ASSET PURCHASE AGREEMENT
AS OF JUNE 24, 1998
BY AND BETWEEN
STATE CABLE TV CORPORATION,
BETTER CABLE TV COMPANY
AND
FRONTIERVISION OPERATING PARTNERS, L.P.
TABLE OF CONTENTS
PAGE
Section 1. Definitions.....................................................................................1
1.01 Certain Definitions ..........................................................................1
1.02 Other Definitional Provisions...................................................................9
Section 2. Purchase and Sale...............................................................................9
2.01 Transfer of Assets..............................................................................9
2.02 Purchase Price..................................................................................9
2.03 Adjustments and Prorations.....................................................................10
2.04 Estimated Adjustments..........................................................................10
2.05 Post-Closing Adjustment........................................................................11
2.06 Assumption of Liabilities......................................................................12
2.07 Sales and Transfer Taxes.......................................................................12
2.08 Allocation of Purchase Price...................................................................12
Section 3. Representations and Warranties of Sellers......................................................12
3.01 Organization and Authority of Sellers..........................................................12
3.02 Legal Capacity: Approvals and CATV Consents...................................................13
3.03 Financial Statements...........................................................................13
3.04 Changes in Operation...........................................................................14
3.05 Tax Returns....................................................................................14
3.06 Acquired Assets................................................................................14
3.07 The CATV Business..............................................................................15
3.08 Employee Benefit Plans.........................................................................19
3.09 Legal and Governmental Proceedings and Judgments...............................................21
3.10 Finders and Brokers............................................................................21
3.11 Environmental Matters..........................................................................21
3.12 Bonds, Insurance and Letters of Credit.........................................................22
3.13 Labor Contracts and Actions....................................................................22
3.14 Transactions with Affiliates...................................................................23
Section 4. Representations and Warranties of Buyer........................................................23
4.01 Organization and Authority of Buyer............................................................23
4.02 Legal Capacity; Approvals and Consents.........................................................23
4.03 Legal and Governmental Proceedings and Judgments...............................................23
4.04 Finders and Brokers............................................................................24
4.05 Acquisition of Rights..........................................................................24
Section 5. Covenants Pending Closing......................................................................24
5.01 Business of Sellers............................................................................24
5.02 Access to Information..........................................................................27
5.03 Notice of Subsequent Events....................................................................27
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5.04 Delivery of Financial Information..............................................................27
5.05 Additional Financial Information...............................................................27
5.06 Rate Forms.....................................................................................28
Section 6. Deliveries at Closing..........................................................................29
6.01 Deliveries by Sellers..........................................................................29
6.02 Deliveries by Buyer............................................................................30
Section 7. Conditions to the Obligations of Buyer.........................................................30
7.01 Receipt of Consents............................................................................30
7.02 Sellers' Authority.............................................................................31
7.03 Performance by Sellers.........................................................................31
7.04 Absence of Breach of Warranties and Representations............................................31
7.05 Absence of Proceedings.........................................................................31
7.06 No Encumbrances................................................................................31
7.07 Risk of Loss...................................................................................31
7.08 Environmental Report...........................................................................32
7.09 Title Commitment...............................................................................32
7.10 Termination and Releases.......................................................................33
Section 8. Conditions to the Obligations of Sellers.......................................................33
8.01 Receipt of Consents............................................................................33
8.02 Buyer's Authority..............................................................................33
8.03 Performance by Buyer...........................................................................33
8.04 Absence of Breach of Representations and Warranties............................................33
8.05 Absence of Proceedings.........................................................................33
Section 9. Mutual Covenants...............................................................................34
9.01 Compliance with Conditions.....................................................................34
9.02 Compliance with HSR Act and Rules..............................................................34
9.03 Applications for Assignment of Contracts
or CATV Instruments and CATV Franchises........................................................34
9.04 Records, Taxes and Related Matters.............................................................35
9.05 Absence of Consents............................................................................35
9.06 Retained Franchises............................................................................36
9.07 Noncompetition.................................................................................39
Section 10. Survival of Representations, Warranties, Covenants
and Other Agreements; Indemnification..........................................................40
10.01 Survival of Representations and Warranties.....................................................40
10.02 Indemnification by Sellers.....................................................................40
10.03 Indemnification by Buyer.......................................................................41
10.04 Limitations on Indemnity.......................................................................41
10.05 Third Party Claims.............................................................................41
10.06 Interest.......................................................................................41
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Section 11. Further Assurances.............................................................................42
Section 12. Closing; Termination...........................................................................42
12.01 Closing........................................................................................42
12.02 Termination....................................................................................42
12.03 Notice of Termination; Rights and Obligations of Parties.......................................43
12.04 Remedies Upon Default..........................................................................43
Section 13. Miscellaneous..................................................................................43
13.01 Amendments; Waivers............................................................................43
13.02 Entire Agreement...............................................................................43
13.03 Binding Effect; Assignment.....................................................................44
13.04 Construction; Counterparts.....................................................................44
13.05 Notices........................................................................................44
13.06 Expenses of the Parties........................................................................45
13.07 Third Party Beneficiary........................................................................45
13.08 Governing Law..................................................................................45
13.09 Press Releases.................................................................................45
13.10 Severability...................................................................................45
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Exhibits and Schedules
EXHIBIT A - Form of Assumption Agreement
EXHIBIT B - Form of Escrow Agreement
EXHIBIT C - Form of ▇▇▇▇ of Sale and General Assignment
Schedule 1.01(c) - Excluded Assets
Schedule 1.01(d) - Excluded Liabilities/Contracts
Schedule 3.02 - Sellers' Consents and Approvals
Schedule 3.04 - Changes in Operation
Schedule 3.05 - Tax Notices and Assessments
Schedule 3.06(a) Encumbrances
Schedule 3.06(b) - Real Property
Schedule 3.06(d) - Equipment
Schedule 3.07(a) - System Bandwidth Capacity
Schedule 3.07(b) - Monthly Rates charged to Customers
Schedule 3.07(c) - Stations and Services
Schedule 3.07(d) - Operations in Ordinary Course
Schedule 3.07(e) - Material Contracts; CATV Instruments
Schedule 3.07(f) - CATV Franchises
Schedule 3.07(g) - CATV Towers
Schedule 3.07(h) - CATV Business Compliance Exceptions
Schedule 3.07(i) - Intangible Property
Schedule 3.07(j) Retransmission Agreements
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Schedule 3.08 - Employee Benefit Plans
Schedule 3.09 - Legal Proceedings
Schedule 3.11 - Environmental Matters
Schedule 3.12 - Bonds, Insurance and Letters of Credit
Schedule 3.14 Transactions with Affiliates
Schedule 4.02 - Buyer's Consents and Approvals
Schedule 5.01(e) - CATV Franchises That Sellers May Elect Not to
Renew
Schedule 5.01(l) System Upgrade
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ASSET PURCHASE AGREEMENT
This Asset Purchase Agreement is made and entered into as of June 24,
1998, by and between State Cable TV Corporation, a Delaware corporation ("State
Cable"), Better Cable TV Company, a Maine general partnership ("Better Cable")
(State Cable and Better Cable are collectively referred to as "Sellers"), and
FrontierVision Operating Partners, L.P., a Delaware limited partnership
("Buyer").
RECITALS
A. Sellers own and operate the CATV Business in the Franchise Areas
described in Schedule 3.07(f).
▇. ▇▇▇▇▇▇▇ desire to sell to Buyer, and Buyer desires to purchase from
Sellers, the CATV Business and the assets used or held for the operation thereof
in accordance with the terms and conditions contained herein.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants contained herein, the parties agree as follows, each intending to be
legally bound as and to the extent herein provided.
1. Definitions.
1.01 Certain Definitions. For the purposes of this Agreement, the
following terms shall have the meanings set forth below:
Access Agreements: The pole attachment agreements and other contracts
with utilities, easements, public and private rights of way, permits for
crossing over or under highways, railroads or other property, and similar grants
of authority, other than the CATV Franchises, all material items of which are
listed in Schedule 3.07(e).
Acquired Assets: All of the properties, assets, privileges, rights,
interests, claims, prepaid expenses, subscriber accounts receivable, deposits,
prepaid taxes and other Current Assets and goodwill, real and personal, tangible
and intangible, of every type and description, including Sellers' leasehold
interests or rights to possession, whether owned or leased or otherwise
possessed, primarily used by Sellers in connection with the CATV Business, now
in existence or hereafter acquired by Sellers prior to the Closing, including,
without limitation, the CATV Instruments, the CATV Franchises, the Equipment,
the Real Property, the Contracts, the Inventory and the Intangible Property;
provided that Acquired Assets shall exclude the Excluded Assets and any
immaterial assets disposed of prior to the Closing in the usual and ordinary
course of business and not in violation of this Agreement.
Additional Financial Statement: As defined in Section 5.05(a).
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Agreement: This Agreement and the Schedules and Exhibits attached
hereto.
Allocation: As defined in Section 2.08.
Asserted Claim: As defined in Section 10.05.
Assumed Liabilities: All liabilities, obligations and commitments of
Sellers (a) under the CATV Instruments, the CATV Franchises, the Equipment, the
Real Property, the Contracts, the Inventory, the Intangible Property and any
other Acquired Assets, in each case to the extent (and only to the extent)
attributable to periods after the Closing Date, (b) all other liabilities,
obligations and commitments arising out of Buyer's ownership of the Acquired
Assets or operation of the CATV Business attributable to periods after the
Closing Date and (c) to the extent (and only to the extent) constituting Current
Liabilities that are included in the Final Closing Adjustment Statement.
Average Eight Month EBUs: As defined in Section 2.03.
Balance Sheet: As defined in Section 3.03.
Base Price: As defined in Section 2.02.
Benefit Plans: As defined in Section 3.08.
Business Day: Means any day other than a Saturday, Sunday or a legal
holiday in Maine, New York or Colorado or any other day on which commercial
banks in any such States are authorized by law or government decree to close.
Buyer: As defined in the preamble to this Agreement.
Buyer Indemnified Party: As defined in Section 10.03.
Buyer Required Consents: As defined in Section 4.02(a).
Buyer's Counsel: ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇, LLP.
Buyer's Objection: As defined in Section 2.05(c).
CATV: Cable television which term also includes satellite master
antenna television.
CATV Business: The CATV business to be transferred to Buyer, presently
owned and operated by Sellers, which consists of the transmission, distribution
and local origination of audio and video signals over the system used by the
CATV Business located in the Franchise Areas.
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CATV Franchises: The franchises and licenses and similar grants of
governmental authority issued by any Governmental Authority used in the CATV
Business as presently conducted by Sellers, all of which are listed in Schedule
3.07(f).
CATV Instruments: All franchises, ordinances or licenses (other than
the CATV Franchises) granted to either Seller by any Governmental Authority,
including the FCC and the FAA; all Access Agreements; construction permits and
certificates of occupancy; business radio, Earth station and other FCC licenses;
copyright licenses and registrations, community antenna relay services; federal,
state, county and municipal permits, orders, variances, exemptions, approvals,
consents, licenses and other authorizations, agreements for the purchase, sale,
receipt or distribution of news, data and microwave relay signals, or for
satellite services; and all other approvals, consents and authorizations used or
held for use in the CATV Business. All material CATV Instruments are listed on
Schedule 3.07(e).
CATV System: A CATV reception and distribution system consisting of
trunk cable, subscriber drops and associated electronic equipment serving one or
more Franchise Areas from a common headend.
Closing Date; Date of Closing: The date fixed for the Closing in
accordance with Section 12.01.
Code: The Internal Revenue Code of 1986, as amended.
Communications Act: As defined in Section 3.07(h).
Community Service Area: That portion of the CATV Business serving an
individual Franchise Area pursuant to a CATV Franchise.
Contract: Any contract, mortgage, deed of trust, bond, indenture,
lease, license, note, certificate, option, warrant, right, or other instrument,
document or written agreement relating to the CATV Business to which the either
Seller is a party or by which either Seller or the assets of the Sellers
included within the CATV Business are bound, excluding any CATV Instrument and
any CATV Franchise. All material Contracts are listed on Schedule 3.07(e).
Copyright Act: As defined in Section 3.07(h).
CPA Firm: As defined in Section 2.05(c).
CPS: As defined in Section 3.07(g)(iv).
Current Assets: Means (i) one hundred percent (100%) of subscriber
accounts receivable that are less than or equal to thirty (30) days past due,
(ii) ninety-five percent (95%) of subscriber
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accounts receivable that are over thirty (30) days past due but less than or
equal to sixty (60) days past due, (iii) zero percent (0%) of all other
subscriber accounts receivable, (iv) one hundred percent (100%) of advertising
accounts receivable that are less than or equal to sixty (60) days past due, (v)
ninety-five percent (95%) of advertising accounts receivable that are over sixty
(60) days past due but less than or equal to ninety (90) days past due, and (vi)
zero percent (0%) of all other advertising accounts receivable, in each such
case under clauses (i) through (vi) above, measured from the first day of the
service period for which such account receivable relates, plus all deposits, the
pro rata portion of any prepaid sales or use taxes, all prepaid expenses,
including in respect of pole rental or equipment maintenance agreements that are
Assumed Liabilities, and in respect of rent, postage, security service or
two-way radio, in each case under this definition as determined in accordance
with GAAP (unless otherwise specified herein).
Current Liabilities: Means accounts payable, accrued expenses, and
other current liabilities determined in accordance with GAAP.
Current Rates. As defined in Section 3.07(b).
Deposit Escrow Amount: As defined in Section 2.02(a).
DOJ: The United States Department of Justice.
Escrow Agreement: As defined in Section 2.02(a).
Earth Station: A satellite earth receiving station consisting of one or
more "dish" antennas, usually operated in conjunction with a building which
houses electronic signal processing and amplification equipment, all of which is
also referred to as a "head end".
EBU: Means an active customer for basic cable service either in a
single household, in a multi-unit dwelling or in a commercial or institutional
establishment (including a hotel unit); provided, however, that the number of
customers in a multi-unit dwelling or in a commercial or institutional
establishment that obtains service on a bulk rate, commercial accounts or
similar basis, shall be determined by dividing the gross bulk rate or similar
revenue for recurring non-pay services attributable to such multi-unit dwellings
or commercial or institutional establishments by the comparable subscription
rate for individual households receiving the same level of service from the same
CATV System that serves such multi-unit dwelling or commercial or institutional
establishment. For purposes of this definition, an "active customer" shall mean
any person at any given time that is paying for and receiving any level of cable
television service from the Systems and who has an account that is not more than
45 days past due except for amounts that are past due pending resolution of a
bona fide dispute or past due amounts of $5 or less, provided such account is
otherwise current. Any person at any given time that is paying for and receiving
any level of cable television service who has an account balance that is more
than 45 days but less than or equal to 60 days past due, except for amounts that
are past due pending resolution of a bona fide dispute or past due amounts of $5
or less, provided such account is otherwise current, shall be counted as 70% of
an "active customer" for purposes of this
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definition. For purposes of this definition, the past due period for any
customer account shall be counted from the first day of the service period for
which the statement was rendered.
Employees: Means all current or former employees of Sellers.
Encumbrances: Means liens, charges, encumbrances, security interests,
options, restrictions or any other claims or third party rights.
Enforceability Exception: As defined in Section 3.02(a).
Environmental Law: Means all applicable laws, statutes, regulations,
rules, ordinances, codes, licenses, permits and orders, of all governmental
agencies, departments, commissions, boards, bureaus or instrumentalities of the
United States and political subdivisions thereof and all applicable judicial,
administrative and regulatory decrees, judgments and orders relating to and
governing the protection of human health and the environment (including air,
water, soil and natural resources) or the use, storage, handling, release or
disposal of any hazardous or toxic substance.
Environmental Notice: As defined in Section 3.11(b).
Environmental Report: As defined in Section 7.08.
Equipment: All tangible personal property; electronic devices; towers;
trunk and distribution cable; decoders and spare decoders for scrambled
satellite signals; amplifiers; power supplies; conduit; vaults and pedestals;
grounding and pole hardware; installed subscriber's devices (including, without
limitation, drop lines, converters and other signal control devices, encoders,
transformers behind television sets and fittings); "head-ends" and "Hubs"
(origination, testing, receiving, transmission and related equipment and
distribution system) hardware; tools; inventory; spare parts; maps and
engineering data; vehicles; supplies, tests and closed circuit devices;
furniture and furnishings; and all other tangible personal property and
facilities owned or leased by Sellers and used in the CATV Business, a balance
sheet category summary of which is set forth on Schedule 3.06(d).
ERISA: The Employee Retirement Income Security Act of 1974, as the same
has been and may be amended from time to time.
ERISA Affiliate: As defined in Section 3.08(c).
Escrow Agent: As defined in Section 2.02(a).
Escrow Agreement: As defined in Section 2.02(a).
Estimated Current Items Closing Adjustment Amount: Means (i) if Current
Liabilities exceed Current Assets as reflected on the Estimated Closing
Adjustment Statement, such excess,
5
expressed as a negative number, or (ii) if Current Assets exceed Current
Liabilities as reflected on the Estimated Closing Adjustment Statement, such
excess, expressed as a positive number.
Estimated Closing Adjustment Statement: As defined in Section 2.04.
Excluded Assets: The assets and properties of Sellers listed on
Schedule 1.01(c).
Excluded Liabilities: Liabilities, obligations and commitments of
Sellers identified on Schedule 1.01(d).
FAA: The Federal Aviation Administration.
FCC: The Federal Communications Commission.
Final Current Items Closing Adjustment Amount: Means (i) if Current
Liabilities exceed Current Assets as reflected on the Final Closing Adjustment
Statement, such excess, expressed as a negative number, or (ii) if Current
Assets exceed Current Liabilities as reflected on the Final Closing Adjustment
Statement, such excess, expressed as a positive number.
Final Closing Adjustment Statement: As defined in Section 2.05(c).
Financial Statements: As defined in Section 3.03.
Franchise Area: As defined in Section 9.06(g)(i).
FTC: The Federal Trade Commission.
Full Per Subscriber Amount: As defined in Section 9.06(b)(iii).
GAAP: Means U.S. generally accepted accounting principles.
Governmental Authority: The Federal Government, any state, county,
municipal, local or foreign government and any governmental agency, bureau,
commission, authority or body.
Hazardous Substance: Means any substance listed, defined, designated or
classified as hazardous, toxic or radioactive under any applicable Environmental
Law, including petroleum products and any other substance, pollutant contaminant
chemical or industrial toxic or waste, including without limitation hazardous
materials within the meaning of any other applicable federal law, regulation,
ordinance or requirement relating to or imposing liability of standards of
conduct concerning any hazardous, toxic or dangerous waste substance or
material.
HSR Act and Rules: The ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act of
1976 and the rules and regulations promulgated thereunder, as from time to time
in effect prior to the Closing.
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HSR Report: The Notification and Report Form for certain mergers and
acquisitions mandated by the HSR Act and Rules.
Income Statement: As defined in Section 3.03.
Indemnitee: As defined in Section 10.05.
Indemnitor: As defined in Section 10.05.
Indemnity Escrow Amount: As defined in Section 2.02(b).
Intangible Property: The copyrights, patents, trademarks, service marks
and trade names used in the CATV Business and all applications for, or licenses
or other rights to use any thereof, and the value associated therewith, which
are owned by either Seller and used in the CATV Business, the material items of
which are listed on Schedule 3.07(i).
Interim Financial Statements: As defined in Section 3.03.
Interim Period: As defined in Section 9.05.
Inventory: Means all inventory as defined under GAAP, plus, without
limitation, all supplies, all maintenance equipment, all converters, all cables
and all amplifiers owned by either Seller and used in the CATV Business.
Judgment: Any judgment, writ, order, injunction, award or decree of or
by any court, or judge, justice or magistrate, including any bankruptcy court or
judge, and any order of or by any Governmental Authority.
Law: The common law and any statute, ordinance, code or other law,
rule, regulation, order, technical or other standard, requirement or procedure
enacted, adopted, promulgated, applied or followed by any Governmental Authority
or court.
Losses: As defined in Section 10.02(a).
Management Agreement: As defined in Section 9.06(b)(iv).
Material or material: Without in any way limiting the ordinary meaning
of the word "material", for purposes of this Agreement (unless the context
requires otherwise), an event, circumstance or state of facts shall in any event
be deemed to be "material" if such event, circumstance or state of facts
individually or in the aggregate could be reasonably expected to (i) result in
an expense or liability as determined in accordance with GAAP in excess of
$100,000 in the aggregate or (ii) involve something that Buyer, Sellers or a
prudent holder or prospective purchaser of any CATV System would reasonably
consider material to itself or to such CATV System.
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Material Adverse Effect: Means, with respect to any event, circumstance
or state of facts, an event, circumstance or state of facts which, individually
or in the aggregate, could be reasonably expected to (i) result in an expense or
liability as determined in accordance with GAAP in excess of $500,000 or (ii)
otherwise have a material adverse effect upon any System, the CATV Business,
Buyer or the transactions contemplated in this Agreement.
1997 Financial Statements: As defined in Section 3.03.
1998 Budget: As defined in Section 5.01(f).
Organizational Documents: As defined in Section 3.02(b).
Permitted Encumbrances: Means all Encumbrances (other than Encumbrances
relating to the payment of money), if any, which do not materially detract from
the value of the property subject thereto and which do not materially interfere
with the present and continued use of such property in the operation of the CATV
Business.
Person: Any natural person, corporation, general or limited partner,
partnership, joint venture, trust, association or unincorporated entity of any
kind.
Proceedings: As defined in Section 3.09.
Preliminary Closing Adjustment Statement: As defined in Section
2.05(a).
Purchase Price: As defined in Section 2.02.
Real Property: All realty, fixtures, leasehold and other fee or
leasehold interests in real property, buildings and improvements used in the
CATV Business or which relate to the operation of the CATV Systems, all of which
are listed on Schedule 3.06(b).
Retained Assets: As defined in Section 9.06(a).
Retained Franchise Escrow Account: As defined in Section 9.06(b)(iii).
Retained Franchise Escrow Agent: As defined in Section 9.06(b)(iii).
Retained Franchise Escrow Agreement: As defined in Section
9.06(b)(iii).
Retained Franchise Escrow Amount: As defined in Section 9.06(b)(iii).
Retained Franchises: As defined in Section 9.06.
SEC: As defined in Section 5.05(a)(i).
Sellers: As defined in the Preamble to this Agreement.
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Seller Indemnified Party: As defined in Section 10.02.
Sellers' Counsel: ▇▇▇▇▇▇▇▇▇▇ and ▇▇▇▇▇, L.L.P.
Sellers' Local Counsel: Preti, Flaherty, ▇▇▇▇▇▇▇▇ & Pachios.
Sellers' Knowledge: The actual knowledge of one or more of ▇▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇. ▇▇▇▇▇ and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇.
Seller Required Consents: As defined in Section 7.01.
Subscription Contracts: All Contracts with subscribers to the CATV
Business and all Contracts for bulk sales of CATV programming.
System: A CATV System.
Tax Returns: As defined in Section 3.05.
Transferable Subscriber Percentage: As defined in Section 9.06(b)(iii).
Transferable Franchise Area: As defined in Section 9.06(g)(ii).
1.02 Other Definitional Provisions. Terms defined in the singular shall
have a comparable meaning when used in plural, and vice versa.
2. Purchase and Sale.
2.01 Transfer of Assets. At the Closing, upon the terms and conditions
set forth in this Agreement, Sellers shall sell, convey, transfer, assign and
deliver to Buyer, and Buyer shall purchase, accept and receive, all of Sellers'
right, title and interest in and to the Acquired Assets free and clear of any
Encumbrances other than permitted Encumbrances, such transaction to be effective
as of 12:01 a.m. on the Closing Date.
2.02 Purchase Price.
The purchase price for the Acquired Assets shall be $188,750,000 (the
"Base Price"), subject to the adjustments described in Section 2.03 below (as
adjusted, the "Purchase Price"). The Purchase Price shall be paid as follows:
(a) as security for Buyer's performance of its obligations hereunder,
Buyer shall, not later than 2:00 p.m. Eastern Daylight Savings Time on June 25,
1998, deliver to Colorado National Bank, as escrow agent (the "Escrow Agent"),
by wire transfer of immediately available funds, an amount equal to $9,500,000
(together with the interest earned thereon, the "Deposit Escrow Amount"), which
sum shall be held and disbursed by the Escrow Agent pursuant to an
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Escrow Agreement of even date herewith among the Buyer, Sellers and the Escrow
Agent (the "Escrow Agreement") in the form of Exhibit B.
(b) at the Closing, the Escrow Agent shall deliver to Buyer by wire
transfer of immediately available funds all of the interest accrued on the
Deposit Escrow Amount, and the Deposit Escrow Amount shall be applied as a
credit against the Purchase Price and retained in escrow by the Escrow Agent as
security for Sellers' obligations to Buyer following the Closing (such amount,
together with all earnings thereon, is referred to herein as the "Indemnity
Escrow Amount"); and (ii) the Buyer shall deliver to Sellers by wire transfer of
immediately available funds pursuant to wiring instructions delivered by Sellers
in writing at least two days prior to the Closing Date, the Purchase Price, less
the Indemnity Escrow Amount. Six months following the Closing $4,750,000 of the
Indemnity Escrow Amount, less the amount of any then asserted indemnification
claims shall be released from escrow and delivered to Sellers. Twelve (12)
months following the Closing, the balance of the Indemnity Escrow Amount,
together with interest thereon, less the amount of any then asserted
indemnification claims shall be released from escrow and paid to Sellers.
2.03 Adjustments and Prorations.
The Base Price shall be adjusted as follows:
(a) by decreasing the Base Price by an amount equal to $2,533
multiplied by the amount by which the Average Eight Month EBUs is less than
75,000; and
(b) by increasing the Base Price, if a positive number, or decreasing
the Base Price, if a negative number, by the Estimated Current Items Closing
Adjustment Amount as provided in Section 2.04.
As used herein, "Average Eight Month EBUs" shall mean the sum of EBUs
as of each of the eight monthly billing cutoff dates immediately preceding the
Closing Date (which cutoff dates shall be established consistent with Sellers'
past practices) divided by eight (8).
2.04 Estimated Adjustments.
Sellers shall prepare and submit to the Buyer, not later than five (5)
days prior to the Closing, a written good faith estimate of (i) the Current
Assets, Current Liabilities and the Average Eight Month EBUs of the CATV
Business as of the Closing Date and (ii) the amount of the adjustments to the
Purchase Price in accordance with Section 2.03 (the "Estimated Closing
Adjustment Statement"). The Estimated Closing Adjustment Statement shall be
based upon the books and records of the Systems, including the accounts
receivable (including the aging reports) as shown on the latest records of
Sellers kept in the ordinary course of business. The Estimated Closing
Adjustment Statement submitted to the Buyer shall be accompanied by (a) a
statement setting forth in reasonable detail the calculation of the Estimated
Closing Adjustment Statement, the Current Assets and Current Liabilities of the
CATV Business as of the Closing Date and the Average Eight Month EBUs as of the
Closing Date, including appropriate back-up
10
documentation related thereto and in support thereof and (b) a certificate
signed by a senior officer of the Sellers certifying that the Estimated Closing
Adjustment Statement was calculated in good faith in accordance with the
provisions of Section 2.03. The Sellers shall also deliver to the Buyer such
other information as may be reasonably requested by the Buyer to verify the
amounts and calculations set forth in the Estimated Closing Adjustment
Statement.
2.05 Post-Closing Adjustment.
(a) Within ninety (90) days after the Closing Date, Sellers shall
prepare, or cause to be prepared, and deliver to Buyer a calculation as of the
Closing Date, which statement shall be prepared in accordance with GAAP,
consistently applied by Sellers, except as otherwise required by this Agreement,
and shall set forth the Current Assets and Current Liabilities of Sellers as of
the Closing Date and the Average Eight Month EBUs as of the Closing Date (the
"Preliminary Closing Adjustment Statement"), together with a copy of any working
papers relating to such Preliminary Closing Adjustment Statement and such other
supporting evidence as Buyer may reasonably request either prior to or after the
delivery thereof. Buyer shall cooperate in providing to Sellers all relevant
books, records and personnel of the CATV Business in order to facilitate the
preparation of the Preliminary Closing Adjustment Statement and shall have the
right to examine all records used to prepare the Preliminary Closing Adjustment
Statement.
(b) In the event that Sellers fail to deliver to Buyer the Preliminary
Closing Adjustment Statement within such 90-day period, then Buyer shall be
entitled to deliver to Sellers the Preliminary Closing Adjustment Statement, in
which case the provisions of this Section 2.05 relating to the parties' roles in
the preparation and review process shall be deemed reversed.
(c) In the event Buyer determines that the Preliminary Closing
Adjustment Statement does not accurately reflect the final calculation of the
Purchase Price or the adjustments and prorations to be made to the Base Price in
accordance with this Agreement, Buyer shall, within forty-five (45) days after
receipt of the Preliminary Closing Adjustment Statement, so inform Sellers in
writing (the "Buyer's Objection"), setting forth the basis of the Buyer's
Objection. In the event of the Buyer's Objection, Buyer and Sellers shall
attempt to resolve the differences underlying the Buyer's Objection within
thirty (30) days of Sellers' receipt thereof. If Sellers and Buyer are unable to
resolve all their differences within such thirty (30) day period, they shall
refer their remaining differences to Ernst & Young, certified public
accountants, or such other nationally recognized firm of independent public
accountants as to which Buyer and Sellers may mutually agree (the "CPA Firm"),
who shall, acting as experts and not as arbitrators, determine on the basis of
the standard set forth in Section 2.04(a) hereof and only with respect to the
remaining differences so submitted, whether and to what extent, if any, the
Preliminary Closing Adjustment Statement requires adjustment. The CPA Firm will
base its determination only on evidence brought to it by the parties and shall
not conduct an audit, but may conduct such testing procedures as it determines
are appropriate to make such determination on the evidence brought to it. The
CPA Firm shall deliver its written determination to Buyer and Sellers no later
than 60 days after the remaining differences underlying the Buyer's Objection
are referred to the CPA Firm. The CPA Firm's determination shall be conclusive
and binding upon the parties. The fees
11
and disbursements of the CPA Firm shall be allocated between Buyer and Sellers
in the same proportion that the aggregate amount of any disputed items submitted
to the CPA Firm that are unsuccessfully disputed by each (as finally determined
by the CPA Firm) bears to the total amount of any disputed items so submitted.
Buyer and Sellers shall make readily available to the CPA Firm all relevant
books and records and any work papers relating to the Preliminary Closing
Adjustment statement and all other items reasonably requested by the CPA Firm.
The "Final Closing Adjustment Statement" shall be (i) the Preliminary Closing
Adjustment Statement in the event that (x) the Buyer's Objection is not
delivered to Sellers in the period set forth in this Section 2.04(c), or (y)
Sellers and Buyer so agree; or (ii) the Preliminary Closing Adjustment
Statement, as adjusted by either (x) the agreement of Sellers and Buyer or (y)
the CPA Firm.
(d) On the fifth (5th) Business Day following the date that any
particular adjustments pursuant to this Section 2.05 are no longer subject to
dispute, the undisputed amounts shall be paid to the party in whose favor such
amounts apply by the other party. Buyer shall have the right, but not the
obligation, to allow Sellers to make payments of adjustments to the Base Price
from the amount held in escrow by the Escrow Agent.
(e) Any amount payable pursuant to Section 2.05(d) hereof shall be paid
by wire transfer of immediately available funds to a bank account designated by
Buyer or Sellers, as the case may be. Any amount not paid when due as provided
in Section 2.05(d) shall bear interest from the Closing Date until paid in full
at a rate of 15% per annum, compounded annually.
2.06 Assumptions of Liabilities. At the Closing Date, Buyer shall
assume the Assumed Liabilities in accordance with the Assumption Agreement
attached hereto as Exhibit A.
2.07 Sales and Transfer Taxes. All sales and use taxes and transfer
taxes, if any, arising from the transfer of the Acquired Assets shall be shared
equally by Buyer and Sellers.
2.08 Allocation of Purchase Price. Prior to the Closing Date, Buyer and
Sellers shall each use their reasonable efforts to agree upon the allocation
(the "Allocation") of the Purchase Price and the Assumed Liabilities to the
individual assets or classes of assets (within the meaning of Section 1060 of
the Code), provided that no more than 10% shall be allocated to tangible assets
other than land. Buyer, Sellers and their respective affiliates shall file all
tax returns and schedules thereto, including, without limitation, those returns
and forms required by Section 1060 of the Code, consistent with the Allocation
unless otherwise required by applicable Law.
3. Representations and Warranties of Sellers.
To induce Buyer to enter into this Agreement, Sellers hereby jointly
and severally represent and warrant to Buyer as follows:
3.01 Organization and Authority of Sellers. State Cable is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware and is qualified to transact business in the States of
Maine and New Hampshire and in each other
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jurisdiction in which the property owned, leased or operated by it requires it
to be so qualified. Better Cable is a general partnership duly organized and
validly existing under the laws of the State of Maine. Each Seller has the
requisite power and authority (i) to own, lease and use the Acquired Assets as
presently owned, leased and used by it, and (ii) to conduct the business and
operations of the CATV Business as presently conducted by such Seller.
3.02 Legal Capacity; Approvals and CATV Consents.
(a) Authority and Binding Effect. Subject to Section 9.02 hereof and
the consents and approvals set forth on Schedule 3.02, each Seller has all
requisite power and authority to execute and deliver this Agreement and to
perform its respective obligations hereunder. All corporate or partnership
action, as the case may be, by each Seller necessary for the authorization,
execution, delivery and performance by such Seller of this Agreement has been
taken and such action has not been rescinded, repealed or amended in any manner.
This Agreement has been duly executed and delivered by each Seller and is the
valid and binding obligation of each Seller enforceable against it in accordance
with its terms, except as such enforceability may be affected by the laws of
bankruptcy, insolvency, reorganization and creditors' rights generally and by
the availability of equitable remedies (the "Enforceability Exception").
(b) No Breach. Subject only to Section 9.02 and to obtaining the
consents and approvals set forth on Schedule 3.02, the execution, delivery and
performance of this Agreement does not, and will not, contravene the certificate
of incorporation, by-laws or partnership agreement, as the case may be, (such
documents and similar constituent documents, "Organizational Documents") of
either Seller, and does not, and will not: (i) conflict with or result in a
breach or violation by either Seller of, or (ii) constitute a default by either
Seller under, or (iii) result in the termination, suspension, modification or
impairment of any CATV Instrument, Law, Judgment, or Contract to be assumed by
Buyer thereunder to which either Seller is a party or by which either Seller,
the CATV Business or any of the Acquired Assets is subject or bound or may be
affected; or (iv) create or impose any Encumbrance upon any of the Acquired
Assets.
(c) Required Consents. Except for the parties listed in Schedule 3.02
and in Section 9.02, there are no parties whose approval or consent, or with
whom the filing of any certificate, notice, application, report or other
document, is legally or contractually required or otherwise is necessary in
connection with the execution, delivery or performance of this Agreement by
Sellers.
3.03 Financial Statements. Sellers have delivered to Buyer true and
complete copies of the consolidated balance sheet of Sellers as at December 31,
1997 (the "Balance Sheet") and December 31, 1996, and related statements of
income and changes in financial position of Sellers for the years ending
December 31, 1997 (the "Income Statement") and 1996 (collectively, the
"Financial Statements"). The Balance Sheet and Income Statement for the year
1997 (collectively, the "1997 Financial Statements") were prepared in accordance
with GAAP and present fairly the financial position of Sellers as of those dates
and the results of their operations
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for the periods then ended. Sellers have also provided to Buyer consolidated
income statements for the respective quarterly and monthly periods ended March
31, 1998 and April 30, 1998. At the date of the Balance Sheet, no Seller had any
material liabilities required by GAAP to be reflected or reserved against
therein that were not fully reflected or reserved against on the Balance Sheet.
3.04 Changes in Operation. Except as set forth in Schedule 3.04, as of
the date hereof, since the date of the Balance Sheet, there has not been any
adverse event or circumstance which, individually or in the aggregate, has had
or could be reasonably expected to be material to Seller or any System other
than those events or circumstances which may affect the cable television
industry generally or in the States of Maine or New Hampshire particularly.
3.05 Tax Returns. Each Seller has duly filed all material federal,
state, local and foreign income, information, franchise, sales, use, property,
excise and payroll and other tax returns or reports (herein "Tax Returns")
required to be filed by such Seller on or prior to the date hereof. All taxes,
fees and assessments that are shown on such Tax Returns as due or payable by
such Seller on or before the date hereof and that might result in an Encumbrance
upon any of the Acquired Assets have been duly paid. Except as set forth in
Schedule 3.05, no Seller has received any notice or assessment to the effect
that there is any unpaid tax, interest, penalty or addition to tax due or
claimed to be due from such Seller in respect of such Tax Returns; no Seller has
received any notice of the assertion or threatened assertion of any Encumbrances
with respect to any Acquired Assets on account of any unpaid taxes; and no
audits of such Tax Returns by any Governmental Authority are pending or, to
Sellers' Knowledge, threatened. To Sellers' Knowledge, except as set forth on
Schedule 3.05, no event has occurred that could impose on Buyer any transferee
liability for any taxes, penalties or interest due or to become due from
Sellers.
3.06 Acquired Assets.
(a) Title; Encumbrances. Sellers hold good title to all the Acquired
Assets, including: (i) good title to all of the Equipment and good and
marketable title to all Real Property owned in fee, and (ii) the right and
authority (subject to the required consents specified herein) to transfer to
Buyer all of such Seller's right, title and interest in and to the other
property or rights included in the Acquired Assets, in each instance free and
clear of any Encumbrances except Permitted Encumbrances, and those Encumbrances
to be discharged at or prior to the Closing and set forth on Schedule 3.06(a).
(b) Real Property. Schedule 3.06(b) sets forth a list of all Real
Property interests of the Sellers in connection with the operation of the CATV
Business as presently conducted, including, without limitation, all fee
interests owned by Sellers and all leases and other real property interests to
which either Seller is a party as of the date hereof. Each Seller has provided
Buyer with true and complete copies of all documents and agreements relating to
such Real Property. Except as set forth in Schedule 3.06(b), each Seller has
good and marketable title to such interests in Real Property and has quiet
enjoyment under all leasehold interests, in all cases free of all Encumbrances
except Permitted Encumbrances, and those Encumbrances to be
14
discharged at or prior to the Closing and set forth on Schedule 3.06(a). No
condemnation proceedings are pending or, to Sellers' Knowledge, threatened with
respect to any of the Real Property, nor has any such property been condemned.
None of the Real Property owned, leased or operated by any Seller, or the
ownership, occupancy or operation thereof, is in violation in any material
respect of any deed, lease, easement, agreement or of any law or any building,
zoning or other ordinance, code, rule, regulation or requirement, and no notice
from any governmental body or other Person has been served upon such Seller
claiming any material violation of any such law, ordinance, code, rule or
regulation or requiring, or calling attention to the need for, any material
work, repairs, construction, alterations or installation on or in connection
with said property which has not been materially complied with. Each Seller has
and, after Closing, Buyer will have, full legal and practical access to the Real
Property, subject to the terms of the leases, agreements and other instruments
described on Schedule 3.06(b). Except for Permitted Encumbrances, there are no
encroachments upon the Real Property by any buildings, structures, towers or
improvements located on adjoining real estate. None of the buildings,
structures, towers or improvements that are constructed on the Real Property and
used in the present operation of the CATV Systems encroaches upon adjoining real
estate, and all such buildings, structures, towers and improvements are
constructed in conformity in all material respects with all "set back" lines,
easements and other restrictions or rights of record. There are no structural
defects in the headends, towers, buildings, structures and other improvements
located on such Real Property.
(c) Acquired Assets. The Acquired Assets and the Excluded Assets
include all assets used by Sellers to conduct the CATV Business as it is
presently being conducted. The Acquired Assets are in good working order,
ordinary wear and tear excepted. Those Acquired Assets damaged or destroyed by
ice storms and related activity during the winter of 1997-1998 have been
repaired or replaced, as appropriate, in all material respects.
(d) Equipment. Schedule 3.06(d) sets forth a balance sheet category
summary of all Equipment owned or leased by Sellers in connection with the
operation of the CATV Business. Each Seller has good title to all Equipment
owned by such Seller, and as of the Closing Date none of the Equipment will be
subject to any Encumbrances, except Permitted Encumbrances. No material items of
Equipment are the subject of any leases. All of the Equipment, and each Seller's
use of the same, (i) comply in all material respects with all applicable
ordinances and regulations and building and other laws, and (ii) meet the rules
and regulations of the FCC and of the CATV Instruments. All transmitting and
studio equipment for the CATV Systems are operating in accordance with and
within the rules and regulations of the FCC and the CATV Instruments and with
all applicable federal, state and local laws, ordinances, rules and regulations.
3.07 The CATV Business. With respect to the CATV Business, Sellers
hereby jointly and severally make the following warranties and representations:
(a) System Information. As of the date hereof, the Systems pass by not
fewer than 82,800 dwellings (as defined below) utilizing at least 2,660 miles of
active cable plant; and (ii) as of the date hereof, the CATV Business includes
not less than 75,000 EBUs and has the
15
bandwidth capacity set forth on Schedule 3.07(a). As used in this Section
3.07(a) "dwellings" means a home or residential unit that can be legally
serviced by the Systems by using no more than 500 feet of cable drop.
(b) Rates Charged to Customers. As of the date hereof, the rates
charged to customers for each class of service and categories of customers for
the Systems are set forth in Schedule 3.07(b) (the "Current Rates"). Schedule
3.07(b) identifies the recent rate increases previously implemented by Sellers
in certain Franchise Areas between December, 1997 and the date hereof. With
respect to such rate increases, Sellers timely filed all applications, notices
and other required documents with the FCC and any Governmental Authority and the
subscribers within the Franchise Areas affected by such rate increases. The
Current Rates have been reflected in all bills sent to subscribers following the
effective dates of such rate increases. Sellers took all action reasonably
necessary to affect the implementation of such rate increases, including,
without limitation, (1) providing the FCC, any necessary Governmental Authority
and the subscribers within the Franchise Areas affected by such rate increases
with the appropriate required information relative to such rate increases, and
(2) filing with such Persons all necessary forms and documentation related to
the rate increases within the requisite time period prior to each rate increase
becoming effective. The Current Rates described on Schedule 3.07(b) for services
delivered by Sellers with respect to the CATV Business are in compliance with
federal, state and local regulation, and no basis exists for any rollback of
Sellers' rates for basic service, or any rollback refund or forfeiture of
Sellers' rates for any cable programming service tiers, as defined by the FCC
with respect to any of the CATV Systems.
(c) Stations and Services. Schedule 3.07(c) contains a true and
accurate description of the television stations and programming services carried
by the CATV Business and the channel position of each such service and station.
(d) No Change in Operations. Except as set forth on Schedule 3.07(d),
since the date of the Balance Sheet, the CATV Business has been operated in the
ordinary course in all material respects. No material assets of Sellers have
been disposed of since the date of the Balance Sheet except in the ordinary
course of business.
(e) Contracts. Schedule 3.07(e) contains a list of all material
Contracts to which either Seller is a party or by which either Seller is bound.
For purposes hereof, the term "material Contract" means all Contracts except
for: (1) Subscription Contracts with customers for the cable services provided
by the CATV Systems; (2) oral employment agreements terminable by either Seller
at will without premium or penalty or severance obligation; (3) Contracts
terminable by Sellers upon not more than 90 days notice without premium or
penalty; (4) any contracts with a remaining term of 12 months or less as of the
Closing Date, none of which is material to any System or the CATV Business
which, in the aggregate involve payment by Sellers of more than $50,000 per
year, or any material nonmonetary obligations (collectively, "Immaterial
Contracts"); provided, however, that notwithstanding the foregoing, any
Contracts between either Seller and Aurora Telecommunications, LLC or any of its
affiliates or any non-public companies in which any of such entities holds an
ownership interest shall be deemed to be a material Contract for all purposes
hereof. Except for (A) the Contracts listed on Schedule
16
3.07(e) (true and complete copies of which agreements, including, any and all
amendments thereto, have been or will be as promptly as practicable after the
date of this Agreement delivered to Buyer or, in the case of oral agreements,
descriptions of which are set forth on said Schedule 3.07(e)), (B) Immaterial
Contracts, (C) Contracts entered into between the date hereof and the Closing
Date as permitted by Section 5.01(a) hereof and (D) Contracts that are Excluded
Assets or Excluded Liabilities, no Seller is a party to nor is it or any of its
respective property bound by any Contract. Except as set forth in Schedule
3.07(e), there are no defaults by Sellers under the material Contracts (nor has
any Seller received written notice of a threatened default or notice of
default), and Sellers know of no defaults by any other party to a material
Contract. Except as provided on Schedule 3.07(e) and except launch commitments
with respect to CATV Systems in the process of being upgraded, neither Seller
has entered into any Contract, agreement or commitment, written or oral, with
any Governmental Authority or any other third party, including, without
limitation, any programmer pursuant to a programming or affiliation agreement,
pursuant to which such Seller has agreed to certain channel launch commitments.
Schedule 3.07(e) contains a complete description of any such launch commitments,
including, without limitation, the type and size of the commitment, the
communities and/or programmers with which such commitments have been made, the
number of channels included in such commitment and any financial or other
incentives provided in connection with such commitments. None of the material
Contracts contains rights of first refusal or similar transfer restrictions.
Except as provided on Schedule 3.07(e) and except for obligations set forth in
the material Contracts, Sellers do not have any commitments or agreements,
written or oral, direct, indirect, express or implied, pursuant to which Sellers
are obligated to make material payments, contributions or donations of any kind
to any third party.
(f) CATV Franchises and Governmental Authorities. Schedule 3.07(f)
includes a true and complete list of all CATV Franchises that are held for use
in connection with the operations of the CATV Business, true and complete copies
of which (including all amendments and modifications thereto) have been provided
to Buyer. Sellers have not made any commitments (oral or written) that are still
in effect to any Governmental Authority with respect to the CATV Systems other
than those contained in the CATV Franchises. Sellers hold all of the CATV
Franchises, and material permits and licenses necessary to enable it to operate
the CATV Business as presently conducted, and no other franchise, franchise
applications, or material licenses, registrations, authorizations or permits are
required by applicable law in connection with the conduct and operation of the
CATV Business in the ordinary course of business. Each of the CATV Franchises is
in full force and effect in accordance with its terms. To Sellers' Knowledge,
there exists no factor circumstance which, with the passage of time or the
giving of notice or both, would constitute a material default under any CATV
Franchise or permit any Governmental Authority to cancel, terminate or suspend
the rights thereunder. None of the CATV Franchises contain rights of first
refusal or similar transfer restrictions upon the sale of the CATV Franchise,
other than customary consent requirements provided for in such CATV Franchises.
All of the communities to which the CATV Systems provide cable television
service have been registered with the FCC. Schedule 3.07(f) contains a true and
complete list of each community which is registered and its corresponding FCC
community unit identification number.
17
(g) CATV Systems.
(i) Schedule 3.07(g) contains a true and complete list of each
CATV System's towers, tower coordinates, total height above ground
level and the aeronautical study number reflecting FAA authorization
for each tower. All necessary FAA approvals have been obtained with
respect to the height and location of towers used in connection with
the operation of the CATV Systems in the manner presently operated and
the towers are being operated in compliance in all material respects
with applicable FCC and FAA rules.
(ii) As of the date of this Agreement and to Sellers'
Knowledge, and except as disclosed on Schedule 3.07(g): (AA) Sellers
are, as of the date of this Agreement, the only person providing
wireline or wireless cable television services or similar video
programming or related services (excluding direct broadcast satellite
services) within all or part of the geographic areas served by the
Systems; and (BB) no person other than the Sellers have been granted a
cable television franchise in any of the geographic areas presently
served by the CATV Systems.
(iii) All notices required to be given by the Sellers to
subscribers of the CATV Systems have been given in material compliance
with the requirements of the Communications Act and applicable FCC
rules, regulations and policies.
(iv) As of the date of this Agreement, except as set forth on
Schedule 3.07(g), no Governmental Authority served by any CATV System
has become certified by the FCC to regulate such System's basic service
rate, and Sellers have not received any complaint on FCC Form 329
concerning the cable programming service ("CPS") rates of any CATV
System, and Sellers are not aware of any CPS rate regulation of any
CATV system.
(h) CATV Business. (i) Except as set forth in Schedule 3.07(h), the
CATV Business is conducted by Sellers in material compliance with all applicable
laws, regulations and other requirements of Governmental Authorities, CATV
Franchises, CATV Instruments and Contracts, including, but not limited to,
material compliance with the rules and regulations of the FCC and the provisions
of the Communications Act of 1934, as amended, and the rules and regulations
promulgated thereunder (collectively, the "Communications Act"). Sellers have
timely filed and paid to the FCC and any Governmental Authority all filings,
applications, reports, payments and fees, including, but not limited to, cable
television registration statements, annual reports, aeronautical frequency usage
notices, FCC Form 320, FCC Form 325, Schedule A, FCC Form 395-A and FCC Form 159
that are required under the rules and regulations of the FCC; and (ii) the CATV
Business is in material compliance with all signal leakage criteria prescribed
by the FCC for the most recent semi-annual reporting periods; and a request for
renewal has been timely filed under Section 626(a) of the Cable Act with the
proper Governmental Authority with respect to each CATV Franchise expiring
within thirty-six (36) months after the date of this Agreement. Each Seller will
make available to Buyer copies of all reports and filings for the past three (3)
years made or filed by such Seller pursuant to FCC rules and regulations and
shall make
18
available to Buyer all other past reports and filings made or filed by Sellers
pursuant to FCC rules and regulations. Sellers have filed and deposited with the
U.S. Copyright Office all statements of account and other documents and
instruments, and paid all royalties, supplemental royalties, fees and other sums
to the U.S. Copyright Office under the Copyright Act of 1976 (as amended, the
"Copyright Act"), with respect to the business and operations of the CATV
Systems as are required to obtain, hold and maintain the compulsory license for
cable television systems prescribed in Section 111 of the Copyright Act. Sellers
will make available to Buyer true and complete copies of all such statements of
account and other documents and instruments filed and deposited with the U.S.
Copyright Office in connection with the ownership and operation of the Systems
for the past three (3) years. The CATV Systems are in material compliance with
the Copyright Act (except with respect to music performances) and the rules and
regulations of the U.S. Copyright Office. To Sellers' Knowledge, there is no
inquiry, claim, action or demand pending before the U.S. Copyright Office or
from any other party which questions the copyright filings or payments made by
the CATV Systems. As of the date hereof, neither Seller has been found to be a
common carrier by any Governmental Authority.
(i) Intangible Property. Schedule 3.07(i), lists each trademark,
service ▇▇▇▇, trade name or copyright of Sellers used in connection with the
CATV Business. To Sellers' Knowledge, and without notice to the contrary,
neither Seller has, nor has the use of any such item in connection with the CATV
Business, infringed upon or conflicted with any patent, trademark, servicemark,
trade name or copyright of others, and neither Seller has received any notice of
any such claimed infringement or conflict. During the past five (5) years,
neither Seller has existed under or used any name other than as set forth in
Schedule 3.07(i).
(j) Retransmission Consents. All broadcast station signals
retransmitted on any of the CATV Systems, excluding superstations carried
pursuant to 47 C.F.R. ss. 76.64, are being retransmitted either pursuant to a
broadcast station's must carry election or a retransmission consent agreement
authorizing the retransmission of the station's signal. Except as provided in
Schedule 3.07(j), each such retransmission consent agreement is in full force
and effect, is effective and valid through at least December 31, 1999 and is
consistent with FCC rules and policies, and there is no dispute or claim pending
by any broadcast station, or, to Sellers' Knowledge, threatened, with respect to
any broadcast station's carriage, lack of carriage or channel position by any
System. Except as set forth on Schedule 3.07(j), no retransmission consent
agreement requires a cash payment by the Sellers or imposes other material
conditions. As of the date of this Agreement, Sellers have not received any
request or demand to lease channel capacity on any of the Systems pursuant to
Section 612 of the Communications Act. Sellers have provided Buyer with true and
complete copies of all retransmission consent agreements, including all
amendments relating thereto.
3.08 Employee Benefit Plans.
(a) All "employee benefit plans" within the meaning of Section 3(3) of
ERISA covering Employees, other than "multiemployer plans" within the meaning of
Section 3(37) of ERISA, and other benefit plans, contracts, policies, practices,
agreements or arrangements providing for compensation, severance, termination
pay, performance awards, stock or stock-
19
related awards or other equity-based awards, fringe benefits of any kind,
whether formal or informal, funded or unfunded, covering Employees
(collectively, the "Benefit Plans") are listed on Schedule 3.08, and copies or
summaries of any such written Benefit Plans (or related Insurance Policies) and
any amendments thereto have been provided or made available to Buyer. Schedule
3.08 also lists all multi-employer plans covering Employees. Except as disclosed
on Schedule 3.08, there is not now in effect or adopted and to become effective
after the date of this Agreement, any new Benefit Plan or any amendment to an
existing Benefit Plan which will affect the benefits of Employees or former
employees of the CATV Systems.
(b) All Benefit Plans have been administered in substantial compliance
with their own terms and, where applicable, with ERISA, the Code, the Age
Discrimination in Employment Act and any other applicable federal and state
laws. There are no material pending or, to Sellers' Knowledge, threatened
investigations, proceedings, actions, suits, claims or other litigation (other
than routine claims for benefits) relating to the Benefit Plans. Neither Seller
has engaged in a transaction with respect to any Benefit Plan that, assuming the
taxable period of such transaction expired as of the date hereof, could subject
Sellers to a tax or penalty imposed by either Section 4975 of the Code or
Section 406 or 502(i) of ERISA in an amount which would be material.
(c) No liability under Subtitle C or D of Title IV or ERISA has been or
is expected to be incurred by either Seller with respect to any ongoing, frozen
or terminated "single-employer plan", within the meaning of Section 4001(a)(15)
of ERISA, currently or formerly maintained by it, or the single-employer plan of
any entity which is considered one employer with such Seller under Section 4001
of ERISA or Section 414 of the Code (an "ERISA Affiliate"). Neither Seller has
incurred, nor does either Seller expect to incur, any withdrawal liability with
respect to a multi-employer plan under subtitle E of Title IV of ERISA. No
notice of a "reportable event", within the meaning of Section 4043 of ERISA for
which the 30-day reporting requirement has not been waived, has been required to
be filed for any Benefit Plan subject to Title IV of ERISA or by any ERISA
Affiliate within the 12-month period ending on the date hereof.
(d) Neither any Benefit Plan nor any single-employer plan of an ERISA
Affiliate has an "accumulated funding deficiency" (whether or not waived) within
the meaning of Section 412 of the Code or Section 302 of ERISA and no ERISA
Affiliate has an outstanding funding waiver. Neither Seller has provided, nor is
either Seller required to provide, security to any Benefit Plan or to any
single-employer plan of an ERISA Affiliate pursuant to Section 401 (a) (29) of
the Code.
(e) Except as disclosed in Schedule 3.08, neither Seller has
contributed to any Multiemployer Plan at any time after September 26, 1980.
(f) Neither Seller is aware of the existence of any governmental audit
or examination of any of such Seller's Benefit Plans or any facts that would
lead it to believe that any such audit or examination is pending or threatened.
There exists no action, suit or claim (other than routine claims for benefits)
with respect to any such Benefit Plan pending, or, to the Sellers' Knowledge,
threatened with respect to any of such Benefit Plan.
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(g) No Benefit Plan which is an employee welfare benefit plan (as
defined in Section 3(1) of ERISA) provides for continuing benefits or coverage
for any participant or beneficiary after the termination of the participant's
employment or upon the participant's retirement except as may be required under
Section 4980B of the Code or applicable state statutory law.
(h) Except as set forth on Schedule 3.08, the execution of this
Agreement and the consummation of the transactions contemplated hereby will not
(either alone or when taken together with any additional or subsequent events)
constitute an event under any Employee Plan that will or may result in any
payment, upon a change in control or otherwise, whether of severance, accrued
vacations or otherwise, acceleration, vesting, distribution, increase in
benefits or obligation to fund benefits with respect to any Employee.
3.09 Legal and Governmental Proceedings and Judgments. Except as may
affect the cable television industry generally, or in the States of Maine or New
Hampshire particularly, or as set forth on Schedule 3.09, there is no legal
action, counterclaim, suit, arbitration, or proceeding, pending or, to Sellers'
Knowledge, any governmental investigation pending or threatened against either
Seller, the CATV Business or the Acquired Assets (collectively, "Proceedings"),
nor is there any Judgment pending or outstanding against either Seller or to or
by which either Seller, any of the Acquired Assets or the CATV Business is
subject or bound. None of the Proceedings could, individually or in the
aggregate, (i) result in any modification, termination, suspension, impairment
or reformation of any material CATV Instrument or Contract or any right or
privilege thereunder; (ii) materially adversely affect the ability either Seller
to consummate any of the transactions contemplated hereby; or (iii) have a
material adverse effect upon either Seller, the Systems or the CATV Business.
3.10 Finders and Brokers. Sellers have not entered into any contract,
arrangement or understanding with any Person or firm, nor is either Seller aware
of any claim or basis for any claim based upon any act or omission of such
Seller or any of its affiliates, which may result in the obligation of Buyer to
pay any finder's fees, brokerage or agent's commissions or other like payments
in connection with the negotiations leading to this Agreement or the
consummation of the transactions contemplated hereby. Sellers jointly and
severally agree to indemnify and hold harmless Buyer against any fee,
commission, loss or expense arising out of any claim by any broker or finder
employed or alleged to have been employed by Sellers.
3.11 Environmental Matters.
(a) Except as disclosed in Schedule 3.11, (i) the Real Property is free
of all friable asbestos; (ii) no Hazardous Substance is currently or has ever
been located in, on, under or about any of the Real Property owned by Sellers
during Sellers' ownership or to Sellers' Knowledge, any of the Real Property
owned by Sellers prior to such Sellers' ownership or leased by Sellers in a
manner which violates any Environmental Law in any material respect or which
requires cleanup or corrective action of any kind under any Environmental Law;
(iii) each Seller is in material past and current compliance with, is not in
material violation of, and has no material liability under, any Environmental
Law; (iv) the CATV Systems are capable of continued
21
operation in compliance with all Environmental Law; (v) no Hazardous Substances
have been used, treated or disposed in, on, over or under the Real Property by
Sellers, except for such substances which are in such amounts and of the type
typically found in commercial cleaning products or standard supplies of
businesses similar to each Seller's, as to which each Seller is in compliance
with all applicable Environmental Law; and (vi) there are no tanks below the
surface of the Real Property.
(b) Except as disclosed in Schedule 3.11, neither Seller has received
any notice from any Governmental Authority indicating that the Real Property or
any property adjacent thereto has been or may be placed on any federal or state
"Superfund" or "Superlien" list ("Environmental Notice"). To Sellers' Knowledge,
there has not been any Environmental Notice with respect to any of the Real
Property received by any prior owner or occupant of the Real Property which has
not been fully satisfied and complied with in a timely fashion.
3.12 Bonds, Insurance and Letters of Credit. Except as otherwise
specified in Schedule 3.12, each insurance policy, each performance bond and
each letter of credit required to be maintained, or which is maintained covering
the property comprising the CATV Systems and Acquired Assets, and/or the
operation of the CATV Systems, is set forth in Schedule 3.12, and a copy of each
such policy, letter of credit or bond has been made or will be available to
Buyer by Sellers within 30 days of the date hereof. Each of such policies,
letters of credit and bonds is current and in full force and effect. Neither
Seller has received any notice of default under or intended cancellation or
nonrenewal of any such policies, letter of credit or bonds. There are no pending
or threatened requests to make a draw under any such letter of credit. Sellers
will continue to maintain in effect through the Closing Date, and for such
periods thereafter as may be required under Section 9.05 hereof, those bonds,
letters of credit and insurance policies in connection with the Acquired Assets
and/or the operation of the CATV Systems. During such periods, Sellers will not
take any action or refrain from taking any action other than in the ordinary
course of business.
3.13 Labor Contracts and Actions.
(a) Neither Seller is a party to any Contract with any labor
organization, nor has either Seller agreed to recognize any union or other
collective bargaining unit, nor has any union or other collective bargaining
unit been certified as representing any of the employees of either Seller with
respect to the operation of the CATV Business. To Sellers' Knowledge there is no
organizational effort currently being made, negotiated, or threatened by or on
behalf of any labor union with respect to either Sellers' employees.
(b) As of the date of this Agreement, Sellers are not experiencing any
strikes, work stoppages, significant grievance proceedings or, to the Sellers'
Knowledge, claims of unfair labor practices filed with respect to the operation
of the CATV Business.
3.14 Transactions with Affiliates. Except as set forth on Schedule
3.14, there is no lease, sublease, indebtedness, contract, agreement,
understanding, or other arrangement of any kind with any affiliate, employee,
director, shareholder or consultant of Sellers.
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4. Representations and Warranties of Buyer.
To induce Sellers to enter into this Agreement, Buyer represents and
warrants to Sellers as follows:
4.01 Organization and Authority of Buyer. Buyer is a limited
partnership, validly organized and existing and in good standing under the laws
of the State of Delaware and is qualified to transact business in Maine and in
each other jurisdiction in which the property owned, leased or operated by it
require it to be so qualified. Buyer has the requisite power and authority (i)
to own, lease and use its assets and properties as presently owned, leased and
used by Buyer, and (ii) to conduct its business and operations as presently
conducted by Buyer; and (iii) to consummate the transactions contemplated
herein.
4.02 Legal Capacity; Approvals and Consents.
(a) Authority and Binding Effect. Subject to Section 9.02 hereof and
the consents and approvals set forth on Schedule 4.02, Buyer has all requisite
power and authority to execute and deliver this Agreement and to perform its
obligations hereunder. All partnership action by Buyer necessary for the
authorization, execution, delivery and performance by Buyer of this Agreement
has been taken and such action has not been rescinded, repealed or amended in
any manner. This Agreement has been duly executed and delivered by Buyer and is
the valid and binding obligation of Buyer enforceable against it in accordance
with its terms, except for the Enforceability Exception.
(b) No Breach. Subject only to Section 9.02 hereof and to obtaining the
consents and approvals set forth on Schedule 4.02, the execution, delivery and
performance of this Agreement does not, and will not, contravene the
Organizational Documents of Buyer, and does not and will not: (i) conflict with
or result in a breach or violation by Buyer of, or (ii) constitute a default by
Buyer under, any Law, Judgment, contract, arrangement or understanding to which
Buyer is a party or by which Buyer is subject or bound or may be affected.
(c) Required Consents. Subject to Section 9.02 hereof and except for
the parties listed in Schedule 4.02, there are no parties whose approval or
consent, or with whom the filing of any certificate, notice, application, report
or other document, is legally or contractually required or otherwise is
necessary in connection with the execution, delivery or performance of this
Agreement by Buyer, except where failure to obtain such consent or approval or
failure to make such filing would not reasonably be expected to be material.
4.03 Legal and Governmental Proceedings and Judgments. There is no
legal action, proceeding, investigation or controversy pending or, to the
knowledge of Buyer, threatened against or otherwise involving Buyer, nor are
there any Judgments outstanding against Buyer or to or by which Buyer is, or may
be, subject or bound which may adversely affect the ability of Buyer to
consummate any of the transactions contemplated hereby.
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4.04 Finders and Brokers. Except for a fee to be paid to ▇▇▇▇▇▇▇ &
Associates, Buyer has not entered into any contract, arrangement or
understanding with any Person or firm, nor is Buyer aware of any claim or basis
for any claim based upon any act or omission of Buyer or any of its affiliates,
which may result in the obligation of Sellers to pay any finder's fees,
brokerage or agent's commissions or other like payments in connection with the
negotiations leading to this Agreement or the consummation of the transactions
contemplated hereby. Buyer agrees to indemnify and hold harmless Seller against
any fee, commission, loss or expense arising out of any claim by any broker or
finder employed or alleged to have been employed by Buyer.
4.05 Acquisition of Rights. As of the date of this Agreement, Buyer is
not aware of, and has no reason to believe there is, any reason relating to
Buyer that any Governmental Authority or other party whose consent is required
or contemplated hereunder, would refuse to consent to the transfer of CATV
Instruments or any rights to Buyer hereunder or would condition granting of any
such consent on the performance by Sellers or Buyer of any material obligation
not expressly set forth herein.
5. Covenants Pending Closing.
5.01 Business of Sellers. From the date hereof to the Closing Date, and
except as otherwise consented to or approved by Buyer in writing (which consent
shall not be unreasonably withheld), Sellers jointly and severally hereby
covenant and agree as follows:
(a) Business in Ordinary Course. Except as otherwise agreed by the
parties or as provided herein, Sellers shall conduct the CATV Business in the
ordinary course, consistent with past practices and will not engage in any
material transaction, including, without limitation, entering into or amending
in any material respect any CATV Instrument, entering into or amending any CATV
Franchise or making any material advance or expenditure, other than in the
ordinary course of business, nor change in any material respect business
policies or practices. Sellers shall not amend any Contract in any material
respect or enter into any Contract with any Person, including, without
limitation, any of Seller's affiliates or any stockholders, directors, officers,
employees, agents or consultants of Sellers other than Immaterial Contracts
entered into in the ordinary course of business. Sellers shall use their
reasonable commercial efforts to preserve the CATV Business and Acquired Assets
intact, to retain the services of their present employees and agents, and to
preserve their business relationships with, and the goodwill of, their
subscribers, customers, advertisers, suppliers and others. Sellers shall pay
before delinquent all taxes and other charges upon or against Sellers or any of
their properties or income, file when due all tax returns and other reports
required by Governmental Authorities and pay when due all liabilities except
those which it chooses to contest in good faith by appropriate proceedings and
for which appropriate reserves have been maintained. Sellers shall not (i) enter
into any transaction or incur any liability or obligation which, if entered into
or incurred prior to the date of this Agreement, would have been required to be
listed on the Schedules hereto, (ii) sell, lease, hypothecate, transfer or
otherwise dispose of any of the Acquired Assets, other than dispositions of
assets in an aggregate amount of less than $50,000 in the ordinary course of
business where suitable replacements have been made therefor, (iii) grant or
agree to grant any increase in the rates of salaries or compensation payable to
employees (other than as required by law and
24
regularly scheduled bonuses and increases in the ordinary course of business or
bonuses to induce employees to remain employed with Sellers through the Closing
Date), (iv) except as provided in (iii) above provide for any new and material
pension, retirement or other employment benefits for employees or any material
increase in any existing benefits (other than as required by law), (v) implement
any retiering or repackaging of cable television programming offered by the CATV
Systems (other than as required by law or the terms of the applicable CATV
Franchise), (vi) except as provided in the 1998 Budget and Marketing Plan
previously delivered to Buyer (the "1998 Budget") implement or conduct any sales
or marketing programs or other activities that could be reasonably expected to
result in a temporary (but not necessarily long term) increase in EBUs, or (vii)
change customer rates for any service or charges for remotes or installation, or
change billing, disconnect, promotional or marketing practices
(b) Books and Records. Each Seller shall maintain its respective books,
accounts and records in the usual, regular and ordinary manner in accordance
with past practices.
(c) Litigation During Interim Period. Sellers will advise Buyer in
writing promptly of the assertion, commencement or threat of any material claim,
litigation, labor dispute, proceeding or investigation in which the Sellers are
a party or the Acquired Assets or CATV Business may be affected.
(d) Contracts. Sellers shall promptly deliver to Buyer copies of all
Contracts that are entered into after the date hereof and prior to the Closing
in accordance with the terms of this Agreement which, if existing on the date
hereof, would constitute a material Contract. Sellers shall not amend the terms
of any material Contracts (or permit any material Contracts to be extended)
without the consent of Buyer, which consent shall not be unreasonably withheld
or delayed.
(e) CATV Franchises. Except as set forth in Schedule 5.01(e) or as
otherwise agreed by the parties, Sellers shall not cause or permit, by any act
or failure to act, any of the CATV Franchises to expire or to be revoked,
suspended, or materially adversely modified, or take any action that could
reasonably be expected to cause any Governmental Authority to institute
proceedings for the suspension, revocation, or material adverse modification of
any Franchise except as otherwise agreed to by the parties. With respect to any
CATV Franchise expiring within thirty-six (36) months from the date hereof for
which a request for renewal has not yet been submitted by either Seller, such
Seller shall submit such renewal requests pursuant to Section 626(a) of the
Cable Act with the proper Governmental Authority.
(f) CATV Systems. Each Seller shall pay all obligations relating to the
CATV Systems as they become due, consistent with past practices. Sellers shall
not change customer rates for any service or charges for remotes or
installation, or change billing, disconnect or marketing practices (other than
as required by law or the terms of the applicable CATV Franchise or as set forth
in the 1998 Budget).
(g) Acquired Assets; Inventory. Sellers shall maintain all of the
Acquired Assets in good working order (ordinary wear and tear excepted), and
shall use, operate and maintain all of
25
the Acquired Assets in a reasonable manner. Sellers shall maintain inventories
at levels consistent with past practices and in accordance with the 1998 Budget.
(h) Compliance with Law. Sellers shall comply in all material respects
with all laws, rules and regulations applicable or related to the ownership and
operation of the CATV Systems.
(i) Encumbrances. Sellers shall not create, assume or permit to exist
any Encumbrance, claim or liability, upon the Acquired Assets, except for
Permitted Encumbrance.
(j) FCC Filings. Each Seller shall provide to Buyer, promptly following
the filing thereof, copies of all reports to and other filings with the FCC
relating to the CATV Systems.
(k) CATV Instruments. Each Seller shall provide to Buyer, as soon as
practicable following the receipt thereof by such Seller, a copy of (i) any
notice from the FCC or any other Governmental Authority of the revocation,
suspension, or limitation of the rights under, or of any proceeding for the
revocation, suspension, or limitation of the rights under (or any written notice
to the effect that such authority may in the future, as the result of failure to
comply with laws or regulations or for any other reason, revoke, suspend or
limit the rights under) any CATV Instrument, and (ii) copies of all protests,
complaints, challenges or other documents filed with the FCC by third parties
concerning any CATV System (if same has been provided to such Seller) and, as
soon as practicable following the filing or making thereof, copies of Seller's
responses to such filings.
(1) Capital Expenditures. Sellers shall make capital expenditures
consistent with past practices and in accordance with the 1998 Budget and
Schedule 5.01(l) and shall complete all CATV System upgrades and
interconnections as contemplated in accordance with Schedule 5.01(l) as of the
dates specified therein. With respect to any system upgrade which is not
scheduled to be completed prior to the Closing Date, Sellers shall continue all
necessary construction in connection with such system upgrade in accordance with
Schedule 5.01(l).
(m) Retransmission Extensions. With respect to any broadcast television
station which is presently retransmitted on the Systems and whose retransmission
consent expires prior to December 31, 1999, Sellers shall cooperate with Buyer
in seeking to obtain the written consent of such station to continue to
retransmit such signal through at least December 31, 1999, on terms which are
substantially similar to those presently applicable to the CATV Systems or upon
such other terms as are reasonably acceptable to Buyer.
5.02 Access to Information.
(a) Access by Buyer. Between the date of this Agreement and the
Closing, Buyer shall have reasonable access during normal business hours to all
of the properties, books, reports, records, CATV Instruments and Contracts of
each Seller, and each Seller shall furnish Buyer with all information it may
reasonably request. All information obtained by Buyer pursuant to this Agreement
and in connection with the negotiation hereof shall be used by Buyer solely for
purposes related to this Agreement and the acquisition of the Acquired Assets
and, in the case of
26
nonpublic information, shall, except as may be required for the performance of
this Agreement or by Law, be kept in strict confidence by Buyer.
(b) Access by Sellers. Subsequent to the Closing, Buyer shall preserve
and give to Sellers reasonable access during normal business hours to all of the
books, reports, records, CATV Franchises, CATV Instruments and Contracts from
files and records transferred to Buyer at the time of Closing, for the purposes
of the preparation of tax returns, the defense of any claims asserted or which
may be asserted with respect to which the Sellers are the Indemnitor as
contemplated by the Agreement, or other proper purposes.
5.03 Notice of Subsequent Events. Each Party agrees to promptly notify
the other of any circumstance, event or action by it or otherwise (i) that, if
known at the date of this Agreement, would have been required to be disclosed in
or pursuant to this Agreement or (ii) the existence, occurrence or taking of
which would result in any of its representation and warranties in this Agreement
not being true and correct in all material respects at Closing.
5.04 Delivery of Financial Information. Sellers shall deliver to Buyer:
(i) as soon as they are available, but in no event later than thirty (30) days
after the end of each month subsequent to the date hereof, consistently prepared
balance sheets and statements of income; (ii) within thirty (30) days after the
end of each month a report prepared on a basis consistent with past practice and
showing monthly revenues and subscriber information for the CATV Systems; and
(iii) such other financial and operating information regarding the CATV Systems
and the Acquired Assets as Buyer reasonably requests, including, without
limitation, monthly capital expenditure reports. Such financial statements have
been and will be prepared on a basis consistent from period to period.
5.05 Additional Financial Information.
(a) Sellers agree to cooperate and assist Buyer with the Buyer's
preparation of, including reasonable efforts necessary to cause Sellers'
independent accountants to audit (to the extent indicated below), at Buyer's
expense, the following financial statements with respect to the CATV Systems,
Buyer's preparation of related management discussions and analyses
(collectively, the "Additional Financial Statements"), conforming with the
requirements specified in this Section 5.05:
(i) Balance Sheets and income statements and statements of
cash flows and changes in equity for such of the years ended December
31, 1996, 1997 and for the period ended September 30, 1998 (or such
other period ending on or prior to the Closing Date as may be necessary
under applicable SEC rules), together with the required footnotes and
the auditor's report thereon under Securities and Exchange Commission
("SEC") Regulations S-K and S-X to the extent required by Buyer in
connection with its reporting and filing obligations under the
Securities Act of 1933, as amended, and the Securities and Exchange Act
of 1934, as amended (the "Securities Laws").
27
(ii) An unaudited balance sheet and income statement and
statement of cash flows for such interim period ending during 1998 as
Buyer may reasonably request, together with the required footnotes.
(b) The Additional Financial Statements shall be prepared by Buyer
using the books and records of each Seller, in accordance with generally
accepted accounting principles, consistently applied, and in the form required
by SEC Regulations S-K and S-X, so as to fairly present the financial condition,
results of operations and cash flows of Sellers for the periods indicated, and
with respect to quarterly financial statements required by this Section 5.05,
subject to normal year-end adjustments.
(c) Each Seller agrees to provide, to the extent it is reasonably able
to do so, one or more audit representation letters as to the information
provided by each Seller to its independent accountants in connection with any
audit required under this Section 5.05. The representation letter will be in
such form and make the representations reasonably required by such independent
accountants to enable them to issue an opinion acceptable to the SEC for
purposes of any registration statement with respect to the audit of those
Additional Financial Statements required to be audited by SEC Regulations S-K
and S-X and to be included in such registration statement. Each Seller shall use
its commercially reasonable efforts to cause its independent accountants to
provide all consents that are necessary for the inclusion of their opinion and
the Additional Financial Statements in any such registration statement.
(d) Buyer acknowledges that the Additional Financial Statements are
being prepared by Buyer for inclusion in its periodic reports and filings with
the SEC pursuant to the Securities Laws. Buyer agrees that (i) any Losses,
claims, liabilities, damages, penalties, costs and expenses it may have as a
result thereof are not Losses, (ii) the Sellers, their owners, officers,
directors, employees and agents (collectively, "Sellers Parties") shall have no
liability under the Securities Laws to any purchaser under, or underwriter (or
its representatives) with respect to, Buyer's periodic reports and filings with
the SEC pursuant to the Securities Laws, and (iii) Buyer shall indemnify and
hold harmless Sellers Parties from and against any losses, claims, liabilities,
damages, penalties, costs and expenses arising out of or with respect to Buyer's
periodic reports and filings with the SEC pursuant to the Securities Laws.
5.06 Rate Forms. Each Seller will furnish Buyer with any correspondence
(including FCC rate forms and associated exhibits) from or to any Governmental
Authority relating to regulatory review of the rates charged by the CATV Systems
for cable television services and equipment. Each Seller agrees to provide to
Buyer the following documentation, as soon as practicable: (i) complete and
correct copies of all applicable FCC Forms 393, 1200, 1205, 1210, 1215, 1230 and
1240 relating to rate regulation generally or specific rates charged to
customers of the CATV Systems that have been prepared by such Seller (either
before or after the date of this Agreement) for filing with the appropriate
Governmental Authorities; (ii) and, to the extent that such Seller has not
completed such forms with respect to any community and/or any level or tier of
cable television service because such forms have not been required to be filed
with any Governmental Authority pursuant to applicable Law, Sellers agree to
assist Buyer, to the extent requested by Buyer, with determining such
information and shall provide Buyer with any such
28
other information, work papers and documents (including rate history
information) reasonably necessary for any rate defense necessary for Buyer to
defend and support any challenge to the past, current and proposed rates charged
or to be charged to the customers of the CATV Business.
6. Deliveries at Closing.
6.01 Deliveries by Sellers. At the Closing, Sellers will deliver or
cause to be delivered to Buyer:
(a) Such special warranty or trustee's deeds, certificates or title
policies, bills of sale, endorsements, and other good and sufficient instruments
of conveyance, transfer and assignment as are necessary to vest in Buyer the
right, title and interest of Sellers in accordance herewith in and to the
Acquired Assets in a form reasonably satisfactory to Buyer, which shall include,
without limitation, a form of ▇▇▇▇ of Sale and General Assignment in the form of
Exhibit C hereto.
(b) A certificate signed by a principal officer of each Seller, dated
as of the Closing Date, representing and certifying to Buyer as to the matters
set forth in Sections 7.03, 7.04 and 7.06.
(c) The Assumption Agreement in the form of Exhibit A hereto.
(d) An opinion of Sellers' Counsel, in form and substance reasonably
acceptable to Buyer and Buyer's counsel.
(e) An opinion of Sellers' Local Counsel, in form and substance
reasonably acceptable to Buyer and Buyer's counsel.
(f) A certificate signed by a principal officer of each Seller, dated
as of the Closing Date, representing and certifying (i) that the resolutions, as
attached to such certificate, were duly adopted by such Sellers' directors and
stockholders or partners, as the case may be, authorizing and approving the
execution and delivery of this Agreement and all Agreements referenced herein
and contemplated hereby and the consummation of the transactions contemplated
hereby and that such resolutions have not been modified or amended in any way
and remain in full force and effect; and (ii) as to the incumbency of each
signatory to this Agreement and each other Agreement, instrument or document
delivered hereunder executed by each Seller.
(g) Evidence that the waiting period under the HSR Act, if applicable,
has expired.
(h) Evidence in a form and substance reasonably satisfactory to Buyer
of receipt of all Seller Required Consents, except as waived by Buyer pursuant
to Section 7.01.
6.02 Deliveries by Buyer. At the Closing, Buyer will deliver or cause
to be delivered to Sellers:
29
(a) The Purchase Price, as adjusted pursuant to Section 2.03, less the
Indemnity Escrow Amount.
(b) The Assumption Agreement in the form of Exhibit A hereto.
(c) A certificate signed by a principal officer of Buyer, dated as of
the Closing Date, representing and certifying to Sellers as to matters set forth
in Sections 8.03 and 8.04.
(d) An opinion of Buyer's Counsel, in form and substance reasonably
acceptable to Sellers and Sellers' Counsel.
(e) A certificate signed by a principal officer of the Buyer, dated as
of the Closing Date, representing and certifying (i) that the resolutions, as
attached to such certificate, were duly adopted by Buyer's partners authorizing
and approving the execution and delivery of this Agreement and all Agreements
referenced herein and contemplated hereby and the consummation of the
transactions contemplated hereby and that such resolutions have not been
modified or amended and remain in full force and effect; and (ii) as to the
incumbency of each signatory to this Agreement and each other Agreement,
instrument or document delivered hereunder executed by Buyer.
(f) Evidence that the waiting period under the HSR Act, if applicable,
has expired.
7. Conditions to the Obligations of Buyer.
Buyer agrees that neither its ability to obtain financing to consummate
the Closing nor the level of Eight Month EBUs as of the Closing Date shall be a
condition to Buyer's obligation to close the transactions contemplated herein.
The obligations of Buyer to complete the transactions provided for herein are
subject to the fulfillment of all of the following conditions any of which may
be waived in writing by Buyer:
7.01 Receipt of Consents. The conditions specified in Section 9.02
shall have been satisfied and such of the approvals and consents described in
Schedule 3.02 that are specifically noted therein as being required as
conditions to the Closing (the "Seller Required Consents"), shall have been
obtained. Notwithstanding the foregoing, to the extent that the approvals and
consents of Governmental Authorities have been obtained for CATV Franchise Areas
that are Transferable Franchise Areas (as defined in Section 9) represent at
least eighty-five percent (85%) of the aggregate number of EBUs in all Franchise
Areas, this closing condition shall have been fulfilled with respect to all such
approvals and consents of such Governmental Authorities; provided, however, that
upon completion of the Closing, the provisions of Section 9.06 hereof with
regard to Retained Franchises shall apply.
7.02 Sellers' Authority. All actions under Sellers' Organizational
Documents, and resolutions necessary to authorize (i) the execution and delivery
of this Agreement by Sellers and
30
the performance by Sellers of their obligations under this Agreement and (ii)
the consummation of the transactions contemplated hereby, shall have been duly
and validly taken by Sellers and shall be in full force and effect on the
Closing Date.
7.03 Performance by Sellers. Sellers shall have performed in all
material respects their agreements and covenants hereunder (including, without
limitation, their covenants in Sections 5 and 6) to the extent such are required
to be performed at or prior to the Closing.
7.04 Absence of Breach of Warranties and Representations. The
representations and warranties of Sellers contained in this Agreement shall be
true and correct on and as of the Closing Date with the same force and effect as
if made on and as of such date, except to the extent that such representations
and warranties describe a condition on a specified time or date or except to the
extent that the breach of such representations or warranties does not have a
Material Adverse Effect; provided however, that if Buyer refuses to close based
upon the existence of such a Material Adverse Effect and if such Material
Adverse Effect is reasonably susceptible of being eliminated within 30 days,
Sellers shall have the right to defer the Closing Date for up to 30 days and to
eliminate such Material Adverse Effect either through actions to cure such
Material Adverse Effect or by agreeing to a reduction in the Purchase Price (to
the extent not already reflected in Current Liabilities as of the Closing Date)
to make Buyer whole with respect to such Material Adverse Effect.
7.05 Absence of Proceedings. There shall not be in effect an injunction
or restraining order issued by a court of competent jurisdiction in an action or
proceeding against the consummation of the transactions contemplated by this
Agreement and no other action or proceeding brought by any Governmental
Authority shall be pending that may result in a Judgment, decree or order that
would prevent or make unlawful the consummation of the transactions under this
Agreement.
7.06 No Encumbrances. There shall be no Encumbrances other than
Permitted Encumbrances.
7.07 Risk of Loss. The risk of loss of damage to the Acquired Assets by
force majeure or for any other reason between the date of this Agreement and the
Closing shall be borne by Sellers. Sellers shall take all reasonable steps to
repair, replace and restore such property as soon as possible after any such
loss or damage, it being understood that all insurance proceeds shall be applied
to or reserved for such replacement, restoration or repair. In the event of any
damage or destruction to the Acquired Assets, or any portion thereof, equal to
or in excess of $1,000,000, then (i) unless Sellers shall have replaced,
repaired or restored such damaged or destroyed property at Sellers' expense
within thirty days of receipt of Buyer's notice of their intent to terminate
pursuant to this Section 7.07, Buyer may terminate this Agreement, in which
event the Deposit Escrow Amount, and all interest earned thereon, shall be
returned to Buyer, or (ii) if Buyer and Sellers mutually agree in writing upon
adjustments to the Purchase Price, payment of insurance proceeds, limitations on
the representations of Sellers and all other matters with respect to such
material adverse change, loss or damage then Buyer and Sellers shall proceed to
consummate the transactions contemplated herein.
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7.08 Environmental Report. Buyer shall have received, at Buyer's option
and expense, a Phase I environmental site assessment (the "Environmental
Report") of the Real Property performed by a nationally recognized environmental
firm designated by Buyer and reasonably satisfactory to Sellers. If Buyer shall
elect to receive an Environmental Report, such Environmental Report shall have
been ordered by Buyer not later than fifteen (15) Business Days from the date
hereof. Buyer shall promptly upon receipt provide Sellers with a copy of such
Environmental Report. If prepared, the Environmental Report shall show no
environmental condition on or affecting such Real Property or the CATV Business
that (i) could reasonably be expected to materially impair the use or value of
such Real Property for the continued operation of the CATV Systems as operated
by Sellers on the Closing Date or subject Buyer to any material liability for
fines, penalties, or cleanup or response costs if Buyer consummates this
Agreement, or (ii) would cause a reasonable purchaser experienced in
environmental matters to proceed with a Phase II environmental site assessment
before proceeding with the transfer of the Real Property. Notwithstanding the
foregoing, this condition to Closing shall not be applicable (a) with respect to
any Real Property as to which Buyer shall not have ordered an Environmental
Report within fifteen (15) Business Days from the date hereof, (b) if at
Sellers' expense, Sellers shall have cured all material adverse environmental
conditions identified to Sellers by Buyer in writing to the level that the
appropriate governmental agency determines that no further action is required,
or, when no governmental agency is involved in the remediation, to the level
that Buyer's environmental consultant has certified to Sellers and Buyer that
all requirements of Environmental Law have been satisfied (or provisions
reasonably satisfactory to Buyer shall have been made for such cure) prior to
the Closing, (c) if the subject parcel of Real Property is retained by Sellers
and replaced prior to Closing, at Sellers' cost, with another parcel of property
of substantially equivalent utility, which replacement property shall be fully
equipped and operational in all material respects as of the Closing or, (d) if
Buyer and Sellers mutually agree in writing on adjustments to the Purchase
Price, payment of insurance proceeds, limitations on the representations of
Sellers and all other matters with respect to such material adverse
environmental condition.
7.09 Title Commitment. Provided that Buyer shall have ordered such
commitments and surveys within fifteen (15) Business Days after the date of this
Agreement, Buyer shall have received, at Buyer's expense, a written commitment
to issue title insurance policies and surveys with respect to the Real Property
owned or headends leased by the Sellers. It shall be a condition to Buyer's
obligation to close that such title commitments and surveys show the state of
title to such Real Property to be as represented and warranted in this Agreement
and that there be no exceptions for gaps in the chain of title, Encumbrances
(other than Permitted Encumbrances and Encumbrances to be removed at or prior to
Closing), encroachments or title defects, and no violations of any applicable
zoning or other ordinance, statute, rule or regulation that could reasonably be
expected to materially impair the use of such Real Property for the continued
operation of the CATV Systems; provided, however, that if Buyer does not waive
any failure to obtain such title commitment and survey, then Sellers shall have
the right, at their expense, to (i) cure any such defect that is reasonably
susceptible of being eliminated, (ii) substitute Real Property owned to the
extent such substitute Real Property is reasonably acceptable to Buyer, or
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(iii) relocate such headends to substitute Real Property leased that is
reasonably acceptable to Buyer.
7.10 Terminations and Releases. Buyer shall have received evidence
reasonably satisfactory to Buyer of the payment and satisfaction of all
indebtedness and liabilities of the Sellers in respect of borrowed money,
together with duly executed UCC-3 termination statements, mortgage releases and
such other releases and termination statements, including, without limitation,
lender payoff letters, as Buyer shall reasonably request in connection with the
release of any Encumbrances from the Acquired Assets.
8. Conditions to the Obligations of Sellers.
The obligations of Sellers to complete the transactions provided for
herein are subject to the fulfillment of all of the following conditions, any of
which may be waived in writing by Sellers.
8.01 Receipt of Consents. The conditions specified in Section 9.02
shall have been satisfied.
8.02 Buyer's Authority. All actions under Buyer's organizational
Documents and resolutions necessary to authorize (i) the execution and delivery
of this Agreement by Buyer and the performance by Buyer of its obligations under
this Agreement, and (ii) the consummation of the transactions contemplated
hereby, shall have been duly and validly taken by Buyer and shall be in full
force and effect on the Closing Date.
8.03 Performance by Buyer. Buyer shall have performed in all material
respects its agreements and covenants hereunder to the extent such are required
to be performed at or prior to the Closing.
8.04 Absence of Breach of Representations and Warranties. All
representations and warranties of Buyer contained in this Agreement shall be
true and correct on and as of the Closing Date with the same effect as if then
made, on and as of such date, except to the extent that such representations and
warranties describe a condition on a specified time or date or except to the
extent that the breach of such representations or warranties does not have a
Material Adverse Effect.
8.05 Absence of Proceedings. There shall not be in effect an injunction
or restraining order issued by a court of competent jurisdiction in an action or
proceeding against the consummation of the transactions contemplated by this
Agreement and no other action or proceeding brought by any governmental
authority shall be pending that may result in a Judgment, decree or order that
would prevent or make unlawful the consummation of the transactions under this
Agreement.
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9. Mutual Covenants.
9.01 Compliance with Conditions. Each of the parties hereto covenants
and agrees with the other to exercise reasonable commercial efforts to perform,
comply with and otherwise satisfy each and every one of the conditions to be
satisfied by such party hereunder, and each party shall use reasonable
commercial efforts to notify promptly the other if it shall learn that any
conditions to performance of either party will not be fulfilled.
9.02 Compliance with HSR Act and Rules.
(a) The performance of the obligations of all parties under this
Agreement is subject to the condition that, if the HSR Act and Rules are
applicable to the transactions contemplated hereby, the waiting period specified
therein, as the same may be extended, shall have expired without action taken to
prevent the consummation of the transactions contemplated hereby.
(b) Each of the parties hereto will use its reasonable commercial
efforts to comply promptly with any applicable requirements under the HSR Act
and rules relating to filing and furnishing of information to the FTC and the
Antitrust Division of the DOJ, the parties' actions to include, without
limitation, (i) filing or causing to be filed promptly the HSR report required
to be filed by them, or by any other Person that is part of the same "person"
(as defined in the HSR Act and Rules) or any of them, sharing equally the filing
fees applicable thereto and taking all other action required by the HSR Act or
Rules; (ii) coordinating the filing of such HSR reports (and exchanging drafts
thereof) so as to present both HSR reports to the FTC and the DOJ at the time
selected by the mutual agreement of Sellers and Buyer, and to avoid substantial
errors or inconsistencies between the two in the description of the transaction;
and (iii) using their reasonable commercial efforts to comply with any
additional request for documents or information made by the FTC or the DOJ or by
a court and assisting the other parties to so comply.
9.03 Applications for Assignment of Contracts or CATV Instruments and
CATV Franchises. In order to secure requisite consents or approvals of the
transfer of control to Buyer of any Contracts, CATV Franchises or CATV
Instruments, Buyer (with respect to CATV Franchises) and Sellers (with respect
to CATV Instruments and Contracts) shall proceed as promptly as practicable and
in good faith and using best efforts, to prepare, file and prosecute such
application or applications as may be necessary to obtain each such consent or
approval. Buyer and Sellers shall use best efforts to promptly assist each other
and shall take such prompt and affirmative actions as may be reasonably
necessary in obtaining such approvals and shall cooperate with each other in the
preparation, filing and prosecution of such applications as may be reasonably
necessary, and agree to furnish all information required by the approving
entity, and to be represented at such meetings or hearings as may be scheduled
to consider such applications. Without limiting in any respect the foregoing,
each party agrees to file mutually acceptable applications to all appropriate
Governmental Authorities for all consents or approvals required to consummate
the transactions hereunder within thirty (30) days after the date of this
Agreement. Buyer further agrees that it will not, without the prior written
consent of Sellers, take any action to amend or that would amend or modify any
application with respect to a CATV
34
Franchise filed as provided in this Section 9.03 after the date that such
application is accepted as complete.
9.04 Records, Taxes and Related Matters. Sellers and Buyer shall each
make their respective books and records (including work papers in the possession
of their respective accountants) available for inspection by the other party, or
by its duly authorized representatives, for reasonable business purposes at all
reasonable times during normal business hours, for a three (3) year period after
the Closing Date with respect to all transactions of the CATV Business occurring
prior to or relating to the Closing, and the historical financial condition,
assets, liabilities, results of operation and cash flows of the CATV Business
for any period prior to the Closing. In the case of records owned by Sellers,
such records shall be made available at Sellers' executive officer, and in the
case of records owned by Buyer, such records shall be made available at the
office at which such records are maintained. As used in this Section 9.04, the
right of inspection includes the right to make copies for reasonable business
purposes. In all cases where Buyer, pursuant to the terms hereof, has assumed
Sellers' liability for the payment of taxes (including, without limitation,
deposits), Buyer shall (unless and to the extent otherwise requested by Sellers)
prepare and file all returns, reports, information statements, forms or other
documents required to be filed with respect to such taxes, all in a timely and
proper fashion and as may be necessary or appropriate to assure that the Sellers
shall be in full and prompt compliance with law, and Buyer shall pay or cause to
be paid all such taxes when due.
9.05 Absence of Consents. The parties acknowledge that their intent and
agreement is for Sellers to transfer the CATV Business to Buyer at Closing in an
orderly manner without interruption in service, and that certain required
consents to the transfer to Buyer of Sellers' rights under the Contracts, the
CATV Franchises and CATV Instruments relating to the operation of the CATV
Business may not have been obtained on the Closing Date, or that such rights may
not be transferred at the Closing for other reasons; provided, however, that,
except as provided in Section 9.06, Buyer shall have no obligation to close the
transactions contemplated hereby in the absence of receiving the Seller Required
Consents and the transfer of such rights. If said transfer is not completed on
the Closing Date, Sellers agree thereafter to maintain such Contracts and CATV
Instruments and, should Buyer so request, any insurance policies and performance
bonds related to any Retained Franchises, in full force and effect for the
benefit of Buyer (with any casualty insurance policies naming Buyer and Buyer's
lenders as loss payees and any liability insurance policies so maintained naming
Buyer, Buyer's lenders, Sellers and such other parties as are required to be so
named as additional insureds) until such transfer is completed (the "Interim
Period"). During the Interim Period, Buyer shall be responsible for obtaining
such consents, and Sellers will provide reasonable assistance to Buyer but at
Buyer's sole cost and expense. Sellers also agree to permit Buyer, at Buyer's
option, to utilize the benefits of such Contracts, CATV Instruments, insurance
policies and performance bonds in compliance with the terms thereof in order to
continue to operate the Systems. Buyer agrees that all expenses incurred by
Sellers in complying with the foregoing during the Interim Period (other than
charges for personnel or internal operating, administrative or overhead expenses
of Sellers or any creditor of Sellers) shall be reimbursed to Sellers by Buyer
on a monthly basis, within twenty (20) days after receipt by Buyer of Sellers'
reasonably detailed statement therefor for each calendar month during the
Interim Period.
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9.06 Retained Franchises. After satisfaction or waiver of the
conditions precedent to Buyer's obligation to close as set forth in Section
7.01, those CATV Franchises (and all assets related thereto) with respect to
which consent to transfer has not been obtained by the Closing Date (the
"Retained Franchises") shall be retained by the Sellers and subsequently
transferred to the Buyer in accordance with the terms hereof.
(a) At the Closing, Sellers shall sell and assign to Buyer, and Buyer
shall purchase and acquire from Sellers, all Acquired Assets, except only for
the Retained Franchises and all of the other Acquired Assets which are used
exclusively in the operation of the Franchise Areas served pursuant to such
Retained Franchises (the "Retained Assets") . From and after the Closing,
Sellers shall retain the Retained Franchises and the Retained Assets, and,
subject to the terms and conditions in this Section 9.06, Sellers shall sell and
assign to Buyer, and the Buyer shall purchase and acquire from Sellers, the
Retained Franchises and the Retained Assets in accordance with the terms of this
Section 9.
(b) At the Closing:
(i) The amount payable by Buyer to Sellers pursuant to Section
2.02 shall be reduced by an amount that Buyer is required to deposit in
escrow pursuant to Section 9.06(b)(iii).
(ii) All conveyance documents, certificates and other
documents contemplated by this Agreement to be delivered at the Closing
shall be in the form and substance provided for in this Agreement with
such modifications as are necessary or appropriate to reflect the
provisions of this Section 9.06.
(iii) Buyer shall deliver to one of Buyer's senior lenders, as
escrow agent or to another mutually acceptable escrow agent (the
"Retained Franchise Escrow Agent"), by wire transfer of federal reserve
funds, (aa) 15% of the Base Price, as adjusted pursuant to Section 2.03
if the aggregate number of EBUs in those Franchise Areas that are
Transferable Franchise Areas shall be less than or equal to eighty-five
percent (85%) of the aggregate number of EBUs in all Franchise Areas
(such computation being hereinafter referred to as the Transferable
Subscriber Percentage"), or (bb) otherwise, an amount equal to that
portion of the Purchase Price allocable to the Retained Franchises and
the Retained Assets, which amount shall be the product of the number of
EBUs in the Franchise Areas serviced under such Retained Franchises
multiplied by $2,533 (the "Full Per Subscriber Amount"). The amount
delivered to the Retained Franchise Escrow Agent (the "Retained
Franchise Escrow Amount") shall be in an escrow account (the "Retained
Franchise Escrow Account") pursuant to the terms of an escrow
agreement, which shall contain the basic terms provided for herein and
shall be mutually agreeable to the parties hereto (the "Retained
Franchise Escrow Agreement"), with any revisions thereto that are
reasonably requested by Buyer's senior lenders to grant them a
perfected security interest in the Retained Franchise Escrow Amount
(subject to the rights of
36
Sellers under this Agreement). All interest earned on the Retained
Franchise Escrow Amount shall be disbursed to Sellers as provided in
this Section 9.06.
(iv) Buyer and Sellers shall enter into a mutually acceptable
management agreement (the "Management Agreement") pursuant to which
Buyer shall manage the Systems serviced by the Retained Franchises. The
Management Agreement shall provide that Buyer will be entitled to
receive and retain all revenues, and will be responsible for all costs
and expenses, attributable to the operations of the Retained Franchises
and the Retained Assets, the intent of the parties being that Buyer
will enjoy the economic rewards and bear the economic risks resulting
from the operation of the Retained Systems and the Retained Assets
during the term of the Management Agreement.
(c) After the Closing, Buyer and Sellers shall cooperate in obtaining
any authorizations, consents; orders or approvals of any municipal authority
necessary to cause any Franchise Area that was not a Transferable Franchise Area
on the Closing Date to become a Transferable Franchise Area, and the agreements
and obligations of Buyer and Sellers under the other provisions of this
Agreement shall be fully applicable in seeking such authorizations, consents,
orders, or approvals after the Closing. Sellers shall give to Buyer written
notice of the receipt of any authorizations, consents, orders, or approvals of
any municipal authority necessary to cause any Franchise Area that was not a
Transferable Franchise Area on the Closing Date to become a Transferable
Franchise Area.
(d) If any Franchise Area that was not a Transferable Franchise Area on
the Closing Date becomes a Transferable Franchise Area within two (2) years
after the Closing Date, then, a closing shall be held on a date to be agreed to
between Buyer and Sellers (or, if Buyer and Sellers fail to agree, on the first
Business Day that is at least ten (10) Business Days after such Franchise Area
becomes a Transferable Franchise Area), in accordance with the following:
(i) At such closing, the Sellers shall sell and assign to
Buyer, and Buyer shall purchase and acquire from Sellers, those
Retained Franchises that cover Franchise Areas that have become
Transferable Franchise Areas by such closing date and all Retained
Assets relating thereto, as evidenced by bills of sale and assignment
and assumption agreements in form and substance substantially identical
to those delivered by the parties at the Closing;
(ii) The closing conditions of Buyer and Sellers provided
herein shall apply to such closing insofar as such conditions related
to the Retained Franchises and Retained Assets described in paragraph
(i) above;
(iii) At such closing, Buyer and Sellers shall make to one
another mutually acceptable representations and warranties with respect
to the Retained Franchises and the Retained Assets and the transactions
contemplated herein with appropriate exceptions taken for actions taken
or omitted to be taken by Buyer or Sellers between the Closing Date and
such closing date as manager or pursuant to the Management Agreement;
37
(iv) At such closing, Buyer and Sellers shall execute and
deliver conveyance documents, certifications and other documents (other
than opinions of counsel) corresponding to those delivered at the
Closing with such modifications as are necessary or appropriate to
reflect the provisions of this Section 9.06 and to relate to the
Retained Franchises and Retained Assets being purchased by Buyer at
such closing;
(v) Upon such closing, the Management Agreement shall be
terminated with respect to the Franchise Areas covered by the Retained
Franchises that are transferred at such closing; and
(vi) At such closing, to the extent the Transferable
Subscriber Percentage is less than or equal to eighty-five percent
(85%), then no disbursement shall be made from the Retained Franchise
Escrow Account. To the extent the Transferable Subscriber Percentage
then exceeds eighty-five percent (85%), Buyer and Sellers shall direct
the Retained Franchise Escrow Agent to disburse to Sellers the Full Per
Subscriber Amount times the number of EBUs (in excess of such
eighty-five percent (85%) threshold) in the Franchise Areas covered by
the Retained Franchises described in paragraph (i), together with all
interest then earned under and credited to the Retained Franchise
Escrow Account.
(e) If any Franchise Areas do not become Transferable Franchise Areas
within two (2) years after the Closing Date, then a closing shall be held on the
first Business Day that is two (2) years after the Closing Date, in accordance
with the following:
(i) At such closing, Sellers must sell and assign to Buyer,
and Buyer shall purchase and acquire from Sellers, all Retained
Franchises and Retained Assets pertaining to Franchise Areas that shall
not have become Transferable Franchise Areas, as evidenced by bills of
sale and assignment and assumption agreements in form and substance
substantially identical to those delivered by the parties at the
Closing;
(ii) The closing conditions of Buyer and Sellers provided
herein shall apply to such closing insofar as such conditions relate to
the Retained Franchises and Retained Assets described in paragraph (i)
above, except that Buyer shall be deemed to have waived the condition
that any authorization, consent, order or approval of any municipal
authority necessary for the transfer of such Retained Franchise shall
have been obtained and shall be final;
(iii) At such closing, Buyer and Sellers shall make to one
another mutually acceptable representations and warranties with respect
to the Retained Franchises and the Retained Assets and the transactions
contemplated herein with appropriate exceptions taken for actions taken
or omitted to be taken by Buyer or Sellers between the Closing Date and
such closing date as manager or pursuant to the Management Agreement;
(iv) At such closing, Buyer and Sellers shall execute and
deliver conveyance documents, certificates and other documents (other
than opinions of counsel)
38
corresponding to those delivered at the Closing with such modifications
as are necessary or appropriate to reflect the provisions of this
Section 9.06 and to relate to the Retained Franchises and Retained
Assets being purchased by Buyer at such closing;
(v) Upon such closing, the Management Agreement shall be
terminated; and
(vi) At such closing, Buyer and Sellers shall direct the
Retained Franchise Escrow Agent to disburse the Retained Franchise
Escrow Amount (to the extent not previously disbursed) as follows: (A)
the Retained Franchise Escrow Agent shall disburse to Buyer the product
of ten percent (10%) of the Full Subscriber Amount times the number of
EBUs in such non transferable Franchise Areas; and (B) the Retained
Franchise Escrow Agent shall disburse to Sellers the remaining balance
of the Retained Franchise Escrow Account.
(f) Buyer and Sellers shall negotiate in good faith any other changes
to this Agreement necessary or appropriate to effectuate the intent of this
Section 9.06.
(g) For purposes of this Section 9.06, the following terms shall have
the following meanings ascribed to them:
(i) "Franchise Area" means any of the geographic areas in
which Sellers are authorized to provide cable television service
pursuant to a Franchise granted by a municipal authority or provides
cable television service in any geographic area in which a Franchise
granted by a municipal authority is not required pursuant to applicable
law;
(ii) "Transferable Franchise Area" means any Franchise Area
with respect to which (AA) any authorization, consent, order or
approval of any municipal authority necessary for the assignment of the
Franchise for such Franchise Area in connection with the consummation
of the transactions contemplated by this Agreement shall have been
obtained and shall be effective, on terms not materially less favorable
to Buyer or Sellers as are currently in place in Sellers' CATV
Franchises or as otherwise agreed by the parties, or (BB) no
authorization, consent, order or approval of any municipal authority is
necessary for the assignment of the Franchise for such Franchise Area
in connection with the consummation of the transactions contemplated by
this Agreement, or (CC) no Franchise is required for the provision of
cable television service in the Franchise Area.
9.07 Noncompetition. Sellers, Aurora Telecommunications, LLC, ▇▇▇▇▇▇ ▇.
▇▇▇▇▇, ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ and ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ covenant and agree that for a
period of three (3) years from the Closing Date neither they nor any of their
affiliates will own, manage, operate, control or engage, directly or indirectly,
in the business of operating a wireline or wireless video cable television
system or other system for the distribution of video programming, in each case
within the Franchise Areas or within any area in the States of Maine or New
Hampshire for which Buyer presently holds a cable television franchise.
Notwithstanding the foregoing, nothing herein shall be construed to prohibit or
restrict the ownership of a company's securities listed on a national securities
exchange or the National Association of Securities Dealers
39
Automated Quotation System, which (a) constitutes less than 5% of each class of
equity of such company, (b) does not constitute control over such company and
(c) is held solely for investment purposes.
10. Survival of Representations and Warranties; Indemnification.
10.01 Survival of Representations and Warranties. All representations
and warranties made by Sellers or Buyer in this Agreement or in any other
documents or instruments delivered pursuant hereto shall survive the Closing for
a period of one (1) year, unless a longer period of survival is provided for in
this Agreement; provided, however, that (i) representations and warranties of
Seller relating to matters of title, and liabilities of Seller other than
Assumed Liabilities and (ii) representations and warranties of Buyer relating to
liabilities of Buyer and Assumed Liabilities shall survive through the
expiration of all statutes of limitation (if any) applicable to any claim, right
of action or Losses to which Buyer could be subject in the event of a breach of
such representations or warranties. The provision of a written notice of claim
setting forth in reasonable detail the basis for such claim with respect to the
breach or alleged breach of any representation or warranty shall extend the
period during which such representation and warranty survives through the date
such claim is resolved.
10.02 Indemnification by Sellers. (a) Sellers jointly and severally
agree to indemnify, defend and hold harmless Buyer, its affiliates and their
respective shareholders, directors, officers, partners, employees, agents,
successors and assigns (a "Seller Indemnified Party"), from and against all
losses, damages, liabilities, deficiencies and obligations, including, without
limitation, all claims, actions, suits, proceedings, demands, judgments,
assessments, fines, interest, penalties, costs and expenses (including, without
limitation, settlement costs and reasonable legal fees and expenses)
(collectively, "Losses"), to which any of the Seller Indemnified Parties may
become subject as a result of (i) the ownership and operation of the Acquired
Assets and the CATV Business prior to the Closing; (ii) the Excluded
Liabilities; (iii) any and all misrepresentations or breaches of any
representation herein or warranty or the nonperformance or breach of any
covenants or agreements of Sellers contained herein and in the agreements or
instruments executed in connection herewith or pursuant hereto; (iv) any and all
obligations of Sellers other than Assumed Liabilities; and (v) any and all
actions, suits, proceedings, claims, demands, assessments, judgments, costs and
expenses, including without limitation, reasonable legal fees and expenses,
incident to any of the foregoing or incurred in investigating or attempting to
avoid the same or to oppose the imposition thereof, or in enforcing this
indemnity.
(b) Payment. Any obligations of Sellers under the provisions of this
Section 10 shall be paid promptly to the Seller Indemnified Party by Sellers and
shall represent a retrospective adjustment to the Purchase Price.
10.03 Indemnification by Buyer. (a) Following the Closing, Buyer agrees
to indemnify, defend and hold harmless Sellers and their shareholders, partners,
directors, officers, employees, agents, successors and assigns (a "Buyer
Indemnified Party"), from and against all Losses to which any of the Buyer
Indemnified Parties may become subject as a result of: (i) any and all
40
misrepresentations or breaches of a representation or warranty or the
nonperformance or breach of any covenant or agreement of Buyer contained herein
and in the agreements or instruments executed in connection herewith or pursuant
hereto; (ii) the Assumed Liabilities; (iii) the ownership and operation of the
Acquired Assets and the CATV Business after the Closing or (iv) any and all
actions, suits, proceedings, claims, demands, assessments, judgments, costs and
expenses, including without limitation, reasonable legal fees and expenses,
incident to any of the foregoing or incurred in investigating or attempting to
avoid the same or to oppose the imposition thereof, or in enforcing this
indemnity.
(b) Payment. Any obligations of Buyer under the provisions of this
Section 10 shall be paid promptly to the Buyer Indemnified Party by Buyer and
shall represent a retrospective adjustment to the Purchase Price.
10.04 Limitations on Indemnity. Notwithstanding anything contained
herein to the contrary, (i) neither party shall have any obligation to make
indemnification payments with respect to breaches of representations or
warranties unless and until the aggregate amount of all Losses in respect of
such party's breaches of representations and warranties exceeds $250,000,
whereupon such party shall be liable for the full amount of all Losses,
including the first $250,000 thereof, and (ii) neither party shall be liable to
make indemnification payments in respect of breaches of representations and
warranties (excluding representations and warranties referred to in the proviso
of the first sentence of Section 10.01 and excluding matters of fraud) in excess
of $9,500,000 in the aggregate. Following the Closing, except for matters of
fraud, indemnification pursuant to this Section 10 shall be the sole remedy of
the parties with respect to breaches of representations and warranties under
this Agreement.
10.05 Third Party Claims. If any claim ("Asserted Claim") covered by
the foregoing indemnities is asserted by a third party against any indemnified
party ("Indemnitee"), it shall be a condition to the obligations under this
Section 10 that the Indemnitee shall promptly give the indemnifying party
("Indemnitor") notice thereof in accordance with Section 13.05. The Indemnitee
shall give Indemnitor an opportunity to control negotiations toward resolution
of such claim without the necessity of litigation, and, if litigation ensues, to
defend the same with counsel reasonably acceptable to Indemnitee, at
Indemnitor's expense, and Indemnitee shall extend reasonable cooperation at
Indemnitor's expense in connection with such defense; provided, however, that
the Indemnitor shall not have the right to control the defense until the
Indemnitor agrees to indemnify the Indemnitee in full irrespective of any
applicable indemnity limitations set forth in Section 10.04. Notwithstanding the
foregoing, the Indemnitor shall only have the right to assume the defense as
provided above in connection with claims for damages and shall have no right to
assume the defense in connection with any claims or actions seeking equitable
relief or involving fines or criminal matters. If the Indemnitor fails to assume
control of the negotiations prior to litigation or to defend such action within
ten (10) days of receipt of such notice (or by such other advance notice that
does not unduly prejudice the Indemnitee) by Indemnitee, Indemnitee shall be
entitled, but not obligated, to assume control of such negotiations or defense
of such action, and Indemnitor shall be liable to the Indemnitee for its
expenses reasonably incurred in connection therewith which Indemnitor shall
promptly pay.
41
10.06 Interest. Any amount not paid when due under this Section 10
shall bear interest from the date of demand therefor until payment in full at
the rate of 15% per annum, compounded annually.
11. Further Assurances.
From time to time at and after the Closing, each party will execute and
deliver such other instruments of conveyance and transfer, fully cooperate with
the other party and take such other actions as the other party reasonably may
request to effect the purposes and intent of this Agreement.
12. Closing; Termination.
12.01 Closing. The Closing shall take place at the offices of Buyer's
Counsel (or if Buyer so elects, at the office of counsel to Buyer's senior
lenders) at 10:00 A.M., local time, on a date specified by Buyer upon at least
ten (10) days' prior written notice to Sellers, which date (the "Closing Date")
is not earlier than October 30, 1998 but in any event by December 31, 1998 or
such later date which is not more than thirty (30) days after the date the
aggregate number of EBUs in those Franchise Areas that are Transferable
Franchise Areas shall be at least eighty-five percent (85%) of the aggregate
number of EBUs in all Franchise Areas.
12.02 Termination. This Agreement may be terminated and the
transactions contemplated hereby may be abandoned:
(a) At any time, by the mutual written agreement of Buyer and Sellers;
(b) By either Buyer or Sellers if the Closing Date does not occur on or
before June 30, 1999;
(c) By Buyer, upon and effective as of the date of written notice to
Sellers, if Buyer is not then in material default of any of its representations,
warranties or obligations under this Agreement and if any of the conditions to
the obligations of Buyer set forth in Section 7 shall not have been waived or
materially satisfied at the time of the Closing or if the Sellers shall have
breached any of their representations, warranties or obligations hereunder in
any material respect, and such breach shall not have been cured in all material
respects or waived prior to the earlier of the Closing Date and thirty (30) days
after the Buyer has given notice to Sellers of such breach;
(d) By Sellers, upon and effective as of the date of written notice to
Buyer, if Sellers are not then in material default of any of their
representations, warranties or obligations under this Agreement and if any of
the conditions to the obligations of Sellers set forth in Section 8 shall not
have been waived or materially satisfied at the time of the Closing or if the
Buyer shall have breached any of its representations, warranties or obligations
hereunder in any material respect, and such breach shall not have been cured in
all material respects or waived prior to the earlier of the Closing Date and
thirty (30) days after the Sellers have given notice to Buyer of such breach.
42
12.03 Notice of Termination; Rights and Obligations of Parties. In the
event of the termination of this Agreement by Buyer or Sellers pursuant to this
Section 12, written notice thereof shall promptly be given to the other party
and, except as otherwise provided herein the transactions contemplated by this
Agreement shall be terminated, without further action by any party.
Notwithstanding the foregoing, no party may terminate this Agreement if such
party is then in default hereunder.
12.04 Remedies Upon Default. If (i) Sellers terminate this Agreement
pursuant to Section 12.02(d) hereof or (ii) Buyer refuses to proceed or tender
performance at the Closing when all conditions to Buyer's obligation to close
have been satisfied, then Sellers shall be entitled to receive the Deposit
Escrow Amount and all earnings thereon pursuant to the Escrow Agreement as
liquidated damages, which shall be the sole remedy of Sellers for such breach,
and neither party shall have any other recourse against the other or any of its
affiliates under or in connection with this Agreement or the transactions
contemplated hereby. In any other case, if the Closing does not occur and this
Agreement is terminated, then, pursuant to the Escrow Agreement, the Deposit
Escrow Amount and all earnings thereon shall be delivered to Buyer, which shall
not in any way be deemed to impair the rights of Buyer to compel specific
performance of Sellers of their obligations under this Agreement, to seek
damages or to pursue any of Buyer's rights at law or in equity.
13. Miscellaneous.
13.01 Amendments; Waivers. This Agreement cannot be changed or
terminated orally and no waiver of compliance with any provision or condition
hereof and no consent provided for herein shall be effective unless evidenced by
an instrument in writing duly executed by the party hereto sought to be charged
with such waiver or consent. No waiver of any term or provision hereof shall be
construed as a further or continuing waiver of such term or provision or any
other term or provision. Any condition to the performance of any party hereto
which may legally be waived at or prior to the Closing may be waived in writing
at any time by the party or parties entitled to the benefit thereof.
13.02 Entire Agreement. This Agreement sets forth the entire
understanding and agreement of the parties and supersedes any and all prior
agreements, memoranda, arrangements and understandings relating to the subject
matter hereof other than any letter or agreement that specifically refers to
this Section 13.02. No representation, warranty, promise, inducement or
statement of intention has been made by any party which is not contained in this
Agreement, and no party shall be bound by, or be liable for, any alleged
representation, promise, inducement or statement of intention not contained
herein or therein.
13.03 Binding Effect; Assignment. This Agreement shall be binding upon
and inure to the benefit of the parties and their respective successors and
permitted assigns. This Agreement may not be assigned by any party without the
prior written consent of the other parties hereto.
43
13.04 Construction; Counterparts. The Section headings of this
Agreement are for convenience of reference only and do not form a part hereof
and do not in any way modify, interpret or construe the intentions of the
parties. This Agreement may be executed in one or more counterparts, and all
such counterparts shall constitute one and the same instrument.
13.05 Notices. All notices and communications hereunder shall be in
writing and shall be deemed to have been duly given to a party when delivered in
person, or one Business Day after delivery by fax or to a nationally recognized
overnight courier service with evidence of receipt, and addressed as follows:
If to Sellers: State Cable TV Corp.
▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
with copies to (which shall not constitute notice)
Whitcom Partners
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
and
▇▇▇▇▇▇▇▇▇▇ and ▇▇▇▇▇, L.L.P.
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇.▇.
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇.▇. ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
If to Buyer: FrontierVision Operating Partners, L.P.
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇-▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
President and CEO
44
with a copy to (which shall not constitute notice)
▇▇▇▇▇▇▇ & ▇▇▇▇▇▇, LLP
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Esq.
Any party may change its address for the purpose of notice by giving notice in
accordance with the provisions of this Section 13.05.
13.06 Expenses of the Parties. Except as otherwise provided herein, all
expenses incurred by or on behalf of the parties hereto in connection with the
authorization, preparation and consummation of this Agreement, including,
without limitation, all fees and expenses of agents, representatives, counsel
and accountants employed by the parties hereto in connection with the
authorization, preparation, execution and consummation of this Agreement shall
be borne solely by the party who shall have incurred the same.
13.07 Third Party Beneficiary. This Agreement is entered into only for
the benefit of the parties and their respective successors and assigns, and
nothing hereunder shall be deemed to constitute any person a third party
beneficiary to this Agreement.
13.08 Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE INTERNAL LAWS, AND NOT THE LAW OF CONFLICTS, OF THE STATE
OF DELAWARE.
13.09 Press Releases. No press release or other public information
relating to the purchase and sale contemplated in this Agreement shall be made
or disclosed by either party hereto without the consent of the other party;
provided, however, that either party may disclose such information if reasonably
deemed to be required by law by the legal counsel for such party.
13.10 Severability. If any provision of this Agreement is finally
determined to be illegal, void or unenforceable, such determination shall not,
of itself, nullify this Agreement which shall continue in full force and effect
subject to the conditions and provisions hereof.
13.11 Joint and Several Liability. All obligations of Sellers under
this Agreement and the other agreements and instruments executed in connection
herewith or pursuant hereto shall be the joint and several obligations of
Sellers whether or not so stated herein or therein.
13.12 Non-Recourse. The obligations of Buyer and Sellers under this
Agreement shall be nonrecourse to the partners of such parties except to the
extent of their ownership interests in such parties and proceeds of the Purchase
Price distributed to such partners.
45
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
SELLERS:
STATE CABLE TV CORPORATION
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
--------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Chairman
BETTER CABLE TV COMPANY
By State Cable TV Corporation,
its general partner
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Chairman
BUYER:
FRONTIERVISION OPERATING PARTNERS, L.P.
By FrontierVision Holdings, L.P., its general partner
By FrontierVision Partners, L.P., its general partner
By FVP GP, L.P., its general partner
By FrontierVision Inc., its general partner
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
---------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇ President and CEO
46
For the sole and limited purpose of acknowledging and committing to be
bound by the obligations set forth in Section 9.07 hereof, the undersigned
hereby execute below as of the date and year first above written.
AURORA TELECOMMUNICATIONS, LLC
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇,
/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
--------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇
/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
--------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
47