointment to Parent and the Escrow Agent, such successor Shareholders Agent shall have fully authority as Shareholders Agent hereunder. 5.8 Governing Law. This Agreement shall be governed by and construed in accordance with the internal laws of the State of Washington without giving effect to any choice or conflict of law provision or rule (whether of the State of Washington or any other jurisdiction) that would cause the application of Laws of any jurisdiction other than those of the State of Washington. 5.9 Counterparts. This Agreement may be executed in any number of counterparts, including by facsimile or other electronic transmission, with the same effect as if the signatures on all counterparts were on the same instrument. 5.10 Brokerage Confirmations. The parties acknowledge that to the extent regulations of the Comptroller of Currency or other applicable regulatory entity grant a right to receive brokerage confirmations of security transactions of the escrow, the parties waive receipt of such confirmations, to the extent permitted by law. The Escrow Agent'shall furnish a statement of security transactions on its regular monthly reports, [SIGNATURE PAGE FOLLOWS] t0'2102434.00;r } 10 EXECUTED as oftiso date first above written byddy authorlmd representatives nFtM undersigned parties. iuteading .to be bound hareiry. PARENT: OH'WDH HOLDCO, LLC By: Name: Title: SHAREHOLDERS AGSN'S': ESCROW AGENT: U.S. BANKNA'110NAL ASSOCIATION BY, Name: Title: (0210 a3a.DCQI ) 11 SC>aEMTE OF FEES FOR SERVICES AS ESCROW AGENT Administrative ]Fees Billed Annually 01010 Acceptance Fee $1,000.00 The acceptance fee includes the administrative review of documents, initial set-up of the account, and other reasonably required services up to and including the closing. This is a one-time fee, payable at closing. Includes fees and expenses, if any, of legal counsel (except for the fees associated with rendering a standard legal opinion). 04460 Escrow Agent. $1,500.00 Annual administration fee for performance of the routine duties of the escrow agent associated with the management of the account. Administration fees are payable in advance. `taxes 30250 All Fees are subject to a tax at the current rate of; 9.500% Direct Out of Pocket Expenses 11cimbursement of expenses associated with the performance of our duties; At Cost including but not limited to publications; legal counsel after the initial close, travel expenses and filing fees, Extraordinary Services Extraordinary services are duties or responsibilities of an unusual nature, including termination, but not provided for in the governing documents or otherwise set forth in this schedule. A reasonable charge will be assessed based on the nature of the service and the responsibility involved. At our option, these charges will be billed at a flat fee or at our hourly rate then in effect. Account approval is subject to review and qualification. Fees are subject to change at our discretion and upon written notice. Fees paid in advance will not be prorated.. The fees set forth above and any subsequent modificatioas thereof are part of your agreemeaat. Finalization of the transaction constitutes agreement to the above fee schedule, including agreement to any subsequent changes upon proper written notice. In the event your transaction is not finalized, any related out- of-pocket expenses will be billed to you directly. Absent your written instructions to sweep or otherwise invest, all sums in your account will remain uninvested and no accrued interest or other compensation will be credited to the account. Payment of fees constitutes acceptance of the terms and conditions set forth. (02102434.DOC;t ) Exhibit A to Escrow Agreement IMPORTANT INFORMATION ABOUT PROCEDURES FOR OPENING A NEW ACCOUNT: To help the government fight the funding of terrorism and woney laundei-ing avtivitim, Federal :Iaw requires all financial institutions to obtain, verify and record information that identifies each person who opens .so scaount. For a non -individual pemon such as a business entity, a charity, a Trust. or othor ic$al entity we ask for documentation to verify its formation and existonce. as a legal entity. We, rriay also ask to sw fwaaeW statements,. Homes, identification and authorixstion documents from individuaia claiming authority to represent the entity or of w rvlevaut documentation. (02102434-DX-,l ) Exhibit A to Escrow Agreement SCHEDULE 2.04 SCHEDULE 5.01 SCBEDULE 8.01 Schedule 8.01 Balance Sheet, August, 2012 Augutst YTD GAAP Aug 31, 1.2 s ASSETS Current Assets Checking/Savings 1005 • Wells Fargo Checking Total Checking/Savings Accounts Receivable 1200 • Accounts Receivable Total Accounts Receivable Other Current Assets 1305 • Prepaid Expenses 1320 • Loans to Shareholders 1499•Suspense 1500 - Undeposited Funds 2121- Payroll Asset Total Other Current Assets Total Current Assets Fixed Assets 1510 - Materials on Hand 1520 • Plant 1523 • BTOP Funded Plant 1525 • Tools & Equipment (Asset) 1530 • Hardware 1535 • Software 1645, Vehicles 1654 • Accum Depn - Total Fixed Assets Other Assets 1905 - Franchise Rights 1910 • Franchise Rights 1911- Accum Amort - Franchise Rights Total 1905 - Franchise Rights 1915 - Deferred Loan Expense 1920 • Deferred Contract Acquistion Ex Total. Other Assets � TOTAL ASSETS Schedule 8.0.1 Balance Sheet, August, 2012 LIABILITIES & EQUITY Liabilities Current Liabilities Accounts Payable 2000 • Accounts Payable Total Accounts Payable Other Current Liabilities 2011 • Checks in excess of bank balanc 2100 • franchise Fees Payable 2150 • Payroll Liabilities 2180 - Accrued Payroll Expense . 2281 • Contra payroll accrual Capex ..� 2201 Sales Tax Payable 2203 Property Tax Liability 2205 • Pole Attachment Liability 2208 - Maintenance -Plant Accrual 2212 . Reserve for Bad Debt 2217 - Building Access Pa.ssthru Trust 221.8 - USAC/E-Rate Trust ilA 2219 • Stimulus - Cannon 5% wth 2220 - Deferred Revenue 2231 • Current portion of LTD 2256 - Wells Fargo -- Revolver Total Other Current Liabilities Total Current Liabilities Long Term Liabilities 6 2248 . Convertible Loan ,. 2255 - Wells Fargo -- Main Loan - #18 2258 - Wells Fargo - #67 2280 - interest Rate Swap Total Long Term Liabilities Total Liabilities Equity 3010 - Common Stock 3011 • Common Stock-ExchangedWarrants 3020.Other Comprehensive income 305D - Dividend Distributions 3100 • Additional Paid in Capital 3900 •"`Retained Earnings Net Income Total Equity_ TOTAL LIABILITIES & EQUITY Adjusted Working Captial Calculation Schedule 8.01 lull 30.12 Jul 31,12 AvC31,12 Current Assets Chaddng/Savings 100S • Wells Fargo Checking Total Chedcing/Sayings Acw" Receivable 1200 • Accounts Receivable Total Accounts Receivable Other Currant Assets 1305, Prepaid Expenses 1320, Loans to Shareholders 1499 • Suspense 1500 • Undeposlted Funds 2121 • Payroll Asset Total Dther Current Assets Total CurremAssets 1510 • Moteriels on Hand Current Assets Adjusted MI ITIES & BQUrrY Uabllttles Current UnbWlbas AcrnuntsPayabie 2000 • Accounts Payable Total Accounts Payable other current Uablllties 2011 • Checks In axon of bank balanc 2100 - Franchise Fees Payable 2M • Payroll Uabillbes 2180 • Accrued Payroll Expense 21.81-Contra payroll accrual Capex 2201 *Sates Tax Payable 2203 • Property Tax Usbllity 2705 . Pole Attact ment Uabillty 2208 • Malnternanm-PlantAMWal 2212•Reserve for Bad Debt 2217 • Building Access Passthru Truss 2218 , USAC/f-Rote Trust 2219 • Stimulus -cannon 5% W/h 222.0 • Deferred Revenue 2225 Aced Transaction Expense 2231. Current portion of LTD 2256 • Welts Fargo - Revotver Total Other Current Uabllldes Current Ua bllltles Adjusted Working Average Adjusted Working Capital for I une 2D12 tbrougtl August, 2012 MEOW Avu Sinsr_ tune gone mom soft A � Me $Inca lure r r ' Schedule 8.01 Monthly Recurring Revenue July, 2012 Revenue rnduded In Monthly Recurring Debit Credit Balance Revenue Fiber lease Total Fiber Services Total Franchise Fee Total Franchise FeecBurlington Tota I r VIM Franchise Fee:Lynden Tata I s - Accrued Fiber lease revenue State & Local Tax Surcharge Total Monthly Recurring Revenue t Nate: The above revenue components are from the Company's financial statements for July, 2012 • B , 9 r DISCLOSURE SCHEDULE DISCLOSURE SCMDULE This Disclosure Schedule is made and given pursuant to Article III of the Agreement and Flan of Merger by and among Black Rock Cable, Ina, ("Black Rockl� OM WDH Ho1dCo, LLC, ,and The Principal Shareholders of Black Rock Cable, Inc. dated September .2012 (the "Merger Agreement"). The section numbers in this Disclosure Schedule correspond to the section numbers in the IY Mer Agreement, however, any information disclosed herein under any section number shall be deemed to be disclosed and incorporated into any other section number under the Merger Agreement only (a) where a specific cross reference to such other section is made or (b) where the applicability of such disclosure to such other section would be reasonably apparent to a knowledgeable buyer. Any terots defined in the Merger Agreement shall have the same meaning when used in this Disclosure Schedule as when used in the Merger Agreement unless the context otherwise requires. Disclosures delivered via or the are incorporated herein by their specific reference. m44762-1791472.doe Section 3.01 Cilrizanizntion; Stand ing, and Power; Charter Documents; Minutes, Suhsidinries Section 3.01 Chader Docmeats: * Certificate of Incorporation: * Designation- * By-laws: mU762-1791472.doc Section 3.02 Capital Structure Section 3.02a) Capital Stock: Shareholder Stock Percent z Total 494.9520 100.000% Warrant Holder Shares Expires m44762-1791472.dot Section 3.03 Authori • Non -Contravention; Third Party and Governmental Consents Section 3.03 c ii nsents of Third Parties and Govemmental Entities: Q f a'. • �f 4 v a 1 & J m44762-179147,7,doa Section 3.04 Financial Statements; Receivables; Liabilities 3. a i Audited Financial Statements: A 3.04(a)(ii) Unaudited Tittiapcial Statements: Section 3.04(d) Company Debt: Company debt as of 8/31/2012 is disclosed in the unaudited financial statements delivered under 3.04(a)(ii) above. o Since 8/31/12 to the date hereof, the Company has not entered into any new agreements which would be deemed Company Debt. Other .Debt Disclosures: o Prepayment Penalty on ated at4am a Current value of interest rate swap Section 3.04(D_Related forty Qbligatjons: • The Corn an leas entered into a Consulting Agreement with a company that is wholly owned by sharcliotderjmm� to provide business consulting services related to the transactions contemplated by the ,Merger Agreement. • See disclosure at Section 3.120) and 3.12(m). m"762-1791472.doa Section 3.05 Ahsenee of Certain Chan es or Events Section 3,05 b : • On June Z5, 2012,41110111MWxercised that certain Common Stock Purchase Warrant issued by Black Rock dated June 30, 2006 to purchaselphares of Black Rock common stock in exchange for a Promissory Note in the amount o secured by the purchased shares. ■ On September 11, 2012 the Company declared and paid a dividend to shareholders in an amount equal to per share, for an aggregate distribution o ■ Immediately upon receipt of such dividend, used the proceeds thereof to make full repayment on a Promissory Note signed by him in favor of the Company on June 25, 2012 in the amount o =-r m44762-1791472.doc Section 3.06 C'axcs Section 3.06fh3 "fax Re Federal — (for years 2009 — 2011) ■ Federal o (for tax years 2003--2008) ■ State — no income returns ■ State Business & Occupation 'Taxes — (for years 2009-current) ■ Property Tax — Section 3.06(o) Tax Basis alai Tax A lrilAACS: + TaxBasis: m44762-1791472.doo Section 3.07 Intellectual Pro e Ccdon 3.07 a Certain Owned Cam an IP: �3cm� 3xam� r�ist£ationc ET OM NET COM q NET CUM m44762-1741472.doo Section 3.08 Compliance; Permits Section 3.4SCU Penn ts: t A. last of all material Permits is located in the 0 • Copies of aA materhd Pernlitg are located in 0 L?I u R R A list describing all outstanduig issues with respect to pale attachments and other operational issues is located_ in the 0 m447Q-1791472.doc Section 3.11 Related PaM Transactions • See Section 3.10 of the Merger Agreement ■ See disclosures in Section 3.05(b) • See disclosures in Section 3.120) and 3.12(m) m44762-1791472.doc Section 3.12 t5.nipioyee Matters Section 3.12(i)Effect of rmnsaction: — terms of a Key Employee Retention Agreement provide for a one-time Payment ofl�ipnij a Change of Control. — terms of a Key Employee Retention Agreement provide hr.a one-time payment of� upon a Company Change of Control. Company has adopted an Employee Cooperation and Bonus Plan which provides for the payment of a bonus to every employee upon the successful completion of the Merger. Section 3.12 in ComRanv l7=plo, +� ees: Current Employees: m"762-1791472.doc Section 3.13 Real PrD¢exty and Personal Property. Matters Section 3.13 a Real ProvMy interests: + See disclosure is Section 3.00) Section 3.13_(b) Personal Property: 0 A list of all material Personal Property is located in th 8 i Section 3.13 Uc (ii) Fiber Network: (A) Approximately dotal miles A ith IMunderg rounded (S)djjfW fiber miles, average count of4strands per sheath wit Wshoath miles • (C) • Some or all of the information required to be disclosed pursuant to this section is available to Parent through its access to fiviw- ■ Conduit Use Agreements are located at: o » Section 3.13 a iii Network QutagLs: • Summary of Outages: Company issued one service credit in the amount ofq� since December 31, 2010. m44762-1791472.doe Section 3.15 Material Contracts Section 3.1 5(b), Schedule of Materiaa Cuntrac:ts;Doemorlu: A list of all material contracts s 0 R Copies of AU Material Contracts see Ci N Section 3.15(c1No Brcach: See Section 3.16(b) m"762-1791472,doc Section 3.16 Franchises Sermon 3.16 Franchises: The below table is a correct and complete list of an Franchises authorizing the Company to provide service in the areas in which the Company operates. Correct and complete copies of the Franchises and copies of all correspondence between the Company and any Govemmea ml Entity concerning the renewal of the Franchises are located in the Jurisdiction Expiration Date Services Authorized _County -- Ulm low" 40 Ulm - also — _OM qMMM* -- - - - d mom iriir �+� f -- maar6i L79ian.doc Section 3.16(b) Expimri Franchises: Below is a fist of all. Franchises that are expired as of the date of this Disclosure SeWule. Jurisdiction I Expiration Date j County 1 Services Authorized m44762-1791472.doc Section 3.17 Bonds: Letter5 of Credit Section 3.17 Bondss6Letters of Credit: A list of all bonds and guarantees, letters of credit, and certificates of insurance see 040 m44762-1791472.dw Section 3.18 Accuracy of Statements A list of material operational issues is included with the file labeled in the third bullet point ofthe disclosure at Section 3,08(b). m44762-1791472:doo 0 c� z cr H 1 EXHIBIT 1-A o o C' m y � ICL O EXHIBITS to FCC Form 394 EXHIBIT 1-B OH W DH Hold co, LLC IW% WaveDivision Holdings, LLC gM% Astound Broadband, LLC 1 Transaction .structure alternative I. EXHIBITS to FCC Form 394 rransecdon structure alternative 2, Black Rock Cable, Inc. 1 j j I WDM Black Rock, LLC Exhibit 2 Section I, Part II, Item 1(c) Contact Persons For WaveDivision Holdings, LLC: Jim Penney Executive Vice President, Business and Legal Affairs 401 Kirkland Parkplace, Suite 500 Kirkland, WA 98033 Direct Phone: 425-896-1891 Cell Phone: 206-972-6943 EXHIBITS to FCC Form 394 For Black Rock Cable Inc.: Bob Warshawer President 1512 Fairview Avenue Bellingham, WA 98229 Direct Phone: 360-738-3116 Cell Phone: 360-927-1524 Email: ipenney(q),wavebroa_dband.com Email: bob w @blackrockcable.com EXHIBITS to FCC Form 394 Exhibit 3 Section ! Part II Item 2 No Proposed Changes to Current franchise Terms of Service and Operations The proposed transaction described in Exhibit 1 will not result in any change to the current terms and conditions of service nor result in adverse changes to the business operated by the holder of franchise. Regardless of the structure of the transaction, the franchise holder that will serve your community will continue to comply with the terms and conditions of the franchise, all applicable federal, state, and local law, meet or exceed all operations requirements of the franchise, and provide the high quality customer service that customers now receive. Neither WaveDivision Holdings, LLC nor any of its subsidiaries seeks any modifications to the terms of the franchise or to any conditions of service or operations of the business conducted under authority of the franchise. EXHIBITS to FCC Form 394 Exhibit 4 Section II, Item I Form of Business Organization of Transferee As described in greater detail in Exhibit 1, the merger will be accomplished by one of two alternative transaction structures, and the final structure will be determined immediately prior to closing. The following is a description of the two transaction structures: • Alternative 1 (Change of Control — WDH Black Rock Merger Sub, Inc. (a newly formed wholly -owned corporate subsidiary of Astound Broadband, LLC) will merge with and into Black Rock Cable, Inc. As a result of this merger, the separate corporate existence of WDH Black Rock Merger Sub, Inc. will cease and Black Rock Cable, Inc. will be the surviving entity in the merger. If the merger is accomplished in this manner, the holder of the franchise will continue to be Black Rock Cable, Inc., a Nevada corporation that is qualified to do business in the State of Washington. • Alternative 2 (Assignment of Franchise — WDH Black Rock, LLC (a newly formed wholly -owned limited liability company subsidiary of Astound Broadband, LLC) will merge with Black Rock Cable, Inc. As a result of this merger, the separate corporate existence of Black Rock Cable, Inc. will cease and WDH Black Rock, LLC will be the surviving entity in the merger. If the merger is accomplished in this manner, the holder of the franchise will be WDH Black Rock, LLC, a Washington limited liability company. Exhibit 5 Section II, Item 2 Ownership Summary Franchise Holder EXHIBITS to FCC Form 394 As described in greater detail in Exhibit 1 and Exhibit 4, depending on the structure of the transaction undertaken by the parties, the franchise will either continue to be held by the current holder, Black Rock Cable, Inc., or will be assigned to WDH Black Rock, LLC. In either circumstance, the holder of the franchise will be a wholly -owned indirect subsidiary of WaveDivision Holdings, LLC. Black Rock Cable, Inc. is a Nevada corporation that is qualified to do business in the State of Washington. WDH Black Rock, LLC is a Washington limited liability company. Intermediate Parent Companies In either transaction scenario, Astound Broadband, LLC, a Washington limited liability company, will be the parent and 100% owner of the equity interest of the franchise holder. Astound Broadband, LLC is a wholly -owned direct subsidiary of WaveDivision Holdings, LLC, a Delaware limited liability company. As described in greater detail in Exhibit B, WaveDivision Holdings, LLC will become a wholly -owned direct subsidiary of OH WDH Holdco, LLC, a Delaware limited liability company. Ultimate Parent Company The membership interests of OH WDH Holdco, LLC will be owned by the following companies: WaveDivision Capital III, LLC Oak Hill Capital Partners III, L.P. Oak Hill Capital Management Partners III, L.P GI Wave Holdings LLC The following information describes each of the membership interest owners of OH WDH Holdco, LLC: WaveDivision Cal2ital III LLC: WaveDivision Capital III, LLC is controlled by Steven B. Weed, the current Chief Executive Officer of WaveDivision Holdings, LLC. EXHIBITS to FCC Form 394 The following information pertains to WaveDivision Capital I II, LLC: a. Name and principal place of business: WaveDivision Capital III, LLC 401 Kirkland Park Place, Suite 500 Kirkland, WA 98033 b. Citizenship: U.S. (a Washington limited liability company) c. Relationship to transferee: d. Number of shares or nature of partnership interest: e. Number of votes: f. Percentage of votes: WaveDivision Capital III, LLC will own approximately 12.50% of OH WDH Holdco, LLC, with a commensurate number of units of membership interest and number and percentage of votes. Oak Hill Capital -Partners Ill L.P.: The following information pertains to Oak Hill Capital Partners III, L.P.: a. Name and principal place of business: Oak Hill Capital Partners III, L.P. 201 Main Street, Suite 1018 Fort Worth, Texas 76102 b. Citizenship: Cayman Islands c. Relationship to transferee: d. Number of shares or nature of partnership interest: e. Number of votes: f. Percentage of votes: Oak Hill Capital Partners III, L.P. will own approximately 68.10% of OH WDH Holdco, LLC, with a commensurate number of units of membership interest and number and percentage of votes. EXHIBITS to FCC Form 394 Oak Hill Capital Management Partners HI L.P. The following information pertains to Oak Hill Capital Management Partners III, L.P.: a. Name and principal place of business: Oak Hill Capital Management Partners III, L.P. 201 Main Street, Suite 1018 Fort Worth, Texas 76102 b. Citizenship: Cayman Islands c. Relationship to transferee: d. Number of shares or nature of partnership interest: e. Number of votes: f. Percentage of votes: Oak Hill Capital Management Partners III, L.P. will own approximately 0.65% of OH WDH Holdco, LLC, with a commensurate number of units of membership interest and number and percentage of votes. GI Wave Holdings LLC The following information pertains to GI Wave Holdings LLC: a. Name and principal place of business: GI Wave Holdings LLC 2180 Sand Hill Road, Suite 210 Menlo Park, CA 94025 b. Citizenship: U.S. (a Delaware limited liability company) c. Relationship to transferee: d. Number of shares or nature of partnership interest: e. Number of votes: f. Percentage of votes: GI Wave Holdings LLC will own approximately 18.75% of OH WDH Holdco, LLC, with a commensurate number of units of membership interest and number and percentage of votes. EXHIBITS to FCC Form 394 Steven B. Weed Chief Executive Officer The following information pertains to Steven B. Weed, the Chief Executive Officer of WaveDivision Holdings, LLC: a. Name and principal place of business: Steven B. Weed 401 Kirkland Parkplace, Suite 500 Kirkland, WA 98033 b. Citizenship: U.S. c. Relationship to transferee: Member of the board of managers Cl. Number of shares or nature of partnership interest: e. Number of votes: f. Percentage of votes: Mr. Weed has no direct interest in OH WDH Holdco, LLC. Mr. Weed has a controlling interest in WaveDivision Capital III, LLC described above. Exhibit 6 Section ll, Item 6 Contracts Relating to Ownership OH Closing EXHIBITS to FCC Form 394 OH WDH Holdco, LLC was formed as a limited liability company to acquire the ownership of WaveDivision Holdings, LLC, in a transaction that is expected to close on or about October 12, 2012. On May 30, 2012, affiliates of Oak Hill Capital Partners III, L.P. ("Oak Hill") and an affiliate of GI Partners ("GI"), in conjunction with Wave Parent's Chief Executive Officer, Steve Weed and other members of the management of WaveDivision Holdings, LLC, entered into a definitive purchase agreement to acquire 100% of the membership interest of WaveDivision Holdings, LLC from its current owners, principally three affiliates of Sandler Capital Management. Oak Hill and GI are leading private equity firms with longstanding cable and IT infrastructure expertise. As a result of this transaction, OH WDH Holdco, LLC will be the direct parent and owner of 100% of the membership interests of WaveDivision Holdings, LLC. See Exhibit 1-B (— "Pro Forma Ownership") for a copy of the organization chart that shows the pro forma structure of WaveDivision Holdings, LLC and its affiliates, after giving effect to the OH Closing and the acquisition of Black Rock. See Exhibit 5 (— "Ultimate Parent Company") for detail about the owners of membership interest in OH WDH Holdco, LLC. EXHIBITS to FCC Form 394 Exhibit 7 Section III, Item 2 Financial Qualifications of the Transferee Attached are the following financial statements for WaveDivision Holdings, LLC, which have been prepared on a pro forma basis giving effect to the OH Closing described in Exhibit 6: (a) pro forma consolidated balance sheet as of June 30, 2012 and (b) pro forma consolidated statement of operations for the six months ended June 30, 2012. The attached financial statements have been marked "CONFIDENTIAL" and are to be maintained as confidential by the franchise authority and its agents to the extent permissible under local law. CONFIDENTIAL WaveDivision Holdings, LLC Pro Forma Consolidated Balance Sheet As of June 30, 2012 (Unaudited) ($ in thousands) ASSETS Current Assets: Cash Accounts receivable, net of allowance for doubtful accounts of $878,073 Other receivables Deposits Prepaid expenses and other assets: Total current assets Property, plant and equipment, net Definite -lived intangible assets, net of accumulated amortization Indefinite -lived intangible assets: Franchise agreements Goodwill Deferred Financing costs Other LIABILITIES & MEMBERS' EQUITY Current liabilities: Accounts payable Accrued programming costs Accrued incentive and share based compensation Accrued expenses Unearned revenue and subscriber deposits Accrued Interest Current portion of senior term loans Total current liabilities Long term debt, net of current portion Fair value of interest rate swaps Commitments and contingencies Members' (Deficit) Equity Contributed capital Members' notes receivable Retained earnings (deficit) EXHIBITS to FCC Form 394 Adjustments Historical Pro Forma Pro Forma (1) $ 1,099.1 $ 3,900.9 $ 5,000.0 23,207.0 — 23,207.0 1,285.9 — 1,285.9 310.9 — 310.9 1,323.9 — 1,323.9 27 226. , 240,591.7 8,566.5 249,158.2 5,802.9 97,396.5 103,199A 153,848.5 286,062.5 439,911.0 43,685.8 106, 477.0 150,162.8 197, 534.3 590, 073.8 0.0 31,350.0 31,350.0 8110010 (8,000.0) 100.0 $479,255.6 _ $1,005,009.1 $ 6,673.2 6,679.1 12, 381.9 7,526.1 19,433.8 627.3 32, 820.0 on -1A4 A (11,700.0) (627.3) (27,820.0) $ 6,673.2 6,679.1 681.9 7,526.1 19,433.8 5,000.0 45, 994.1 329,695.0 416,305.0 745,000.0 663.2 (683.2) — 70,103.8 143,911.2 214,015.0 (51,855.2) 51,855.2 — 44,487.5 (44,487.5) — VL, l QV. I _ G I-!,L I U. V $479,255.6 $1,005,009.1 CONFIDENTIAL EXHIBITS to FCC Form 394 CONFIDENTIAL WaveDivision Holdings, LLC Pro Forma Consolidated Statement of Operations Six Months Ended June 30, 2012 (Unaudited) ($ in thousands) Adjustments Historical Pro Forma Pro Forma Revenues: Cable television services $ 62,699.2 — $ 62,699.2 High-speed data services 45.652.9 — 45,652.9 Telephone services 13,518.6 — 13,518.6 Advertising and other 8,293.6 — 8,293.6 Total revenues 130,164.3 130,164.3 Operating expenses: Programming and other direct costs Depreciation and amortization Technical service Business service Customer service Marketing General and administrative Total operating expenses Income from operations Interest and other income (expense): Interest income on shareholder notes receivable and other Interest (expense) and debt issuance (costs) Unrealized foreign exchange gain (loss) on derivatives Bargain purchase gain on acquisition Gain on fair value of interest rate swaps, net Net income (loss) 37,202.3 — 29,464.2 10,215.6 8,509.4 — 1, 305.9 -- 8,830.7 — 6,336.4 — 25,535.6 (11,897.2) 117.184.3 12, 979.9 933.4 (4,915.2) (933.4) (21,301.3) 37,202.3 39,679.8 8,509.4 1,305.9 8,830.7 6,336.4 13,638.4 115, 602.7 14,661.6 (26,216.5) 7,596.5 — 7,596.5 465.2 465.2 — _ 4,079.9 18,620.0 $ 17 059.9 $ (3,956.4) CONFIDENTIAL Exhibit 8 Section IV — Technical Qualifications WaveDivision Holdings, LLC EXHIBITS to FCC Form 394 WaveDivision Holdings, LLC is one of the most experienced operators of broadband systems in the U.S. and provides technologically advanced product offerings to customers in Washington, Oregon and California. As of September 15, 2012, Wave served approximately 153,280 video customers, 163,400 high-speed Internet access customers and 67,150 phone customers. In addition, Wave provides high-speed data service to over 4,540 small business customers and phone service to over 4,600 small business customers. Wave has invested tens of millions of dollars in recent years to rebuild and upgrade its distribution network and related equipment. As a result, all of Wave's systems are two-way and provide video and broadband Internet access, as well as voice services. Wave has significant experience operating large, technologically advanced cable systems. Over eighty percent of Wave's core systems have been upgraded to 860MHZ (and all of the core systems have been upgraded to at least 750 MHz) and are interconnected with a redundant 10GB fiber ring. Wave provides advanced video services over all of its systems, including digital cable, video -on - demand (VOD), high -definition television (HDTV) and digital video recorders. Wave offers broadband Internet access in all of its interconnected systems. Through its wholly -owned subsidiary, Astound Broadband, LLC, Wave also provides Voice over Internet Protocol (VoIP) services in all of its interconnected systems. Wave has established an enviable track record in providing high -quality customer service and technical service and in developing technology to enable its 24x7 Network Operations Center to proactively monitor its distribution network and customer premises equipment to prevent or quickly remedy any technical issues. The significant achievements of the highly regarded staff of Wave in areas of technical quality and innovation have been widely recognized. In fact, Wave recently received the prestigious "Independent Operator of the Year 2012" award from CableFax Magazine. Wave is not only committed to giving its customers an array of entertainment and information choices, but also high quality customer service. Wave customer care representatives meet or exceed all federal and local customer service standards, and are considered among the best in the cable and broadband industry. The following table identifies the members of Wave's senior executive management team, and the biographies below provide additional information on these team members: Name Position Industry Experience Steven B. Weed Chief Executive Officer 28 years Steve Friedman Wayne Schattenkerk Chief Operating Officer Chief Financial Officer 26 ears 14 years James A Penney Executive Vice President 24 years Steven B. Weed Chief Executive Officer. Mr. Weed is the founder of Wave and has long been a successful leader in the cable and telecommunications industry. Mr. Weed will leverage his more than 28 years of experience to continue the successful performance of these cable systems. Prior to becoming Chief Executive Officer of Wave in 2003, Mr. Weed was COO of a Northwest -based MSO, Summit Communications Inc. (Summit). After the sale of Summit to EXHIBITS to FCC Form 394 Millennium Digital Media Systems, L.L.C. (Millennium) in April 1999, Mr. Weed remained with Millennium as President of the Northwest Region until he left to form WaveDivision Networks, LLC in February 2002. During Mr. Weed's tenure at Summit/Millennium, the company grew from 23,000 customers to more than 70,000 customers in the states of Washington, Oregon, and Idaho. Mr. Weed began his career in marketing, holding regional and corporate level executive positions for such companies as Group W Cable in the Northwest, Falcon Cable in Los Angeles, and a national pay television company. Mr. Weed joined Summit in 1988 to manage its Seattle area cable operations and became COO in 1994. An industry leader, Mr. Weed served as Chairman of The American Cable Association from 2000 to 2002. He was awarded the Washington State Cable Association's "Presidents Award" for his role in deregulating small cable as part of the 1996 Telecommunications Act and was a 2002 inductee into the Cable TV Pioneers. Mr. Weed also served on the National Cable and Telecommunications Association (NCTA) Independent Operator Committee, and has provided testimony before both the FCC and the United States Congress on cable television issues. Locally, Mr. Weed is a founding member of the Seattle Business Roundtable, a member of the Northwest Chapter of the Young Presidents Organization, and a member of the Board of Directors for Vista Broadband. He has also served as Finance Committee Director for U.S. Congressman Rick White and Cable Television Advisory Board Member for Seattle Mayor, Norm Rice. Steve Friedman Chief Operating Officer. Mr. Friedman joined Wave and assumed his current position in May 2003. Mr. Friedman has over 26 years of cable industry operations experience in the Pacific Northwest and previously worked with Steve Weed at Millennium. In addition, Mr. Friedman worked with Northland Communications, Apollo Communications and, from 1991 to 2002, Mr. Friedman operated Somerset Communications, a company he founded. Prior to working in the cable industry, Mr. Friedman worked as a CPA in a nationally recognized public accounting firm and in management consulting. Mr. Friedman has been involved in the cable industry as a Founder and Board member of the American Cable Association. He is also a frequent participant in the cable industry panels and seminars where he speaks on current operational issues in the business. Wayne Schattenkerk Chief Financial Officer. Mr. Schattenkerk joined Wave and assumed his current position in March 2006. Mr. Schattenkerk has nearly 24 years of finance and operations experience. From 2001 to 2005, Mr. Schattenkerk served as Chief Financial Officer, then President and Chief Operating Officer of Saltmine, a creator of web -based business applications for Northwest companies. Prior to Saltmine, Mr. Schattenkerk spent four years with Northland Communications, first as Corporate Controller, then as Vice President of West Coast Operations. From 1985 to 1992, Mr. Schattenkerk worked for IBM Corporation in a variety of accounting and finance positions supporting manufacturing and research divisions. James A Penney, Executive Vice President, Business and Legal Affairs. Mr. Penney joined Wave and assumed his current position in January 2006. Mr. Penney has been involved in the cable industry for over 24 years. From 1985 until 2000, Mr. Penney was the Vice President and General Counsel for Northland Communications where he was responsible for mergers and acquisitions, corporate finance, franchise compliance and a wide variety of operational matters. From 2000 until 2006, Mr. Penney was a partner with the Seattle law firm of Cairncross & Hempelmann, P.S. where he practiced in the corporate finance and technology EXHIBITS to FCC Form 394 transactions groups and represented a diverse group of clients including Microsoft Corporation, Starwood Corporation, Spacelabs Medical, Inc., Huna Totem Corporation, Copacino+Fujikado, LLC and Sealaska Corporation, as well as a number of cable television operators. Mr. Penney was inducted into the Cable TV Pioneers in 2012. In addition to the Wave senior management team described above, Wave has a full complement of local managers and technical staff responsible for system operations. This local staff has extensive experience managing and operating cable systems. In addition, Wave customers will be served by Wave's call center operations team, which is available Monday through Friday from 7:30 AM to 8:00 PM, Saturday from 8:00 AM to 5:00 PM and Sunday, 9:00 AM to 1:00 PM for sales and billing matters. Wave's network operations team will monitor system performance 24 hours per day 7 days per week for technical matters. Additionally, our technical service representatives will be available 24 hours per day 7 days per week. Oak Hill Capital Partners Oak Hill Capital Partners has a 25-year history owning and operating companies in the communications infrastructure industry, including a particular focus on the cable space, with six past investments in the sector. Oak Hill has consistently focused on acquiring, building and/or upgrading technologically advanced networks in order to provide local customers and communities with the highest quality products and service offerings available in the market. Past investments include Wometco Cable Corporation (1986); MC Cable TV LP (1987); Georgia Cable Partners (1988); Northeastern Cable (1988); WideOpenWest (1999 and 2001); and Atlantic Broadband (2004). Oak Hill's commitment to technologically advanced networks and product offerings was particularly evident in its two most recent cable investments. At WideOpenWest, Oak Hill and management transformed underperforming cable systems which had previously offered only video services by launching a high -quality, affordably priced high-speed Internet product and by being among the first independent operators in the industry to offer a full "triple play" including voice -over -Internet Protocol (VoIP) digital telephone service. At Atlantic Broadband, Oak Hill again invested in a company which enhanced what had been underperforming cable assets by rebuilding portions of the cable network, improving both video and high-speed Internet product availability and/or speeds across multiple markets, and launching residential VoIP telephone as well as small business data and telephone offerings. Oak Hill admires Wave's demonstrated commitment to rebuilding cable networks in order to provide the highest quality products to customers in the communities it serves. OL)"Ee DIVISION HOLDINGS Via Overnight Delivery November 9, 2012 City of Edmonds 121 Fifth Avenue North Edmonds, WA 98020 WtIvE BLACK ROCK CABLE IIf I)IIIEE su SS FIBER -BASED COMMUNICATION u- SOU VTIO astou d SERVICES AND SOLUTIONS Re: Black Flock Cable Inc. WaveDivision Holdings, LLC Ladies and Gentlemen: This letter follows up our prior letter of September 28, 2012, and our subsequent telephone conversations in connection with our planned acquisition of Black Rock Cable. As you know, we previously submitted to you FCC Form 394 "Application for Franchise Authority Consent to Assignment or Transfer of Control of Cable Television Franchise," with respect to the assignment / change of control of Black Rock's OVS franchise. We made similar filings with respect to Black Rock's OVS franchises with the other cities and counties where Black Rock holds such franchises. After discussing these applications with several franchising authorities, including you, we have determined instead to submit a telecommunications franchise application, as we believe this process will be easier and will more accurately reflect the nature of the services that we will be providing through the Black Rock assets. The OVS franchise held by Black Rock authorized the provision of cable television services but did not contemplate the provision of telecommunications services. Black Rock, however, never provided cable television services; instead, Black Rock provided only telecommunications infrastructure services to commercial customers. Once our acquisition of Black Rock is completed we intend to expand the array of services available to include telecommunications services. The OVS franchise held by Black Rock provided for a franchise fee of 5% to be paid to the City. Under RCW 35.21.870 the City will be authorized to impose a utility tax of up to 6% on the telecommunications services we provide. Application for Tefecom Franchise Enclosed with this letter is an application by Astound Broadband, LLC ("Astound") for a telecommunications franchise with the City, along with a proposed form of franchise agreement and supporting documents for the application. By way of background, Astound is a wholly -owned subsidiary of WaveDivision Holdings, LLC ("Wave") and is a competitive local exchange carrier authorized by the Washington Utilities and Transportation Commission to provide telecommunications services in the State of Washington. We appreciate your attention to this application, and request that the City timely process this application in accordance with RCW 35.99. Please contact Jim Penney by email at jpenney@wavebroadband.com or by phone at (425) 896-1891 if you require any additional information or have any questions. FCC Form 394 Proceed_ ingsto be held in Abeyance With the filing of this telecommunications franchise application, we are requesting that the City hold in abeyance the processing of the FCC Form 394 materials submitted by Wave and Black Rock and instead work with Wave and Astound to develop a mutually -acceptable telecom franchise. Wave agrees that the 120-day time limit for franchise authority consideration of the FCC Form 394 submission materials will be tolled during the time the City works with Wave and Astound on the issuance of a telecom franchise. Once the new telecommunications franchise has been issued to Astound the OVS franchise held by Black Rock will be terminated and of no further force or effect. In addition to holding the processing of the Form 394 in abeyance, we ask you also to hold in abeyance any pending request by Black Rock for a renewal of its OVS franchise. Black Rock Transaction As described in our previous correspondence, we entered into a definitive merger agreement on September 20, 2012 to acquire Black Rock. As a result of the transaction, Black Rock's operations will be controlled by Astound Broadband, LLC, through a wholly -owned subsidiary. (As mentioned above, Astound is a wholly -owned subsidiary of WaveDivision Holdings, LLC). Accordingly, Astound will be the named franchisee for the telecom franchise. Closing for the merger is currently scheduled for the end of November 2012. Following the transaction, all of Black Rock's current employees are expected to become employees of Wave and all of Black Rock's infrastructure network operations will continue without interruption. We will make it our highest priority to provide ongoing services to the City and Black Rock's other customers in the same manner as previously provided, with no disruption or degradation of customer service. Until the telecom franchise is approved and issued to Astound, we will continue to operate the Black Rock assets under the existing rights granted by the City under the OVS franchise. Thank you for your prompt attention to this application. Please contact us if you have any questions. Very Truly Yours, Black Rock Cable, In By: Robert Warshawer Title: President Astound Broadband, LLC WaveDivision HoId' s, LLC i By: lames A. Penney Title: Executive Vice President TELECOMMUNICATIONS FRANCHISE APPLICATION Date of Application: November 9, 2012 Franchising Authority Information , Applicant Information Name: City of Edmonds Name: Astound Broadband, LLC Address: 121 Fifth Avenue North Address: 401 Kirkland ParkplM. Ste 500 Edmonds WA 98020 Kirkland WA 9803 Telephone: (425) 576-8200 Applicant Primary Contact Name: James A. Penngy Executive Vice President Address: 401 Kirkland Park lace Ste 500 Kirkland WA 9803 Telephone: (425) 896-1891 1. Identity and legal status of the registrant, including any Affiliates: Astound Broadband, LLC, a Washington limited liability company ("Astound"), will be the registered franchise holder. Astound is a wholly -owned direct subsidiary of WaveDivision Holdings, LLC, a Delaware limited liability company ("Wave"). Wave is a wholly -owned direct subsidiary of OH WDH Holdco, LLC, a Delaware limited liability company ("Holdco"). Holdco is simply a holding company; it does not provide any services or conduct business. The membership interests of Holdco are owned by the following companies: • WaveDivision Capital III, LLC -- This company is managed by Steve Weed, the CEO of Wave and its members include Mr. Weed and several of his family members and various members of Wave's management team. • Oak Hill Capital Partners -- This is a private equity company that has a long history of investing in cable operators such as Wave. GI Partners — This is a private equity company that also has a history of investing in cable operators. The organization chart attached as Exhibit A depicts the relationships of Astound, its parent companies and affiliates. Astound is registered as a Competitive Telecommunications Company with the Washington Utilities and Transportation Commission pursuant to Docket No. UT-090160. A copy of the registration is attached as Exhibit B. As a Competitive Telecommunications Company, Astound is authorized to provide telecommunications services in the state of Washington. Astound holds Domestic and International Section 214 authorizations from the Federal Communications Commission, copies of which are attached as Exhibit C (Domestic) and Exhibit D (International). 2. Name, address and telephone number of the officer, agent or employee responsible for the accuracy of the registration statement: James A. Penney Executive Vice President 401 Kirkland Parkplace, Suite 500 Kirkland, WA 98033 (425) 896-1891 3. Describe registrant's existing or proposed Telecommunications Facilities or proposed OVS with the City (be specific): Black Rock Cable, Inc. ("Black Rock") has existing telecommunications facilities located within the City of Edmonds and various other communities in Snohomish County, Skagit County and Whatcom County. As described in our previous correspondence, on September 20, 2012, Astound entered into a definitive merger agreement to acquire Black Rock. As a result of the transaction, Black Rock's assets and operations will be owned by Astound. Expansion or growth of Black Rock's distribution network under Astound will occur organically based on a number of factors including customer demand. 4. Describe the Telecommunications Service or OVS that the registrant intends to offer or provide, or is currently offering or providing, to Persons, firms, businesses, or institutions within the City (be complete and specific): Astound will continue to operate the existing distribution network and facilities and continue to lease dark fiber in a manner generally consistent with that employed by Black Rock. Additionally, Astound will provide telecommunications services to customers within the City. Although Wave, via its subsidiaries, provides cable television services, these services will not be provided by Astound under the telecommunications franchise sought by this application. 5. Provide sufficient information for the City to determine whether the transmission, origination, or receipt of the Telecommunications Services or OVS provided or to be provided by the registrant constitutes an occupation or privilege subject to any municipal permit, license, or franchise fee: Astound will operate the distribution network now owned by Black Rock and provide telecommunications services to customers in the City. Astound is therefore subject to the permitting, licensing and fee requirements set forth in the City's Municipal Code. 6. Attach copies of applicant's registration filed with WUTC pursuant to WAC 480-121, and any tariff or price list or other authorization or related filings as may be required by the WUTC to provide Telecommunications Services (if applicable). List the documents attached: Please see Exhibit B — WUTC Competitive Telecommunications Company registration 7. Submit copies of applications made to, or receipt of approvals from, the City for any utility right-of-way permit, operating license or other approvals required by the FCC to provide Telecommunications Services or Facilities or OVS within the City. Please see Exhibit C — Domestic Section 214 Authorization Please see Exhibit D — International Section 214 Authorization 8. Other information as follows: Financial and Technical Qualifications of Applicant: Wave, the direct parent of Astound, has substantial financial resources and technical qualifications in operating telecommunications systems. These are detailed in Exhibit E, Financial Qualifications and Exhibit F. Technical Qualifications. CERTIFICATION I certify that the information and any attachments herewith submitted are true and correct to the best of my knowledge and that I have the authority to file this application and act on behalf of the above named telecommunications provider or carrier Signature: L- Date: November 9, 2012 Penney, Executive Vice Presi Zit Exhibit A Organization Chart AFTER Proposed Transaction Manager: Steven B. Weed WaveDivision Capital III, LLC 16.53% of Ownership Funds managed by GI Partners 17.44% of Ownership OH WDH Holdco, LLC 100% Funds managed by Oak Hill Capital Partners 66.03% of Ownership WaveDivision Holdings, LLC WaveDivision I, LLC WaveDivision IV, LLC Bayview, Conway, Camano Island, Sequim, Clallam Bay, King County, Seattle, Bellevue, WA 100% 100% Port Orchard, Mason County, W A WaveDivision II, LLC LaConner, WA WaveDivision III, LLC Port Angeles, Clal lam County, WA Cedar Communications, LLC Lakewood, WA 100% Wave/Powers Acquisition, LLC 100% Naval Base Kitsap - Bangor, WA 100% 100% WaveDivision VII, LLC Canby, Woodburn, Depoe Bay, Newport, Clackamas County, k00% Lincoln County, OR 5 Astound Broadband, LLC Rocklin, Auburn, Colfax, Concord, Walnut Creek, West Sacramento, Winters, Woodland, Dixon, San Francisco, San 100%. Mateo, Redwood City, CA i 100% 100% ��Black Rock Wave Business Subsidiary Entity Services, LLC Arlington, Bellingham, ; Lake Washington, WA Bothell, M ount loke Tic rrace, ' Conduit Loop Skagit Caunly, Snohomish Portland, OR Fiber Loop � Count , W hntcern County Exhibit B l�J r? F� I 9 7 Exhibit C �a PUBLIC NOTICE Federal Communications Commission 44512th St., S.W. Washington, D.C. 20554 News Media Information 2021418-0500 Internet: http;//www.fcc.gov TTY: 1.888-835-5322 DA 06-2580 Released: December 26, 2006 NOTICE OF DOMESTIC SECTION 214 AUTHORIZATIONS GRANTED WC Docket No. 06-209 WC Docket No. 06-202 The applications listed in this notice have been granted pursuant to the Commission's streamlined procedures for domestic section 214 transfer of control applications, 47 C.F.R. § 63.03. The Wireline Competition Bureau has determined that grant of these applications serves the public interest.' For purposes of computation of time for filing a petition for reconsideration or application for review, or for judicial review of the Commission's decision, the date of "public notice" shall be the release date of this notice.z Domestic Section 214 Application Filed for the Acquisition of Certain Assets of RCN Telecom Services, Inc. by Astound Broadband, LLC, WC Docket No. 06-209, DA 06-2363 (rel. Nov. 22, 2006). Effective Date of Grant: December 23, 2006 Domestic Section 214 Application Filed for the Transfer of Control of Corona Holdings, Inc. to SSF Partners, LLC, WC Docket No. 06-202, DA 06-2359 (rel. Nov. 22, 2006). Effective Date of Grant: December 23, 2006 For further information, please contact Alex Johns at 202-418-1167, Competition Policy Division, Wireline Competition Bureau. — FCC — I Implementation of Further Streamlining Measures for Domestic Section 214 Authorizations, Report and Order, 17 FCC Red 5517, 5529, para. 22 (2002). Id.; see 47 C.F.R. § 1.4 (Computation of time). Exhibit D LOQMktty PUBLIC NOTICE u s FEDERAL COMMUNICATIONS COMMISSION 445 12th STREET S.W. FFi15�+ WASHINGTON D.C. 20554 News media information 202-418-0500 Fax -On -Demand 202-418-2830; Internet: http://www.fee.gov (or ftp.fcc.gov) TTY (202) 418-2555 DA No. 06-2616 Report No. TEL-01100 Friday December 29, 2006 INTERNATIONAL AUTHORIZATIONS GRANTED Section 214 Applications (47 C.F.R. § 63,18); Section 310(b)(4) Requests The following applications have been granted pursuant to the Commission's streamlined processing procedures set forth in Section 63.12 of the Commission's rules, 47 C.F.R. § 63.12, other provisions of the Commission's rules, or procedures set forth in an earlier public notice listing applications accepted for filing. Unless otherwise noted, these grants authorize the applicants (1) to become a facilities -based international common carrier subject to 47 C.F.R. § 63.22; and/or (2) to become a resale -based international common carrier subject to 47 C.F.R. § 63.23; or (3) to exceed the 25 percent foreign ownership benchmark applicable to common carrier radio licensees under 47 U.S.C. § 310(b)(4). THIS PUBLIC NOTICE SERVES AS EACH NEWLY AUTHORIZED CARRIER'S SECTION 214 CERTIFICATE. It contains general and specific conditions, which are set forth below. Newly authorized carriers should carefully review the terms and conditions of their authorizations. Failure to comply with general or specific conditions of an authorization, or with other relevant Commission rules and policies, could result in fines and forfeitures. An updated version of Sections 63.09—.25 of the rules, and other related sections, is available at http://www.fcc.gov/ib/pd/pf/telecomrules.html. ITC-214-20061130-00536 E OMELY TELECOM CORPORATION International Telecommunications Certificate Service(s): Global or Limited Global Facilities -Based Service, Global or Limited Global Resale Service Grant of Authority Date of Action: 12/22/2006 Application for authority to provide facilities -based service in accordance with Section 63.18(e)(1) ofthe rules, and also to provide service in accordance with Section 63.18(e)(2) ofthe rules. ITC-214-20061201-00539 E American Telephone Company LLC International Telecommunications Certificate Service(s): Global or Limited Global Resale Service Grant of Authority Date of Action: 12/22/2006 Application for authority to provide service in accordance with Section 63.18(e)(2) ofthe rules. Page 1 of 5 ITC-214-20061205-00549 E Sunshine State Telephone Cc International Telecommunications Certificate Service(s): Global or Limited Global Resale Service Grant of Authority Date of Action: 12/22/2006 Application for authority to provide service in accordance with Section 63.18(e)(2) of the rules. ITC-214-20061206-00548 E A&A COMM UN I CATIONS INC. International Telecommunications Certificate Service(s): Global or Limited Global Facilities -Based Service, Global or Limited Global Resale Service Grant of Authority Date of Action: 12/22/2006 Application for authority to provide facilities -based service in accordance with Section 63.18(e)( I ) of the rules, and also to provide service in accordance with Section 63.18(e)(2) of the rules. ITC-ASG-20061106-00504 E Astound Broadband, LLC Assignment Grant of Authority Date of Action: 12/22/2006 Current Licensee: RCN Telecom Services, Inc. FROM: RCN Telecom Services, Inc. TO: Astound Broadband, LLC Application for consent to assign certain telecommunications assets from RCN Telecom Services, Inc. (RCN) to Astound Broadband, LLC (Astound). Pursuant to an Asset Purchase Agreement dated August 17, 2006, Astound will acquire from RCN the customer accounts, networks, and telecommunications switch located in the San Francisco and San Mateo counties of Northern California (Affected Service Area). After the acquisition RCN will continue to provide services outside the affected service area pursuant to its international section 214 authorization, ITC-214-19970723-00430. Astound will provide service pursuant to its existing section 214 authorization, ITC-214-20050701-00565 (see ITC-ASG-20050701-00241, DA 05-2397 dated Sept. 1, 2005). Astound is a Washington limited liability company and wholly -owned subsidiary of WaveDivision Holdings, LLC (Wave). The limited liability company agreement pursuant to which Wave is organized authorizes the issuance of three classes of units (A, B, and C) for purposes of distribution of proceeds of the company. The following U.S entities hold 10 percent or greater Class A Units in Wave: WaveDivision Capital, LLC (I I members, all U.S. citizens) (10 percent); Sandler Capital Partners V, L.P. (Sandler Capital Partners) (60.19 percent), and SCP V FTE WaveDivision Holdings, L.P. (SCP V FTE WaveDivision) (27.01 percent). Sandler Investment Partners, L.P. (Sandler Investment Partners), U.S. entity, is general partner or both Sandler Capital Partners and SCP V FTE WaveDivision, Sandler Capital Management, U.S. entity, is general partner of Sandler Investment Partners. Five individuals, all U.S. citizens, hold 10 percent or greater ownership or controlling interest in Sandler Capital Management. The following U.S. entities or individuals hold 10 percent or greater Class B and C Units in Wave: WaveDivision Networks, LLC (sole member Steven Weed, U.S. citizen) (85 percent); Steve Friedman (15 percent). Upon consummation, no other person or entity will hold 10 percent or greater direct or indirect interest in Astound. This authorization is without prejudice to the Commission's action on any other related pending application(s). Page 2 of 5 CONDITIONS APPLICABLE TO INTERNATIONAL SECTION 214 AUTHORIZATIONS (1) These authorizations are subject to the Exclusion List for International Section 214 Authorizations, which identifies restrictions on providing service to particular countries or using particular facilities. The most recent Exclusion List is attached to this Public Notice. The list applies to all U,S. international carriers, including those that have previously received global or limited global Section 214 authority, whether by streamlined grant or specific written order. Carriers are advised that the attached Exclusion List is subject to amendment at any time pursuant to the procedures set forth in Streamlining the International Section 214 Authorization Process and Tariff Requirements, IB Docket No. 95-118, 11 FCC Red 12884 (1996), para. 18. A copy of the current Exclusion List will be maintained in the FCC Reference and Information Center and will be available at http://www.fec.gov/ib/td/pf/exclusionlist.html. It also will be attached to each Public Notice that grants international Section 214 authority. (2) The export of telecommunications services and related payments to countries that are subject to economic sanctions may be restricted. For information concerning current restrictions, call the Office of Foreign Assets Control, U.S. Department of the Treasury, (202) 622-2520. (3) Carriers shall comply with the requirements of Section 63.11 of the Commission's rules, which requires notification by, and in certain circumstances prior notification by, U.S. carriers acquiring an affiliation with foreign carriers. A carrier that acquires an affiliation with a foreign carrier will be subject to possible reclassification as a dominant carrier on an affiliated route pursuant to the provisions of Section 63.10 of the rules. The Commission recently amended Section 63.11 of -the rules in its Order on Reconsideration in IB Docket No. 97-142, 15 FCC Red 18158 (2000). (4) Carriers shall comply with the Commission's International Settlements Policy and associated filing requirements contained in Sections 43.51 and 64.1001 of the Commission's Rules, 47 C.F.R. §§ 43.51, 64,1001. The Commission modified these requirements most recently in 2000 Biennial Regulatory Review, Policy and Rules Concerning the International, Interexchange Marketplace, FCC 01-93, released, March 20, 2001, 66 Fed. Reg, 16874 (Mar. 28, 2001). See also 1998 Biennial Regulatory Review - Reform of the International Settlements Policy and Associated Filing Requirements, IB Docket Nos. 98-148, 95-22, CC Docket No. 90-337 (Phase II), FCC 99-73 (rel. May 6, 1999). In addition, any carrier interconnecting private lines to the U.S. public switched network at its switch, including any switch in which the carrier obtains capacity either through lease or otherwise, shall file annually with the Chief, International Bureau, a certified statement containing, on a country -specific basis, the number and type (e.g., 64 kbps circuits) of private lines interconnected in such manner. The Commission will treat the country of origin information as confidential. Carriers need not file their contracts for interconnection unless the Commission specifically requests. Carriers shall fi le their annual report on February 1 (covering international private lines interconnected during the preceding January 1 to December 31 period) of each year. International private lines to countries for which the Commission has authorized the provision of switched basic services over private lines at any time during a particular reporting period are exempt from this requirement. See 47 C.F.R. § 43.51(d). (5) Carriers authorized to provide private line service either on a facilities or resale basis are limited to the provision of such private line service only between the United States and those foreign points covered by their referenced applications for Section 214 authority. In addition, the carriers may not -- and their tariffs must state that their customers may not -- connect their private lines to the public switched network at either the U.S. or foreign end, or both, for the provision of international switched basic services, unless the Commission has authorized the provision of switched services over private lines to the particular country at the foreign end of the private line or the carrier is exchanging switched traffic with a foreign carrier that the Commission has determined lacks market power in the country at the foreign end of the private line. See 47 C.F.R. §§ 63. l6, 63.22(e), 63.23(d). A foreign carrier lacks market power for purposes of this rule if it does not appear on the Commission I ist of foreign carriers that do not qualify for the presumption that they lack market power in particular foreign points. This list is available at http://www.fcc.gov/Bureaus/Intemational/Public — Notices/1999/da990809.txt. See generally 1998 Biennial Regulatory Review - Reform of the International Settlements Policy and Associated Filing Requirements, IB Docket Nos. 98-148, 95-22, CC Docket No. 90-337 (Phase II), FCC 99-73 (rel. May 6, 1999), paras. 12-15, 102-109. (6) The Commission has authorized the provision of switched basic services via facilities -based or resold private lines between the United States and the following foreign points: Sweden, Canada, New Zealand, the United Kingdom, Australia, The Netherlands, Luxembourg, Norway, Denmark, France, Germany, Belgium, Austria, Switzerland, Japan, Italy, Ireland, Hong Kong, Iceland, Spain, Finland, Israel, Singapore, Netherlands Antilles, Poland, Argentina, United Arab Emirates, Macau, Hungary, Philippines, Greece, Uruguay, Brunei, Trinidad & Tobago, Czech Republic, the Dominican Republic, Brazil, Botswana, Costa Rica, South Africa, Saint Lucia, Saint Kitts & Nevis, Saint Vincent, Antigua, Malaysia, Thailand, Belize, Panama, Guatemala, Venezuela, Bahrain, South Korea, Portugal, Cyprus, Slovak Republic, Slovenia, Dominica, Grenada, Jamaica, Kuwait, Jordan, Paraguay, Croatia, Egypt, Zambia, Ecuador, Barbados, Colombia, Chile, El ... �. .. - - Page 3 of 5 "" .. _. .. .. ... Salvador, Taiwan, Nicaragua, Turkey, Peru, Morocco, Ghana, Bolivia, Guyana, Mongolia, Zimbabwe, Gambia, Nigeria, Bangladesh, Indonesia, Tunisia, Qatar, Oman, Mauritius, New Caledonia, Guniea, Suriname, and Fiji Islands. (7) Carriers may engage in "switched hubbing" to countries for which the Commission has not authorized the provision of switched basic services over private lines consistent with Section 63.17(b) of the rules. (8) Carriers may provide U.S. inbound or outbound switched basic service via their authorized private lines extending between or among the United States, Sweden, New Zealand, the United Kingdom, Australia, The Netherlands, Luxembourg, Norway, Denmark, France, Germany, Belgium, Austria, Switzerland, Japan, Italy, Ireland, Hong Kong, Iceland, Spain, Finland, Israel, Singapore, Netherlands Antilles, Poland, Argentina, United Arab Emirates, Macau, Hungary, Philippines, Greece, Uruguay, Brunei, Trinidad & Tobago, Czech Republic, the Dominican Republic, Brazil, Botswana, Costa Rica, South Africa, Saint Lucia, Saint Kitts & Nevis, Saint Vincent, Antigua, Malaysia, Thailand, Belize, Panama, Guatemala, Venezuela, Bahrain, South Korea, Portugal, Cyprus, Slovak Republic, Slovenia, Dominica, Grenada, Jamaica, Kuwait, Jordan, Paraguay, Croatia, Egypt, Zambia, Ecuador, Barbados, Colombia, Chile, El Salvador, Taiwan, Nicaragua, Turkey, Peru, Morocco, Ghana, Bolivia, Guyana, Mongolia, Zimbabwe, Gambia, Nigeria, Bangladesh, Indonesia, Tunisia, Qatar, Oman, Mauritius, and New Caledonia, Gunica, Suriname, and Fiji Islands. (9) Carriers shall comply with the "No Special Concessions" rule, Section 63,14, 47 C.F.R. § 63.14. (10) Carriers regulated as dominant for the provision of a particular communications service on a particular route for any reason other than a foreign carrier affiliation under Section 63.10 of the rules shall file tariffs pursuant to Section 203 of the Communications Act, as amended, 47 U.S.C. § 203, and Part 61 of the Commission's Rules, 47 C.F.R. Part 61. Except as specified in Section 20.15 with respect to commercial mobile radio service providers, carriers regulated as non -dominant, as defined in Section 61.3, and providing detariffed international services pursuant to Section 61.19 must comply with all applicable public disclosure and maintenance of information requirements in Sections 42.10 and 42.11. These non -dominant carriers may continue filing new or revised international tariffs for mass market services until January 28, 2002, when all tariffs, with limited exceptions, must be cancelled. Carriers may not file any new or revised contract tariffs or tariffs for other long-term international service arrangements. See 2000 Biennial Regulatory Review, Policy and Rules Concerning the International, Interexchange Marketplace, FCC 01-93, released March 20, 2001, 66 Fed. Reg. 16874 (Mar. 28, 2001). (11) Carriers shall file the annual reports of overseas telecommunications traffic required by Section 43.61(a). Carriers shall also file the quarterly reports required by Section 43.61 in the circumstances specified in paragraphs (b) and (e) orthat Section. (12) Carriers shall file annual reports of circuit status and/or circuit additions in accordance with the requirements set forth in Rules for Filing of International Circuit Status Reports, CC Docket No. 93-157, Report and Order, 10 FCC Red 8605 (1995), See 47 C.F.R. §§ 43.82, 63.23(e). These requirements apply to facilities -based carriers and private line resellers, respectively. See also: http:www.fec,gov/ib/pd/pf/csmanual.htm] (13) Carriers should consult Section 63.19 of the rules when contemplating a discontinuance, reduction or impairment of service. Further, the grant of these applications shall not be construed to include authorization for the transmission of money in connection with the services the applicants have been given authority to provide. The transmission of money is not considered to be a common carrier service. (14) If any carrier is reselling service obtained pursuant to a contract with another carrier, the services obtained by contract shall be made generally available by the underlying carrier to similarly situated customers at the same terms, conditions and rates. 47 U.S.C. § 203. (15) To the extent the applicant is, or is affiliated with, an incumbent independent local exchange carrier, as those terms are defined in Section 64.1902 of the rules, it shall provide the authorized services in compliance with the requirements of Section 64.1903. See Regulatory Treatment of LEC Provision of Interexchange Services Originating in the LEC's Local Exchange Area and Policy and Rules Concerning the Interstate, Interexchange Marketplace, Second Report and Order in CC Docket No. 96-149 and Third Report and Order in CC Docket No. 96-61, 12 FCC Red 15756, recon., 12 FCC Red 8730 (1997), Order, 13 FCC Red 6427 (Com. Car. Bur. 1998), further recon., FCC 99-103 (rel. June 30, 1999). (16) Except as otherwise ordered by the Commission, a carrier authorized here to provide facilities -based service that (i) is classified as dominant under Section 63.10 of the rules for the provision of such service on a particular route and (ii) is affiliated with a carrier that collects settlement payments for terminating U.S. international switched traffic at the foreign end of that route may not provide facilities -based service on that route unless the current rates the affiliate charges U.S. international carrier to terminate traffic are at or below the Commission's relevant benchmark adopted in International Page 4 of 5 Settlement Rates, [B Docket No. 96-261, Report and Order, 12 FCC Red 19806 (1997). Sec also Report and Order on Reconsideration and Order Lifting Stay in IB Docket No. 96-261, FCC 99-124 (rel. June 11, 1999). For the purposes of this rule, "affiliation" and "foreign carrier" are defined in Section 63.09. Petitions for reconsideration under Section 1.106 or applications for review under Section 1.115 of the Commission's rules in regard to the grant of any of these applications may be filed within thirty days of this public notice (see Section 1.4(b)(2))• For additional information, please contact the FCC Reference and Information Center, Room CY-A257, 445 12th Street SW, Washington, D.C, 20554, (202) 418-0270. People with Disabilities: To request materials in accessible formats for people with disabilities (braille, large print, electronic files, audio format), send an e-mail to fcc504@fec.gov or call the Consumer & Governmental Affairs Bureau at 202-418-0530 (voice), 202-418-0432 (tty). Exclusion List for International Section 214 Authorizations -- Last Modified December 22, 1999 -- The following is a list of countries and facilities not covered by grant of global Section 214 authority under Section 63.18(e)(1) of the Commission's Rules, 47 C.F.R. § 63.18(e)(1). In addition, the facilities listed shall not be used by U.S. carriers authorized under Section 63.18 of the Commission's Rules unless the carrier's Section 214 authorization specifically lists the facility. Carriers desiring to serve countries or use facilities listed as excluded hereon shall file a separate Section 214 application pursuant to Section 63.18(e)(4) of the Commission's Rules. See generally 47 C.F.R. § 63.22, Countries: Cuba (Applications for service to Cuba shall comply with the separate filing requirements of the Commission's Public Notice Report No. I-6831, dated July 27, 1993, "FCC to Accept Applications for Service to Cuba.") Facilities: All non-U.S.-licensed satellite systems that are not on the Permitted Space Station List, maintained at http://www.fcc.gov/ib/sd/sc/permitted.html. See International Bureau Public Notice, DA 99-2844 (rel. Dec. 17, 1999). This list is subject to change by the Commission when the public interest requires, Before amending the list, the Commission will first issue a public notice giving affected parties the opportunity for comment and hearing on the proposed changes. The Commission may then release an order amending the exclusion list. This list also is subject to change upon issuance of an Executive Order. See Streamlining the Section 214 Authorization Process and Tariff Requirements, IB Docket No. 95-418, FCC 96-79, 11 FCC Red 12,884, released March 13, 1996 (61 Fed. Reg. 15,724, April 9, 1996). A current version of this list is maintained at http://www.fcc.gov/ib/pd/pf/telecomrules.html#exclusionlist. For additional information, contact the International Bureau's Policy Division, (202) 418-1460. Page 5 of 5 Exhibit E 10 Financial Qualifications Attached are the following financial statements for WaveDivision Holdings, LLC, which have been prepared on a pro forma basis: (a) pro forma consolidated balance sheet as of June 30, 2012 and (b) pro forma consolidated statement of operations for the six months ended June 30, 2012. The attached financial statements have been marked "CONFIDENTIAL" and are to be maintained -as confidential by the franchise authority and its agents to the extent permissible under local law. it CONFIDENTIAL WaveDivision Holdings, LLC Pro Forma Consolidated Balance Sheet As of June 30, 2012 (Unaudited) ($ in thousands) Adjustments Historical Pro Forma Pro Forma 1 ASSETS Current Assets: Cash $ 1,099.1 $ 3,900.9 $ 5,000.0 Accounts receivable, net of allowance for 23,207.0 — 23,207.0 doubtful accounts of $878,073 Other receivables 1,285.9 -- 1,285.9 Deposits 310.9 — 310.9 Prepaid expenses and other assets: 1,323.9 — 1,323.9 Total current assets 27,226.8 31,127.7 Property, plant and equipment, net 240,591.7 8,566.5 249,158.2 Definite -lived intangible assets, net of 5,802.9 97,396.5 103,199.4 accumulated amortization Indefinite -lived intangible assets Franchise agreements Goodwill Deferred Financing costs Other LIABILITIES & MEMBERS' EQUITY Current liabilities: Accounts payable Accrued programming costs Accrued incentive and share based compensation Accrued expenses Unearned revenue and subscriber deposits Accrued Interest Current portion of senior term loans Total current liabilities Long term debt, net of current portion Fair value of interest rate swaps Commitments and contingencies Members' (Deficit) Equity Contributed capital Members' notes receivable Retained earnings (deficit) 153,848.5 286,062.5 439,911.0 43,685.8 106,477.0 150,162.8 197,534.3 590,073.8 0.0 31,350.0 31,350.0 8,100.0 (8,000.0) _100.0 $479,255.6 $1 005 009.1 $ 6,673.2 — $ 6,673.2 6,679.1 — 6,679.1 12,381.9 (11,700.0) 681.9 7,526.1 — 7,526.1 19,433.8 -- 19,433.8 627.3 (627.3) — 32,820.0 (27,8.20.0) 5,000.0 86,141.4 45.994.1 329,695.0 415,305.0 745,000.0 683.2 (683.2) — 70,103.8 143,911.2 214,015.0 (51,855.2) 51,855.2 — 44,487.5 44,487.5) -- 62,736.1 214,016.0 $479,255.6 $1,005 009.1 12 CONFIDENTIAL WaveDivision Holdings, LLC Pro Forma Consolidated Statement of Operations Six Months Ended June 30, 2012 (Unaudited) ($ in thousands) Adjustments Historical Pro Forma Pro Forma Revenues: Cable television services $ 62,699.2 — $ 62,699.2 High-speed data services 45,652.9 — 45,652.9 Telephone services 13,518.6 — 13,518.6 Advertising and other 8,293.6 _ — 8,293.6 Total revenues 130,164.3 130 164.3 Operating expenses: Programming and other direct costs Depreciation and amortization Technical service Business service Customer service Marketing General and administrative Total operating expenses Income from operations Interest and other income (expense): Interest income on shareholder notes receivable and other Interest (expense) and debt issuance (costs) Unrealized foreign exchange gain (loss) on derivatives Bargain purchase gain on acquisition Gain on fair value of interest rate swaps, net Net income (loss) 37,202.3 — 37,202.3 29,464.2 10,215.6 39,679.8 8,509.4 — 8,509.4 1,305.9 — 1,305.9 8,830.7 — 8,830.7 6,336.4 — 6,336.4 (11,897.2) 13,638.4 _25,535.6 117.184.3 115,502.7 12, 979.9 14,661.6 933.4 (933.4) — (4,915.2) (21,301.3) (26,216.5) 7,596.5 - 7,596.5 465.2 (465.21 — 4,079.9 (18,620.0) $ 17,059.9 . $ (3,958.4) 13 Exhibit F 14 'f echnical Qualifications Wave)division Holdin s LLC WaveDivision Holdings, LLC is one of the most experienced operators of broadband systems in the U.S. and provides technologically advanced product offerings to customers in Washington, Oregon and California. As of September 15, 2012, Wave served approximately 153,280 video customers, 163,400 high-speed Internet access customers and 67,150 phone customers. In addition, Wave provides high-speed data service to over 4,540 small business customers and phone service to over 4,600 small business customers. Wave has invested tens of millions of dollars in recent years to rebuild and upgrade its distribution network and related equipment. As a result, all of Wave's systems are two-way and provide video and broadband Internet access, as well as voice services. Wave has significant experience operating large, technologically advanced cable systems. Over eighty percent of Wave's core systems have been upgraded to 860MHZ (and all of the core systems have been upgraded to at least 750 MHz) and are interconnected with a redundant IOGB fiber ring. Wave provides advanced video services over all of its systems, including digital cable, video -on -demand (VOD), high -definition television (HDTV) and digital video recorders. Wave offers broadband Internet access in all of its interconnected systems. Through its wholly -owned subsidiary, Astound Broadband, LLC, Wave also provides Voice over Internet Protocol (VoIP) services in all of its interconnected systems. Wave has established an enviable track record in providing high -quality customer service and technical service and in developing technology to enable its 24x7 Network Operations Center to proactively monitor its distribution network and customer premises equipment to prevent or quickly remedy any technical issues. The significant achievements of the highly regarded staff of Wave in areas of technical quality and innovation have been widely recognized. In fact, Wave recently received the prestigious "Independent Operator of the Year 2012" award from CableFax Magazine. Wave is not only committed to giving its customers an array of entertainment and information choices, but also high quality customer service. Wave customer care representatives meet or exceed all federal and local customer service standards, and are considered among the best in the cable and broadband industry. The following table identifies the members of Wave's senior executive management team, and the biographies below provide additional information on these team members: Name Position Industry Experience Steven B. Weed Chief Executive Officer 28 years Steve Friedman Chief Operating Officer 26 years Wayne Schattenkerk Chief Financial Officer 14 years James A Penney Executive Vice President 24 years Steven B. Weed, Chief Executive Officer. Mr. Weed is the founder of Wave and has long been a successful leader in the cable and telecommunications industry. Mr. Weed will leverage his more than 28 years of experience to continue the successful performance of 15 these cable systems. Prior to becoming Chief Executive Officer of Wave in 2003, Mr. Weed was COO of a Northwest -based MSO, Summit Communications Inc. (Summit). After the sale of Summit to Millennium Digital Media Systems, L.L.C. (Millennium) in April 1999, Mr. Weed remained with Millennium as President of the Northwest Region until he left to form WaveDivision Networks, LLC in February 2002. During Mr. Weed's tenure at Summit/Millennium, the company grew from 23,000 customers to more than 70,000 customers in the states of Washington, Oregon, and Idaho. Mr. Weed began his career in marketing, holding regional and corporate level executive positions for such companies as Group W Cable in the Northwest, Falcon Cable in Los Angeles, and a national pay television company. Mr. Weed joined Summit in 1988 to manage its Seattle area cable operations and became COO in 1994. An industry leader, Mr. Weed served as Chairman of The American Cable Association from 2000 to 2002. He was awarded the Washington State Cable Association's "Presidents Award" for his role in deregulating small cable as part of the 1996 Telecommunications Act and was a 2002 inductee into the Cable TV Pioneers, Mr. Weed also served on the National Cable and Telecommunications Association (NCTA) Independent Operator Committee, and has provided testimony before both the FCC and the United States Congress on cable television issues. Locally, Mr. Weed is a founding member of the Seattle Business Roundtable, a member of the Northwest Chapter of the Young Presidents Organization, and a member of the Board of Directors for Vista Broadband. He has also served as Finance Committee Director for U.S. Congressman Rick White and Cable Television Advisory Board Member for Seattle Mayor, Norm Rice. Steve Friedman Chief Operating Officer. Mr. Friedman joined Wave and assumed his current position in May 2003, Mr. Friedman has over 26 years of cable industry operations experience in the Pacific Northwest and previously worked with Steve Weed at Millennium. In addition, Mr. Friedman worked with Northland Communications, Apollo Communications and, from 1991 to 2002, Mr. Friedman operated Somerset Communications, a company he founded. Prior to working in the cable industry, Mr. Friedman worked as a CPA in a nationally recognized public accounting firm and in management consulting. Mr. Friedman has been involved in the cable industry as a Founder and Board member of the American Cable Association. He is also a frequent participant in the cable industry panels and seminars where he speaks on current operational issues in the business. Wayne Schattenkerk, Chief Financial Officer. Mr. Schattenkerk joined Wave and assumed his current position in March 2006, Mr. Schattenkerk has nearly 24 years of finance and operations experience. From 2001 to 2005, Mr. Schattenkerk served as Chief Financial Officer, then President and Chief Operating Officer of Saltmine, a creator of web -based business applications for Northwest companies. Prior to Saltmine, Mr. Schattenkerk spent four years with Northland Communications, first as Corporate Controller, then as Vice President of West Coast Operations. From 1985 to 1992, Mr. Schattenkerk worked for IBM Corporation in a variety of accounting and finance positions supporting manufacturing and research divisions. .lames A. Penney, Executive Vice President Business and Legal Affairs. Mr. Penney joined Wave and assumed his current position in January 2006. Mr. Penney has been involved in 16 the cable industry for over 24 years. From 1985 until 2000, Mr. Penney was the Vice President and General Counsel for Northland Communications where he was responsible for mergers and acquisitions, corporate finance, franchise compliance and a wide variety of operational matters. From 2000 until 2006, Mr. Penney was a partner with the Seattle law firm of Cairncross & Hempelmann, P.S. where he practiced in the corporate finance and technology transactions groups and represented a diverse group of clients including Microsoft Corporation, Starwood Corporation, Spacelabs Medical, Inc., Huna Totem Corporation, Copacino+Fujikado, LLC and Sealaska Corporation, as well as a number of cable television operators. Mr. Penney was inducted into the Cable TV Pioneers in 2012. In addition to the Wave senior management team described above, Wave has a full complement of local managers and technical staff responsible for system operations. This local staff has extensive experience managing and operating cable systems. In addition, Wave customers will be served by Wave's call center operations team, which is available Monday through Friday from 7:30 AM to 8:00 PM, Saturday from 8:00 AM to 5:00 PM and Sunday, 9:00 AM to 1:00 PM for sales and billing matters. Wave's network operations team will monitor system performance 24 hours per day 7 days per week for technical matters. Additionally, our technical service representatives will be available 24 hours per day 7 days per week. Oak Hill Capital Partners Oak Hill Capital Partners has a 25-year history owning and operating companies in the communications infrastructure industry, including a particular focus on the cable space, with six past investments in the sector. Oak Hill has consistently focused on acquiring, building and/or upgrading technologically advanced networks in order to provide local customers and communities with the highest quality products and service offerings available in the market. Past investments include Wometco Cable Corporation (1986); MC Cable TV LP (1987); Georgia Cable Partners (1988); Northeastern Cable (1988); WideOpenWest (1999 and 2001); and Atlantic Broadband (2004). Oak Hill's commitment to technologically advanced networks and product offerings was particularly evident in its two most recent cable investments. At WideOpenWest, Oak Hill and management transformed underperforming cable systems which had previously offered only video services by launching a high -quality, affordably priced high-speed Internet product and by being among the first independent operators in the industry to offer a full "triple play" including voice- over -Internet Protocol (VoIP) digital telephone service. At Atlantic Broadband, Oak Hill again invested in a company which enhanced what had been underperforming cable assets by rebuilding portions of the cable network, improving both video and high-speed Internet product availability and/or speeds across multiple markets, and launching residential VoIP telephone as well as small business data and telephone offerings. Oak Hill admires Wave's, demonstrated commitment to rebuilding cable networks in order to provide the highest quality products to customers in the communities it serves. 17 ORDINANCE NO. AN ORDINANCE OF THE CITY COUNCIL OF THE CITY OF EDMONDS, WASHINGTON, GRANTING A FRANCHISE TO ASTOUND BROADBAND LLC WHEREAS, Astound Broadband, LLC ("Grantee") has applied to the City of Edmonds ("C") for a non-exclusive franchise for the right of entry, use, and occupation of the public Rights -of -Way within City, expressly to install, construct, erect, operate, maintain, repair, relocate and remove its facilities in, on, upon, along and/or across those Rights -of -Way for purposes of offering and providing Network Telephone Service and Telecommunications Infrastructure Services ("Grantee Services"); and WHEREAS, following proper notice, the City Council of City held a public hearing on Grantee's request for a franchise, at which time representatives of Grantee and interested citizens were heard in a full public proceeding affording opportunity for comment by any and all persons desiring to be heard; and WHEREAS, from information presented at such public hearing, and from facts and circumstances developed or discovered through independent study and investigation, the City Council now deems it appropriate and in the best interest of the City and its inhabitants that a franchise be granted to Grantee. NOW, THEREFORE, THE CITY COUNCIL OF THE CITY OF EDMONDS, WASHINGTON, DOES HEREBY ORDAIN AS FOLLOWS: Section 1. Grant of Franchise Right to Use Franchise Area. A. Subject to the terms and conditions stated herein, City hereby grants Grantee a franchise as set forth in this Ordinance (this "Franchise"), including without limitation general permission to enter, use and occupy the right(s)-of-way and/or other public property within the City as now or hereafter constituted (the "Franchise Area"). B. Grantee is authorized to install, remove, construct, erect, operate, maintain, relocate and repair the types of facilities necessary or convenient for Grantee Services and all appurtenances thereto (collectively, "Grantee Facilities") in, along, under and across the Franchise Area. C. This Franchise does not authorize the use of the Franchise Area for any facilities or services other than Grantee Facilities and Grantee Services, and it extends no rights or privilege relative to any facilities or services of any type, including Grantee Facilities and Grantee Services, on private property within City., 1 Telecommunications Franchise D. This Franchise is non-exclusive and does not prohibit City from entering into other agreements, including other franchises, impacting the Franchise Area, unless City determines that entering into such agreements interferes with Grantee's rights set forth herein. E. Except as explicitly set forth herein, this Franchise does not waive any rights that City has or may hereafter acquire with respect to the Franchise Area or any other City roads, Rights -of -Way, property, or any portions thereof. This Franchise shall be subject to the power of eminent domain, and in any proceeding under eminent domain, Grantee acknowledges its use of the Franchise Area shall have no value. F. City reserves the right to change, regrade, relocate, abandon, or vacate any Right -of -Way within the Franchise Area. If, at any time during the term of this Franchise, City vacates any portion of the Franchise Area containing Grantee Facilities, City shall reserve an easement for public utilities within that vacated portion, pursuant to RCW 35.79.030, within which Grantee may continue to operate any existing Grantee Facilities under the terms of this Franchise for the remaining period set forth under Section 3. G. Grantee agrees that its use of Franchise Area shall at all times be subordinated to and subject to City and the public's need for municipal infrastructure, travel, and access to the Franchise Area, except as may be otherwise required by law. Section 2. Notices. A. Written notices to the parties shall be sent by certified mail to the following addresses, unless a different address shall be designated in writing and delivered to the other party. City: with a copy to: City Clerk Grantee: Astound Broadband, LLC 401 Kirkland Parkplace Suite 500 Kirkland, WA 98033 Attention: Steve Weed, CEO, and Jim Penney, EVP 2 Telecommunications Franchise B. Any changes to the Grantee's information shall be sent to City's Public Works Director, with copies to the City Clerk, referencing the title of this agreement. C. The Grantee's voice numbers shall be staffed at least during normal business hours, Pacific time zone. Section 3. Term of Franchise. A. This Franchise shall run for a period of ten (10) years, from the date of execution specified in Section 5. B. If the Parties fail to formally renew this Franchise prior to the expiration of its term or any extension thereof, this Franchise shall automatically continue in full force and effect until renewed or either party gives written notice at least one hundred and eighty (180) days in advance of intent not to renew this Franchise. Section 4. Definitions. For the purpose of this Franchise: "Affiliate" means, with respect to any Person, any other Person controlling, controlled by or under common control with such Person. For purposes of this definition, the term "control" (including the correlative meanings of the terms "controlled by" and "under common control with"), as used with respect to any Person, means the possession, directly or indirectly, of the power to direct, or cause the direction of, the management policies of such Person, whether through the ownership of voting securities, by contract or otherwise. "Emergency" means a condition of imminent danger to the health, safety and welfare of persons or property located within City including, without limitation, damage to persons or property from natural consequences, such as storms, earthquakes, riots, acts of terrorism or wars. "Maintenance" or "Maintain" means examining, testing, inspecting, repairing, maintaining and replacing the existing Grantee Facilities or any part thereof as required and necessary for safe operation. "Person" means any individual, sole proprietorship, partnership, association, corporation or other form of organization authorized to do business in the State of Washington, and includes any natural person. "Relocation" means permanent movement of Grantee Facilities required by City, and not temporary or incidental movement of such facilities, or other revisions Grantee would accomplish and charge to third parties without regard to municipal request. 3 Telecommunications Franchise "Right -of -Way" (pluralized as "Rights -of -Way") means the surface and the space above and below streets, roadways, highways, avenues, courts, lanes, alleys, sidewalks, easements, rights -of -way and similar public properties and areas. "State" means the State of Washington. "Network Telephone Service" has the same meaning as "Network telephone service" as defined under RCW 82.16,010 (2012). "Telecommunications Infrastructure Services" means any services provided by Grantee using Grantee Facilities in the Rights -of -Way excluding Network Telephone Service. Section S. Acceptance of Franchise. A. This Franchise, and any rights granted hereunder, shall not become effective for any purpose unless and until Grantee files with the City Clerk the Statement of Acceptance, attached hereto as Exhibit A (the "Franchise Acceptance"). The date that the Franchise Acceptance is filed with the City Clerk shall be the effective date of this Franchise. B. Should Grantee fail to file the Franchise Acceptance with the City Clerk within 30 days after the effective date of this Franchise will automatically terminate and shall be null and void. Section 6. Construction and Maintenance. A. Grantee shall apply for, obtain, and comply with the terms of all permits required under [municipal code sections regulating construction in the right-of-way] for any work done on Grantee Facilities. Grantee shall comply with all applicable City, State, and federal codes, rules, regulations, and orders in undertaking such work, which shall be done in a thorough and proficient manner consistent with the standards of the telecommunications industry. B. Grantee agrees to use commercially reasonable efforts to coordinate its activities with City and all other utilities located within the Franchise Area. C. City expressly reserves the right to prescribe how and where Grantee Facilities shall be installed within the Franchise Area and may from time to time, pursuant to the applicable sections of this Franchise, require the removal, Relocation and/or replacement thereof in the public interest and safety at the expense of Grantee. 4 Telecommunications Franchise D. Before commencing any work within the Franchise Area, Grantee shall comply with the One Number Locator provisions of RCW Chapter 19.122 to identify existing utility infrastructure. E. Upon prior written approval of City and in accordance with City ordinances, Grantee shall have the authority (but not the obligation) to reasonably trim trees upon and overhanging streets, Public Ways and places in the Franchise Area so as to prevent the branches of such trees from coming in physical contact with Grantee Facilities. Grantee shall be responsible for debris removal from such activities. If such debris is not removed within twenty-four (24) hours of completion of the trimming, City may, at its sole discretion, remove such debris and charge Grantee for the cost thereof. This section does not, in any instance, grant automatic authority to clear vegetation for purposes of providing a clear path for radio signals. Any such general vegetation clearing will require a land clearing permit. Section 7. Repair and Emergency Work. In the event of an Emergency, Grantee may commence such repair and Emergency response work as required under the circumstances, provided that Grantee shall notify the City Public Works Director in writing as promptly as possible, before such repair or Emergency work commences, or as soon thereafter as possible, if advance notice is not practical. City may act, at any time, without prior written notice in the case of Emergency, but shall notify Grantee in writing as promptly as possible under the circumstances. Section 8. Damages to City and Third -Party Property. Grantee agrees that should any of its actions under this Franchise materially impair or damage any City property, survey monument, or property owned by a third - party, Grantee will restore, at its own cost and expense, said property to a safe condition. Such repair work shall be performed and completed to the reasonable satisfaction of the City Engineer. Section 9. Location Preference. A. Any structure, equipment, appurtenance or tangible property of a utility, other than Grantee's, which was installed, constructed, completed or in place prior in time to Grantee's application for a permit to construct Grantee Facilities under this Franchise shall have preference as to positioning and location with respect to Grantee Facilities. However, to the extent that Grantee Facilities are completed and installed prior to another utility's submittal of a permit for new or additional structures, equipment, appurtenances or tangible property, then Grantee Facilities shall have priority. These rules governing preference shall continue in the event of the necessity of relocating or changing the grade of any City road or Right -of -Way. A relocating utility 5 Telecommunications Franchise shall not necessitate the relocation of another utility that otherwise would not require Relocation. This Section shall not apply to any City facilities or utilities that may in the future require the Relocation of Grantee Facilities. Such Relocations shall be governed by Section 11. B. Grantee shall maintain a minimum underground horizontal separation of five (5) feet from City water facilities and ten (10) feet from above -ground City water facilities; provided, that for development of new areas, City, together with Grantee and other utility purveyors or authorized users of Rights -of -Way, will develop and follow the Public Works Director's determination of a consensus for guidelines and procedures for determining specific utility locations, subject additionally to this Franchise. Section 10. Grantee Information. A. Grantee agrees to supply, at no cost to City, any information reasonably requested of the Director of Public Works to coordinate municipal functions with Grantee's activities and fulfill any municipal obligations under State law. Said information shall include, at a minimum, as -built drawings of Grantee Facilities, installation inventory, and maps and plans showing the location of existing or planned facilities within City. Said information may be requested either in hard copy and/or electronic format, if reasonably possible in a format compatible with City's database system, as now or hereinafter existing, including City's geographic information Service (GIS) data base. Grantee shall use its commercially reasonable efforts to keep the Public Works Director informed of its long-range plans for coordination with City's long-range plans. B. The parties understand that Washington law limits the ability of City to shield from public disclosure any information given to City. Accordingly, the parties agree to work together to avoid disclosures of information which would result in economic loss or damage to Grantee because of mandatory disclosure requirements to third persons. Grantee shall indemnify and hold harmless City for any loss or liability for costs for attorneys fees because of non -disclosures requested by Grantee under Washington's open public records law, provided reasonable notice and opportunity to defend was given to Grantee or Grantee is made aware of the pending of a request or claim. Section 11. Relocation of Grantee Facilities. A. Except as otherwise so required by law, Grantee agrees to Relocate, remove, or reroute its facilities as ordered by the City Engineer at no expense or liability to City, except as may be required by RCW Chapter 35.99. Any determination to require the Relocation of Grantee Facilities shall be made in a reasonable, uniform and non- discriminatory manner. Any City funds used to reimburse costs incurred by any Person in connection with any relocation shall be allocated in a reasonable, uniform and non- 6 Telecommunications Franchise discriminatory manner. Pursuant to the provisions of Section 14, Grantee agrees to protect and save harmless City from any customer or third -party claims for service interruption or other losses in connection with any such change, Relocation, abandonment, or vacation of public property. B. If a readjustment or Relocation of Grantee Facilities is necessitated by a request from a Person other than City, that party shall pay Grantee the actual costs thereof. Section 12. Abandonment and or Removal of Grantee Facilities. A. Within one hundred and eighty days (180) of Grantee's permanent cessation of use of Grantee Facilities, or any portion thereof, Grantee shall, at City's discretion, either abandon in place or remove the affected facilities. B. The parties expressly agree that this Section shall survive the expiration, revocation or termination of this Franchise. Section 13. Undergrounding. A. The parties agree that this Franchise does not limit City's authority under federal law, State law, or local ordinance, to require the undergrounding of utilities. B. Whenever City requires the undergrounding of aerial utilities in the Franchise Area, Grantee shall underground Grantee Facilities in the manner specified by the City Engineer at no expense or liability to City, except as may be required by RCW Chapter 35.99. Where other utilities are present and involved in the undergrounding project, Grantee shall be required to pay only its fair share of common costs borne by all utilities, in addition to the costs specifically attributable to the undergrounding of Grantee Facilities. Common costs shall include necessary costs for common trenching and utility vaults. Fair share shall be determined in comparison to the total number and size of all other utility facilities being undergrounded. Section 14. Indemnification and Hold Harmless. A. Grantee shall defend, indemnify, and hold City and its officers, officials, agents, employees, and volunteers harmless from any and all costs, injuries, damages, losses, suits, or liabilities of any nature including attorneys' fees arising out of or in connection with any third party claims arising from Grantee's performance under this Franchise, except to the extent such costs, claims, injuries, damages, losses, suits, or liabilities are caused by the negligence or willful misconduct of City. B. City shall hold Grantee harmless from any liability arising out of or in connection with any damage or loss to Grantee Facilities caused by Maintenance and/or 7 Telecommunications Franchise construction work performed by, or on behalf of, City within the Franchise Area or any other City road, Right -of -Way, or other public property (provided that prior to undertaking any such activities City shall provide notice to Grantee and a reasonable opportunity to perform such activities itself), except to the extent any such damage or loss is directly caused by the negligence of Grantee, or its agent performing such work. C. Grantee acknowledges that neither City nor any other public agency with responsibility for firefighting, Emergency rescue, public safety or similar duties within City has the capability to provide trench, close trench or confined space rescue. Grantee, and its agents, assigns, successors, or contractors, shall make such arrangements as Grantee deems fit for the provision of such services. Grantee shall hold City harmless from any liability arising out of or in connection with any damage or loss to Grantee for City's failure or inability to provide such services, and, pursuant to the terms of Section 14(A), Grantee shall indemnify City against any and all third -party costs, claims, injuries, damages, losses, suits, or liabilities based on City's failure or inability to provide such services. D. Acceptance by City of any work performed by Grantee shall not be grounds for avoidance of this section. Section 15. Insurance. A. Grantee shall procure and maintain for the duration of this Franchise, insurance against claims for injuries to persons or damage to property which may arise from or in connection with the performance of the work hereunder by Grantee, its agents, representatives, or employees in the amounts and types set forth below: 1. Automobile Liability insurance covering all owned, non -owned, hired, and leased vehicles with a minimum combined single limit for bodily injury and property damage of $1,000,000 per accident. 2. Commercial General Liability insurance with limits no less than $1,000,000 each occurrence, $2,000,000 general aggregate and a $2,000,000 products - completed operations aggregate limit. Coverage shall cover liability arising from premises, operations, independent contractors, products -completed operations, stop gap liability, and personal injury and advertising injury and liability assumed under an insured contract. City shall be named as an additional insured under Grantee's Commercial General Liability insurance policy with respect to the work performed under this Franchise. 3. Workers' Compensation coverage as required by the Industrial Insurance laws of the State of Washington. P Telecommunications Franchise B. Grantee's insurance coverage shall be primary insurance as respects City. Any insurance, self-insurance, or insurance pool coverage maintained by City shall be in excess of Grantee's insurance and shall not contribute with it. C. Grantee shall furnish City with certificates of the foregoing insurance coverage or a copy of amendatory endorsements, including but not necessarily limited to the additional insured endorsement. D. Grantee shall have the right to self -insure any or all of the above -required insurance. Any such self insurance is subject to approval by City. E. Grantee's maintenance of insurance as required by this Franchise shall not be construed to limit the liability of Grantee to the coverage provided by such insurance, or otherwise limit City's recourse to any remedy to which City is otherwise entitled at law or in equity. Section 16. Performance Security. Grantee shall provide City with a surety bond in the amount of Fifty Thousand Dollars ($50,000) running or renewable for the term of this Franchise, in a form and substance reasonably acceptable to City. In the event Grantee shall fail to substantially comply with any one or more of the provisions of this Franchise following notice and a reasonable opportunity to cure, then there shall be recovered jointly and severally from the principal and any surety of such surety bond any damages suffered by City as a result thereof, including but not limited to staff time, material and equipment costs, compensation or indemnification of third parties, and the cost of removal or abandonment of facilities hereinabove described. Grantee specifically agrees that its failure to comply with the terms of Section 19 shall constitute damage to City in the monetary amount set forth therein. Such a financial guarantee shall not be construed to limit Grantee's liability to the guarantee amount, or otherwise limit City's recourse to any remedy to which City is otherwise entitled at law or in equity. Section 17. Successors and Assignees. A. All the provisions, conditions, regulations and requirements herein contained shall be binding upon the successors, assigns of, and independent contractors of Grantee, and all rights and privileges, as well as all obligations and liabilities of Grantee shall inure to its successors, assignees and contractors equally as if they were specifically mentioned herein wherever Grantee is mentioned. B. This Franchise shall not be leased, assigned or otherwise alienated, except to an Affiliate of Grantee, without the express consent of City by ordinance, which approval shall not be unreasonably withheld. 9 Telecom municatlons Franchise C. Grantee and any proposed assignee or transferee shall provide and certify the following to City not less than sixty (60) days prior to the proposed date of transfer: (a) complete information setting forth the nature, term and conditions of the proposed assignment or transfer; (b) all information required by City of an applicant for a Franchise with respect to the proposed assignee or transferee; and, (c) an application fee which shall be set by City, plus any other costs actually and reasonably incurred by City in processing, and investigating the proposed assignment or transfer. D. Prior to City's consideration of a request by Grantee to consent to a Franchise assignment or transfer, the proposed assignee or transferee shall file with City a written promise to unconditionally accept all terms of this Franchise, effective upon such transfer or assignment of this Franchise. City is under no obligation to undertake any investigation of the transferor's state of compliance and failure of City to insist on full compliance prior to transfer does not waive any right to insist on full compliance thereafter. Section 18. Dispute Resolution. A. In the event of a dispute between City and Grantee arising by reason of this Franchise, the dispute shall first be referred to the operational officers or representatives designated by Grantor and Grantee to have oversight over the administration of this Franchise. The officers or representatives shall meet within thirty (30) calendar days of either party's request for a meeting, whichever request is first, and the parties shall make a good faith effort to achieve a resolution of the dispute. B. If the parties fail to achieve a resolution of the dispute in this manner, either party may then pursue any available judicial remedies. This Franchise shall be governed by and construed in accordance with the laws of the State of Washington. In the event any suit, arbitration, or other proceeding is instituted to enforce any term of this Franchise, the parties specifically understand and agree that venue shall be exclusively in County, Washington. The substantially prevailing party in any such action shall be entitled to its attorneys' fees and costs of suit, which shall be fixed by the judge hearing the case, and such fees shall be included in the judgment. Section 19. Enforcement and Remedies. A. If Grantee shall violate, or fail to comply with any of the provisions of this Franchise, or should it fail to heed or comply with any notice given to Grantee under the provisions of this Franchise, City may shall provide Grantee with written notice specifying with reasonable particularity the nature of any such breach and Grantee shall undertake all commercially reasonable efforts to cure such breach within thirty (30) days of receipt of notification. If City reasonably determines the breach cannot be cured within (30) thirty days, City may specify a longer cure period, and condition the extension of time on Grantee's submittal of a plan to cure the breach within the 10 Telecommunications Franchise specified period, commencement of work within the original thirty (30) day cure period, and diligent prosecution of the work to completion. If the breach is not cured within the specified time, or Grantee does not comply with the specified conditions, City may, at its discretion, either (1) revoke this Franchise with no further notification, or (2) claim damages of Two Hundred Fifty Dollars ($250.00) against the financial guarantee set forth in Section 16. B. Should City determine that Grantee is acting beyond the scope of permission granted herein for Grantee Facilities and Grantee Services, City reserves the right to cancel this Franchise and require Grantee to apply for, obtain, and comply with all applicable City permits, franchises, or other City permissions for such actions, and if Grantee's actions are not allowed under applicable federal and state or City laws, to compel Grantee to cease such actions. Section 20. Compliance with Laws and Regulations. A. This Franchise is subject to, and Grantee shall comply with all applicable federal and state or City laws, regulations and policies (including all applicable elements of City's comprehensive plan), in conformance with federal laws and regulations, affecting performance under this Franchise. Furthermore, notwithstanding any other terms hereof to the contrary, Grantee shall be subject to the police power of City to adopt and enforce general ordinances necessary to protect the safety and welfare of the general public in relation to the rights granted in the Franchise Area. B. City reserves the right at any time to amend this Franchise to conform to any hereafter enacted, amended, or adopted federal or state statute or regulation relating to the public health, safety, and welfare, or relating to roadway regulation, or a City Ordinance enacted pursuant to such federal or state statute or regulation upon providing Grantee with thirty (30) days written notice of its action setting forth the full text of the amendment and identifying the statute, regulation, or ordinance requiring the amendment. Said amendment shall become automatically effective upon expiration of the notice period unless, before expiration of that period, Grantee makes a written call for negotiations over the terms of the amendment. If the parties do not reach agreement as to the terms of the amendment within thirty (30) days of the call for negotiations, City may enact the proposed amendment, by incorporating Grantee's concerns to the maximum extent City deems possible. Section 21. License, Tax, Charges and Consideration. A. This Franchise shall not exempt Grantee from any future license, tax, or charge which City may hereinafter adopt pursuant to authority granted to it under state or federal law for revenue or as reimbursement for use and occupancy of the Franchise Area. 11 Telecommunications Franchise B. As consideration for this Franchise, and consistent with RCW 35.21.860, Grantee commits to pay a City utility tax not to exceed six percent (6%) on revenues derived from Grantee's provision of Telecommunications Infrastructure Services (net of bad debt or other uncollectable amounts) in the City, or an amount equivalent to the amount due under such a tax, regardless of any change in law, or whether any authority may determine that said tax does not apply to said revenues. Section 22. Consequential Damages Limitation. Notwithstanding any other provision of this Franchise, in no event shall either party be liable for any special, incidental, indirect, punitive, reliance, consequential or similar damages. Section 23. Severability. If any portion of this Franchise is deemed invalid, the remainder portions shall remain in effect. Section 24. Titles. The section titles used herein are for reference only and should not be used for the purpose of interpreting this Franchise. ADOPTED AND APPROVED this day of _ 20—. CITY OF EDMONDS Mayor ATTEST: City Clerk APPROVED AS TO FORM: City Attorney 12 Telecommunications Franchise EXHIBIT "A" STATEMENT OF ACCEPTANCE Astound Broadband LLC, for itself, its successors and assigns, hereby accepts and agrees to be bound by all lawful terms, conditions and provisions of the Franchise attached hereto and incorporated herein by this reference. ASTOUND BROADBAND, LLC By: Date: Name: James A. Penney Title: Executive Vice President STATE OF WASHINGTON J ) ss. COUNTY OF KING J On this day of , 2012, before me the undersigned, a Notary Public in and for the State of Washington, duly commissioned and sworn, personally appeared, James A. Penney, the Executive Vice President of Astound Broadband, LLC, the limited liability company that executed the within and foregoing instrument, and acknowledged the said instrument to be the free and voluntary act and deed of said company, for the uses and purposes therein mentioned, and on oath stated that he/she is authorized to execute said instrument. IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official seal on the date hereinabove set forth. Signature NOTARY PUBLIC in and for the State of Washington, residing at My Commission Expires: 13 Telecommunications Franchise January 11, 2013 VIA E-MAIL Mr. James Penney WaveDivision Holdings, LLC 401 Kirkland Place, Suite 500 Kirkland, WA 98033 Mr. Bob Warshawer Black Rock Cable, Inc. 1512 Fairview Avenue Bellingham, WA 98229 Re: City of Edmonds - Tolled FCC Form 394 Dear Mr. Penney and Mr. Warshawer: Thank you for the email dated January 9, 2013 and for the phone call today. This letter will confirm that all of the parties agree to toll the 120-day review period for the FCC Form 394 that WaveDivision Holdings ('Wave") and Black Rock Cable, Inc. ("Black Rock") filed with the City of Edmonds, Washington, while the we work on putting a new telecommunications franchise together for Astound Broadband, LLC ("Astound"), a subsidiary of Wave. If either party terminates franchise discussions, the City shall have forty-five (45) days in which to complete its review of the FCC Form 394. Once the new Astound franchise is completed, Wave and Black Rock will withdraw its FCC Form 394 transfer application. Very truly yours, LIGHTHOUSE LAW GROUP, PLLC Michael R. Bradley Special Counsel C. Mr. Stephen Clifton Mr. Jeff Taraday is1100 Dexter Ave N Suite 100 Seattle WA 98109 ' P206273.7440 F 206.273.7401 www.lighthouselawgroup com