1
ASSET PURCHASE AGREEMENT
BY AND BETWEEN
NORTHLAND CABLE PROPERTIES FIVE LIMITED PARTNERSHIP
("BUYER")
AND
PHOENIX CABLE INCOME FUND
("SELLER")
2
TABLE OF CONTENTS
Page
----
Section 1. Definitions ........................................ 1
1.1 Agreement ................................... 1
1.2 Assets ...................................... 1
1.2.1 Cash and Cash Equivalents ............ 1
1.2.2 CATV Instruments ..................... 2
1.2.3 CATV Equipment ....................... 2
1.2.4 Real Property ........................ 2
1.2.5 Seller Contracts ..................... 2
1.2.6 Intangibles .......................... 2
1.3 Basic Package Services ...................... 2
1.4 Basic Service Tier .......................... 2
1.5 Buyer ....................................... 3
1.6 CATV ........................................ 3
1.7 CATV Systems ................................ 3
1.8 CLI Rules ................................... 3
1.9 Closing and Closing Date .................... 3
1.10 Code ........................................ 3
1.11 Equivalent Billing Units .................... 3
1.12 Equivalent Subscribers ...................... 3
1.13 ERISA ....................................... 4
1.14 Excluded Assets ............................. 4
1.15 FCC ......................................... 4
1.16 Monthly Revenue ............................. 4
1.17 Note ........................................ 5
1.18. Pay-TV Services ............................. 5
1.19 Pay-TV Subscribers .......................... 5
1.20 Purchase Price .............................. 5
1.21 Required Consents ........................... 5
1.22 Seasonal Subscribers ........................ 5
1.23 Security Interest ........................... 5
1.24 Seller ...................................... 5
1.25 Seller's Lender ............................. 5
Section 2. Sale of Assets .............................. 6
2.1 Agreement to Purchase and Sell .............. 6
2.2 Assets to Be Sold ........................... 6
Section 3. Purchase Price .............................. 6
3.1 Purchase Price .............................. 6
3.1.1 Cash ................................. 6
3.1.2 Note ................................. 6
i
3
3.2 Adjustments and Prorations to the Purchase Price at Closing ................ 6
3.2.1 Shortfall Adjustments ............................................... 6
3.2.2 Prorations and Other Adjustments .................................... 7
3.3 Post-Closing Adjustments ................................................... 9
3.3.1 Procedure ........................................................... 9
3.3.2 Property Taxes ...................................................... 10
3.3.3 Continuing Offset Rights of Buyer ................................... 10
3.4 Allocation of Purchase Price ............................................... 10
Section 4. Assumption of Liabilities ......................................................... 10
4.1 Assignment and Assumption .................................................. 10
4.2 Limitation of Liability .................................................... 11
4.2.1 Buyer's Liability ................................................... 11
4.2.2 Termination of or Indemnification Against Agreements not Assumed .... 11
4.3 Sales and Transfer Taxes; Third-Party Consents. ............................ 11
Section 5. Representations and Warranties of Seller .......................................... 11
5.1 Organization and Authority ................................................. 11
5.2 Schedules .................................................................. 12
5.3 No Breach or Violation ..................................................... 12
5.4 Title to Assets ............................................................ 12
5.5 Real Property .............................................................. 13
5.5.1 Zoning .............................................................. 13
5.5.2 Access; Utilities ................................................... 13
5.5.3 Effectiveness of Leases ............................................. 13
5.5.4 Easements ........................................................... 13
5.5.5 Environmental Matters ............................................... 13
5.6 Required Consents .......................................................... 14
5.7 CATV Instruments and Seller Contracts ...................................... 14
5.7.1 Effectiveness ....................................................... 14
5.7.2 Copies .............................................................. 15
5.7.3 Status of CATV Instruments and Seller Contracts Not Assumed ......... 15
5.8 FCC Compliance ............................................................. 15
5.8.1 General Compliance .................................................. 15
5.8.2 CLI Compliance ...................................................... 16
5.8.3 Tests and Compliance with Standards ................................. 17
5.8.4 System Repair ....................................................... 17
5.8.5 Payment of Fines .................................................... 18
5.9 Copyrights, Patents and Trademarks ......................................... 18
5.9.1 Copyright Filings ................................................... 18
5.9.2 Copyright Infringement .............................................. 18
5.9.3 Payment of Fines and Copyright Royalties ............................ 18
5.9.4 Patents, Trademarks ................................................. 19
5.10 Assets and CATV Business ................................................... 19
5.10.1 Generally .......................................................... 19
ii
4
5.10.2 Cable Plant ........................... 19
5.11 Litigation and Proceedings .................... 19
5.12 Tax Returns; Other Reports .................... 20
5.13 Dissenters' Rights ............................ 20
5.14 Employment Matters ............................ 20
5.14.1 Employees ............................. 20
5.14.2 Employment Relationship ............... 20
5.14.3 Unions ................................ 20
5.14.4 Benefits .............................. 21
5.14.5 Plans ................................. 21
5.14.6 Seller's Responsibility ............... 21
5.14.7 Health Care Continuation .............. 21
5.14.8 Miscellaneous Federal Acts ............ 21
5.14.9 FCC Filings ........................... 21
5.15 Subscribers Fees and Rates .................... 21
5.16 Insolvency Proceedings ........................ 21
5.17 Finders and Brokers ........................... 22
5.18 Effect of Certificates ........................ 22
5.19 Citizenship ................................... 22
5.20 Overbuilds; Competition ....................... 22
5.21 Financial Statements .......................... 23
5.22 Free CATV Service ............................. 23
5.23 Full Disclosure ............................... 23
Section 6. Buyer's Representations and Warranties ............... 23
6.1 Organization and Authority .................... 23
6.2 Litigation and Proceedings .................... 23
6.3 Finders and Brokers ........................... 24
6.4 Status of Assumed Liabilities ................. 24
6.5 Effect of Certificates ........................ 24
6.6 Citizenship ................................... 24
Section 7. Conduct Pending Closing .............................. 24
7.1 Access to Premises and Records ................ 24
7.2 Continuity and Maintenance of Operations ...... 25
7.3 Existing Relationships ........................ 25
7.4 Employees; Employment Relationship ............ 25
7.5 Buyer's Right to Employ ....................... 26
7.6 Approvals ..................................... 26
7.7 News Releases and Media Notification .......... 26
7.8 Written, Executed Easements ................... 26
Section 8. Closing; Closing Date; Termination ................... 27
8.1 Closing Date .................................. 27
8.2 Termination ................................... 27
iii
5
8.3 Effect of Termination ........................................................ 28
Section 9. Seller's Obligations At and Prior to Closing ........................................ 28
9.1 Transaction Documents ........................................................ 28
9.2 Closing Documents Checklist .................................................. 28
9.3 Security Interest Searches ................................................... 28
9.4 Tax Certificates ............................................................. 29
Section 10. Buyer's Obligations At Closing ..................................................... 29
Section 11. Conditions of Buyer's Obligations .................................................. 29
11.1 Tests and Inspections Before Closing ......................................... 29
11.1.1 Technical Tests ...................................................... 29
11.1.2 Environmental Site Assessments ....................................... 30
11.1.3 Financial Inspection ................................................. 30
11.1.4 Due Diligence ........................................................ 30
11.2 Approvals and Consents ....................................................... 30
11.2.1 Franchises ........................................................... 30
11.2.2 Other Required Consents .............................................. 30
11.3 Performance by Seller of Covenants and Accuracy of Representations and
Warranties .............................................................. 30
11.3.1 Performance of Covenants ............................................. 30
11.3.2 Operability .......................................................... 31
11.3.3 Restraint of Proceedings ............................................. 31
11.3.4 No Governmental Action ............................................... 31
11.3.5 Equivalent Subscribers and Monthly Revenue ........................... 31
11.3.6 Updated Schedules .................................................... 31
11.3.7 Closing Documents .................................................... 31
11.4 Conveyance of Title to Assets ................................................ 31
11.4.1 Security Interests ................................................... 31
11.4.2 Title Insurance ...................................................... 31
11.5 Financing Commitment ......................................................... 32
Section 12. Conditions of Seller's Obligations ................................................. 32
12.1 Performance by Buyer ......................................................... 32
12.2 Buyer's Certificate. ......................................................... 32
12.3 Operability .................................................................. 32
12.4 Restraint of Proceedings ..................................................... 33
12.5 No Governmental Action ....................................................... 33
12.6 Closing Documents ............................................................ 33
Section 13. Noncompetition Agreement ........................................................... 33
Section 14. Indemnification .................................................................... 33
14.1 Survival of Representations, Warranties and Covenants ........................ 33
iv
6
14.2 Limitations of Liability .............................. 34
14.3 Indemnification ....................................... 35
14.4 Defense of Claims ..................................... 36
14.5 Extension of Due Date of Note ......................... 37
14.6 Dispute Resolution Regarding Indemnification Claims ... 37
14.7 Offset ................................................ 37
Section 15. Miscellaneous .............................................. 38
15.1 Governing Law ......................................... 38
15.2 Assignment and Delegation of Agreement ................ 38
15.3 Entire Agreement; Amendments .......................... 38
15.4 Binding Effect ........................................ 38
15.5 Additional Agreements ................................. 38
15.6 Efforts ............................................... 38
15.7 Expenses .............................................. 39
15.8 Execution in Multiple Counterparts .................... 39
15.9 Schedules and Exhibits ................................ 39
15.10 Waiver ................................................ 40
15.11 Counsel ............................................... 40
15.12 Captions and Headings ................................. 40
15.13 Notices ............................................... 40
15.14 Legal Expenses ........................................ 41
15.15 Severability; Invalidity .............................. 41
15.16 Time of the Essence ................................... 41
15.17 Seller's Best Knowledge ............................... 41
v
7
ASSET PURCHASE AGREEMENT
This Asset Purchase Agreement is made as of August 15, 1995, by and
among NORTHLAND CABLE PROPERTIES FIVE LIMITED PARTNERSHIP, a Washington limited
partnership, and PHOENIX CABLE INCOME FUND, a California limited partnership.
RECITALS
A. Phoenix Cable Income Fund currently is engaged in the business of
providing cable television service in or around the communities of Ellenboro,
Bostic and certain nearby unincorporated areas of ▇▇▇▇▇▇▇▇▇▇ County, North
Carolina.
B. Northland Cable Properties Five Limited Partnership desires to
purchase, and Phoenix Cable Income Fund desires to sell and convey,
substantially all of the assets of the CATV Systems (as defined herein) used or
useful in connection with such cable television business, all as more
particularly described below.
AGREEMENT
For good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties agree as follows:
SECTION 1. DEFINITIONS
For the purposes of this Agreement, the following capitalized terms
shall have the respective meanings ascribed to them below (terms defined in the
singular shall have the same meanings when used in the plural, and vice versa):
1.1 Agreement shall mean this Asset Purchase Agreement, as amended,
supplemented or modified from time to time, including all agreements,
instruments and documents delivered in connection with this Agreement and all
Schedules and Exhibits annexed hereto.
1.2 Assets shall mean all properties, privileges, rights and interests,
real and personal, tangible and intangible, of every type and description in
which Seller has any right, title or interest, and that are owned, held, used,
or useful in the CATV Systems as of the Closing Date, including without
limitation the items which are listed in Schedule 1.2, but excepting only the
Excluded Assets as defined in Section 1.14, and the following:
1.2.1 Cash and Cash Equivalents. All cash and cash
equivalents held by Seller and relating to converter and other subscriber
deposits (but only to the extent the refund obligations for the same are assumed
by Buyer), all subscriber prepayments, advertising prepayments and other prepaid
revenues, including but not limited to those Cash Equivalents
1
8
described in Schedule 1.2, but not including cash on hand, all accounts
receivable existing as of Closing with respect to the CATV Systems, accounts or
investments of any kind that are not otherwise Cash Equivalents;
1.2.2 CATV Instruments. Franchises, pole attachment rights,
licenses, crossing permits, service agreements, retransmission consent
agreements and all intangible CATV channel distribution rights or privileges
owned, used or held for use by Seller, with respect to the CATV Systems, all of
which are described in Schedule 1.2;
1.2.3 CATV Equipment. All tangible property, furniture,
fixtures, office equipment and supplies, electronic devices, strand, trunk,
feeder, drop and other distribution cable, towers, antennae, poles, amplifiers,
power supplies, conduit, vaults, pedestals, grounding and pole hardware,
"headend" (origination, earth stations, transmission and distribution system)
hardware, motor and other vehicles, tools, construction equipment, test
equipment, maintenance equipment, spare parts, inventory and other personal
property and facilities owned, leased, used, or held for use in the CATV
Systems, including without limitation subscribers' devices to the extent owned
by Seller (including, without limitation, converters, encoders, transformers
behind TV sets and fittings), all of which are described in Schedule 1.2;
1.2.4 Real Property. All realty, including appurtenances,
improvements, and fixtures located thereon, easements, and other such items,
owned or leased by Seller and used or held for use in the CATV Systems,
including Seller's fee and leasehold interests therein, all of which are
described in Schedule 1.2;
1.2.5 Seller Contracts. All contracts, agreements and other
arrangements pertaining to the lawful ownership, operation and maintenance of
the CATV Systems or used in the CATV Systems, all of which are described in
Schedule 1.2; and
1.2.6 Intangibles. All general intangibles including, but not
limited to, subscriber lists, accounts receivable, notes receivable, options,
claims, trade names other than those listed in Schedule 1.14 (including any
derivatives thereof), patents, copyrights, registered trademarks, and goodwill.
1.3 Basic Package Services shall mean the package of cable television
programming, including broadcast and satellite service programming (but
excluding premium or pay-television programming) sold to the greatest number of
subscribers of the CATV Systems for a fixed monthly fee, as more particularly
described in Schedule 1.7.
1.4 Basic Service Tier shall mean that level of cable services, offered
at the rate set forth in Schedule 1.7, that includes only (a) the signals of
off-air television broadcast stations, (b) the signals of television broadcast
stations that are secondarily transmitted by a satellite carrier beyond the
local service area of such stations, (c) local origination channels, and (d)
public, educational and governmental access channels.
2
9
1.5 Buyer shall mean Northland Cable Properties Five Limited
Partnership, a Washington limited partnership, or any affiliated corporation or
partnership to which Northland Cable Properties Five Limited Partnership may
assign its rights and obligations pursuant to Section 15.2.
1.6 CATV shall mean cable television.
1.7 CATV Systems shall refer to (a) Seller's complete CATV reception
and distribution systems as presently conducted by Seller in or around the
communities of Ellenboro, Bostic and certain nearby unincorporated areas of
▇▇▇▇▇▇▇▇▇▇ County, North Carolina, consisting of one or more headends, trunk
cable, feeder cable, microwave transmission and reception facilities, drops and
associated electronic equipment, which are, or are capable of being, operated as
an independent system without interconnections to other CATV systems; and (b)
all of the Assets and business of such systems, as more particularly described
in Schedules 1.2 and 1.7.
1.8 CLI Rules shall refer to the Cumulative Leakage Index ("CLI")
standards under currently effective FCC rules and regulations.
1.9 Closing and Closing Date shall refer to the meeting for the purpose
of concluding the transactions contemplated by this Agreement, to be held at the
place and on the date specified in Section 8.1. The day on which such meeting
takes place shall be referred to as the "Closing Date."
1.10 Code shall mean the Internal Revenue Code of 1986, and any
successor statute of similar import, and regulations thereunder, in each case as
in effect from time to time.
1.11 Equivalent Billing Units shall mean the units described on
Schedule 1.11, as the same may be updated at Closing pursuant to Section 15.9.
1.12 Equivalent Subscribers shall mean, with respect to the CATV
Systems, the sum of:
(a) the number of single family households (exclusive of
"additional outlets" or "second connects" and "pending disconnects," as
such terms are commonly understood in the CATV industry) subscribing to
Basic Package Services of the CATV Systems and paying the full or
senior citizen monthly price for such services in accordance with
standard rates generally charged by Seller throughout the CATV Systems,
provided, that no part of the account exceeding the lesser of 5% or $5
of the total monthly ▇▇▇▇▇▇▇▇ is more than sixty (60) days past due
from the original due date as stated on such billing, and provided
further, that such households have paid at least one (1) month's
payment for Basic Package Services in full without discount and all
installation charges billed therefor; and
3
10
(b) the number obtained by dividing (i) the aggregate amount
billed by Seller to Seasonal Subscribers over the twelve month period
immediately preceding the Closing Date for Basic Package Services
(excluding Pay-TV Services, installation, re-connection and other
non-recurring charges), by (ii) the product of (A) the full
monthly rate charged to single family households in the CATV Systems
for Basic Package Services, multiplied by (B) twelve; provided, that no
part of the account of any Seasonal Subscriber exceeding the lesser of
5% or $5 of the total monthly ▇▇▇▇▇▇▇▇ is more than sixty (60) days
past due from the original due date as stated on such billing; and
(c) the number of Equivalent Billing Units.
1.13 ERISA shall mean the Employee Retirement Income Security Act of
1974, as amended, and any successor statute of similar import, and regulations
thereunder, in each case as in effect from time to time.
1.14 Excluded Assets shall include Seller's cash on hand at Closing,
but only to the extent that such cash does not constitute Cash Equivalents under
Section 1.2.1, the names listed in Schedule 1.14 and all derivatives thereof,
assets utilized by Seller or an affiliate of Seller in connection with the
operation of the CATV Systems and which are physically located in their
respective California, Tennessee and New Jersey offices, and those assets, and
only those assets (including a regional bucket truck), mutually agreed to by the
parties and listed in Schedule 1.14.
1.15 FCC shall mean the Federal Communications Commission.
1.16 Monthly Revenue shall mean the sum of:
(a) the monthly average of the total revenues (as defined
under generally accepted accounting principles, but not including any
sales or similar taxes collected by Seller on behalf of any
governmental entity) earned by the CATV Systems (except for revenue
earned from Seasonal Subscribers in the CATV Systems) during the three
(3) full calendar months immediately preceding the Closing Date from
(i) recurring monthly subscription payments earned from the CATV
Systems' Equivalent Subscribers and Pay-TV Subscribers, and (ii) the
other operations of the CATV Systems; plus
(b) one-twelfth (1/12) of the total annual revenues (as
defined under generally accepted accounting principles, but not
including any sales or similar taxes collected by Seller on behalf of
any governmental entity) earned by the CATV Systems from Seasonal
Subscribers during the twelve (12) full calendar months immediately
preceding the Closing Date;
provided, however, that such revenue shall be counted in the determination of
Monthly Revenue only to the extent that the CATV Systems' charges to customers
for any equipment and/or services subject to regulation, have not been found to
be in violation of the applicable rate regulation rules of the FCC.
4
11
1.17 Note shall mean the unsecured, non-negotiable, non-assignable,
non-interest bearing promissory note made by Buyer and payable to Seller, as
more particularly described in Section 3.1.2.
1.18. Pay-TV Services shall mean one or more additional channels of
programming commonly known as premium or pay-television programming channels not
otherwise made available to Equivalent Subscribers without the payment of
monthly fees in addition to the fee for Basic Package Services.
1.19 Pay-TV Subscribers shall mean the sum of (a) the number of
Equivalent Subscribers who are paying to receive one or more Pay-TV Services,
and (b) the number of such Pay-TV Services in excess of one for which each such
Equivalent Subscriber is paying, provided, that no part of the payment for such
Pay-TV Services exceeding the lesser of 5% or $5 of the total monthly ▇▇▇▇▇▇▇▇
is more than sixty (60) days past due from the original due date as stated on
such billing, and provided further, that such subscriber has paid at least one
(1) month's regular charges for such services and all installation charges
billed therefor.
1.20 Purchase Price shall mean the total consideration payable by Buyer
to Seller for the transactions contemplated in this Agreement, as more
particularly described in Section 3.1.
1.21 Required Consents shall mean the written consents of the
governmental authorities and other third parties necessary or required for Buyer
to conduct the business of the CATV Systems, as more particularly described in
Section 5.6.
1.22 Seasonal Subscribers shall mean only those subscribers in the CATV
Systems who during the twelve calendar months immediately preceding the Closing
Date have contracted with Seller to receive Basic Package Services for a period
of not less than two months, and who have purchased at least Basic Package
Services.
1.23 Security Interest shall mean any mortgage, deed-of-trust, lien,
security agreement, limitation, pledge, hypothecation, assignment for security
purposes, option, put, charge, restrictive agreement, capital or financing lease
arrangement, restriction, priority, encumbrance, adverse interest, claim,
restraint on transfer, or claim of any kind or nature whatsoever (including,
without limitation, any agreement to give or suffer to exist any of the
foregoing) against title with respect to any Asset to be sold under this
Agreement.
1.24 Seller shall mean Phoenix Cable Income Fund, a California limited
partnership.
1.25 Seller's Lender shall mean National Westminster Bank USA, a
national banking association.
5
12
SECTION 2. SALE OF ASSETS
2.1 Agreement to Purchase and Sell. Subject to the terms and conditions
set forth in this Agreement, at Closing Buyer shall purchase the Assets from
Seller, and Seller shall sell, transfer, assign, convey and deliver the Assets
to Buyer.
2.2 Assets to Be Sold. Except as otherwise specifically provided in
this Agreement, all of the Assets are intended to be sold, transferred,
assigned, conveyed and delivered to Buyer, whether or not described in the
Schedules to this Agreement.
SECTION 3. PURCHASE PRICE
3.1 Purchase Price. Buyer shall pay to Seller total consideration of
Two Million Nine Hundred Thirty Two Thousand Dollars ($2,932,000) (the "Purchase
Price") for the Assets, as adjusted pursuant to Sections 3.2 and 3.3. The
Purchase Price shall be paid as follows:
3.1.1 Cash. At Closing, Buyer shall pay to Seller Two Million
Eight Hundred Sixty Thousand Dollars ($2,860,000) as adjusted pursuant to
Section 3.2, by wire transfer of immediately available funds on the Closing
Date; and
3.1.2 Note. At Closing, Buyer shall execute and deliver to
Seller an unsecured, non-negotiable, nonassignable, non-interest bearing
promissory note in the principal amount of Seventy Two Thousand Dollars
($72,000), due and payable one hundred twenty (120) days following Closing and
in substantially the form of Exhibit G. The Note shall be subject to offset as
described in Section 3.3.3. Upon the request of Buyer, Seller, at Closing, shall
enter into a subordination agreement with Buyer's senior lender, reasonably
acceptable to Seller, Buyer and Buyer's senior lender, providing that the Note
and any right to payment thereunder shall be fully subordinated to the interest
of Buyer's senior lender.
3.2 Adjustments and Prorations to the Purchase Price at Closing
3.2.1 Shortfall Adjustments. Northland Communications
Corporation, the managing general partner of Buyer, originally negotiated the
transactions contemplated by this Agreement as a part of a larger transaction
with Seller and its affiliates. Such other transactions are reflected in those
certain Asset Purchase Agreements, of even date herewith, (i) between Seller and
Northland Premier Cable Limited Partnership, (ii) between Seller and Northland
Cable Television, Inc., and (iii) between PCI One Incorporated and Buyer (the
collective transactions represented by this Agreement and such other agreements
shall be referred to in this Section 3.2.1 and Sections 8.2 and 11.3.5 as the
"Aggregated Systems"). Although Seller has consented to the allocation of
portions of the Aggregated Systems to Buyer and its affiliates, Seller
nevertheless has required that no shortfall adjustments shall be made if the
actual aggregate number of Equivalent Subscribers and the actual aggregate
Monthly Revenue for the Aggregated Systems are equal to or greater than the
aggregated benchmarks of Equivalent Subscribers or the aggregated Minimum
Monthly Revenue, as the case may be.
6
13
(a) If Aggregate Minimum Levels Are Met. If on the
Closing Date the actual number of aggregated Equivalent Subscribers and
the actual Monthly Revenue for (i) each of the transactions comprising
the Aggregated Systems, and (ii) the Aggregated Systems as a whole,
meet or exceed the minimum stipulated and aggregated levels for
Equivalent Subscribers and Minimum Monthly Revenue, as the case may be,
then the Purchase Price and the portion thereof payable to Seller under
Section 3.1.1 shall not be adjusted.
(b) If Aggregate Minimum Levels Are Not Met. If on the
Closing Date the actual number of aggregated Equivalent Subscribers is
less than five thousand nine hundred fifty (5,950), or the actual
Monthly Revenue for the Aggregated Systems is less than One Hundred
Sixty Four Thousand Five Hundred Dollars ($164,500), then the Purchase
Price and the portion thereof payable under Section 3.1.1 shall be
reduced in accordance with either of the following:
(i) Subscriber Shortfall Adjustment. If the
Aggregated Systems serve fewer than five thousand nine hundred fifty
(5,950) Equivalent Subscribers at the Closing Date, to an amount
determined by multiplying the Purchase Price by a fraction, the
numerator of which is the actual number of Equivalent Subscribers
served by the Aggregated Systems at the Closing Date and the
denominator of which is five thousand nine hundred fifty (5,950); or
(ii) Monthly Revenue Shortfall Adjustment. If the
Aggregated Systems generate less than One Hundred Sixty Four Thousand
Five Hundred Dollars ($164,500) of Monthly Revenue at the Closing Date,
to an amount determined by multiplying the Purchase Price by a
fraction, the numerator of which is the actual Monthly Revenue for the
Aggregated Systems at the Closing Date and the denominator of which is
One Hundred Sixty Four Thousand Five Hundred Dollars ($164,500).
(c) Additional Adjustments among Buyer and Its
Affiliates. To the extent that Buyer may make additional Purchase Price
increases or reductions in the manner described above, relative to the
purchase prices payable by Buyer's affiliates, to account for material
variations of actual Equivalent Subscribers or Monthly Revenue among
Buyer's affiliates, Seller shall reasonably cooperate with Buyer to
accomplish such adjustments; provided, however, that Seller's
reasonable cooperation shall in no case require Seller to sustain a
purchase price adjustment for the Aggregated Systems where both the
aggregate minimum levels of Equivalent Subscribers and Monthly Revenue
have been achieved.
3.2.2 Prorations and Other Adjustments
(a) Prorations. In addition to the adjustments
described in Section 3.2.1 and Section 4.1, appropriate adjustments to
the Purchase Price and the
7
14
portion thereof payable under Section 3.1.1 shall be made on a prorata
basis as of the Closing Date (or as of such other date as mutually
agreed by the parties) to the extent reasonably possible for all
prepaid expenses, accrued expenses and prepaid revenue, all as
determined in accordance with generally accepted accounting principles,
to reflect the principle that all expenses arising out of and all
income attributable to the CATV Systems for the period prior to 11:59
p.m. on the Closing Date are for the account of Seller, and that all
expenses arising out of and all income attributable to the CATV Systems
for the period after 11:59 p.m. on the Closing Date are for the account
of Buyer. All overlapping items of income or expense, including without
limitation the following, shall be prorated or reimbursed, as the case
may be, as of 11:59 p.m. on the Closing Date:
(i) Prepaid expenses and deposits made prior to
Closing, as permitted by the terms hereof, for or in connection with
goods or services where all or a part of such goods or services have
not been received or used as of the Closing Date (e.g., rents paid in
advance for a rental period extending beyond the Closing Date);
(ii) Liabilities customarily accrued, arising from
expenses incurred but unpaid as of Closing, including without
limitation liabilities under any and all obligations assumed by Buyer
pursuant to Section 4.1 (e.g., rents, sales commissions, fees for
business and professional services, and other similar matters);
(iii) Taxes and utility charges related to the
CATV Systems or in respect of any of the Assets (other than state sales
taxes that may be due as a consequence of the consummation of the
transactions contemplated by this Agreement, and any taxes that may be
imposed upon Buyer on the basis of Buyer's income);
(iv) Deposits made and unearned prepayments
received by Seller in connection with any of Seller's obligations
assumed by Buyer pursuant to Section 4.1; and
(v) Franchise fees, copyright payments, pole
attachment agreements, railroad and/or highway crossing charges,
programming expenses, satellite service fees, antenna space leases, bad
debt expenses, billing company charges, and other fees, expenses, costs
and charges normally prorated in the sale of the assets of a CATV
business.
No payments or adjustments shall be made with respect to any Excluded
Assets.
(b) Pre-Closing Procedure. At least five (5) calendar
days before Closing, Seller shall notify Buyer of Seller's good faith
estimate of (i) the Equivalent Subscribers and the Monthly Revenue as
of the Closing Date, and (ii) any adjustments or
8
15
prorations required by this Section 3.2. If such estimate will result
in an adjustment to the Purchase Price, then the amount to be paid by
Buyer at Closing shall be preliminarily adjusted by such estimate.
Prior to Closing, Seller shall provide Buyer or Buyer's representatives
with copies of or reasonable access to all books and records,
subscriber work orders, billing reports, bank statements and related
documentation as Buyer may reasonably request for purposes of verifying
the matters set forth in such notification, but without limiting
Seller's obligations hereunder to certify the accuracy of all
adjustments. Seller and Buyer shall work together in good faith to
resolve on or before the Closing Date any disagreement with respect to
any matter set forth in such notification. At least one (1) day before
Closing, Seller shall deliver to Buyer a certificate setting forth (i)
the number of Equivalent Subscribers and the Monthly Revenue as of the
Closing Date, and (ii) any adjustments or prorations required by this
Section 3.2 to which the parties have mutually agreed.
(c) Accounts Receivable. In addition to the Purchase
Price, Buyer shall purchase, and Seller shall sell, transfer, assign,
convey and deliver to Buyer, all of Seller's accounts receivable
existing as of Closing with respect to the CATV Systems. For purposes
of this Agreement, the age of Seller's accounts receivable shall be
measured from the original due date as stated on Seller's ▇▇▇▇▇▇▇▇. The
consideration that Buyer shall pay to Seller shall be calculated as
follows:
(i) For accounts receivable aged 0-30 days, 100% of the
aggregate amounts of such accounts receivable;
(ii) For accounts receivable aged 31-60 days, 75% of the
aggregate amount of such accounts receivable;
(iii) For accounts receivable aged 61-90 days, 25% of the
aggregate amounts of such accounts receivable; and
(iv) For accounts receivable aged over 90 days, 0% of the
aggregate amounts of such accounts receivable.
3.3 Post-Closing Adjustments
3.3.1 Procedure. As soon as practicable, but in any event
within sixty (60) days after the Closing Date, Buyer shall prepare and deliver
to Seller a certificate setting forth Buyer's computations of the amount of all
prorations and adjustments, if any, called for in Section 3.2. After such
certificate has been delivered, Seller shall have a period of fifteen (15) days
to review such certificate and to present objections, if any, to Buyer. Buyer
shall grant to Seller or Seller's representatives reasonable access to Buyer's
books and records as Seller may reasonably request for purposes of verifying
such computations. Such certificate shall be final and conclusive unless
objected to by Seller in writing within such 15-day period. During the fifteen
(15) days after Buyer's receipt of any such written objection from Seller,
Seller and Buyer shall attempt to
9
16
reach agreement upon the proper prorations and adjustments called for in Section
3.2. A payment shall be made by Seller or Buyer within five (5) business days
after any such agreement as to the proper undisputed amounts, taking into
account any preliminary adjustment for such items made at Closing. If Seller and
Buyer are unable to agree upon the proper amount of any such adjustment within
such 15-day period, then the amounts in dispute shall be submitted to an
accounting firm mutually acceptable to Buyer and Seller, which shall render a
written decision to Seller and Buyer within thirty (30) calendar days after it
has been retained, which decision shall be final, and whose fees shall be paid
one-half by Buyer and one-half by Seller.
3.3.2 Property Taxes. If the amount of any real or personal
property tax to be prorated is not known on the Closing Date, such tax shall be
deemed payable in advance on a calendar or fiscal year basis, as may be utilized
by the taxing authority, and shall be apportioned on the basis of the most
recent tax assessment; except, however, if there is a re-assessment pending or
threatened with respect to the property being taxed, then the parties shall
mutually agree to an appropriate apportionment taking into account such pending
or threatened re-assessment.
3.3.3 Continuing Offset Rights of Buyer. Subject to the terms
and conditions of Section 14, Buyer shall have the continuing right to offset or
recoup against the Note: (a) for liabilities or expenses of Seller which were
undisclosed by Seller prior to Closing and which Buyer in its sole and absolute
discretion elects to assume; or (b) for damages suffered or costs incurred
(whether or not yet paid) by Buyer for reason of Seller's breach of any
provision of this Agreement. After Closing, Buyer shall not have the right to
offset or recoup against the Note for further reductions to the Purchase Price
pursuant to Section 3.2.1, unless Buyer can reasonably demonstrate that Seller
committed fraud or made a knowing misrepresentation. Nothing contained in this
Section 3.3.3 shall be deemed to limit or in any way restrict Buyer's right to
be indemnified by Seller pursuant to Section 14 of this Agreement to the extent
the amount to which Buyer is entitled under Section 14 exceeds the amount
actually offset or recouped under this Section 3.3.3.
3.4 Allocation of Purchase Price. The Purchase Price shall be allocated
among the Assets in such amounts as set forth in Schedule 3.4. Buyer and Seller
agree to be bound by such allocation and to file according to Code Section 1060,
all returns and reports with respect to the transaction contemplated by this
Agreement, including, but not limited to, all federal, state, and local tax
returns, on the basis of such allocation. In the event the Purchase Price is
adjusted pursuant to Sections 3.2 or 3.3, the difference shall be allocated
among appropriate categories on a prorata basis unless such differences are
specifically allocable in whole or in part to a particular category or
categories as mutually agreed by Buyer and Seller.
SECTION 4. ASSUMPTION OF LIABILITIES
4.1 Assignment and Assumption. All of Seller's obligations with
respect to the CATV Systems are set forth in the agreements listed in Schedule
1.2. Buyer shall assume only the obligations of Seller set forth on Schedule 4.1
that accrue after the Closing Date (the
10
17
"Assumed Liabilities"). If and to the extent that Seller, in the ordinary course
of business, enters into other agreements after the date of this Agreement but
before the Closing Date that are not listed on Schedule 4.1 but have terms less
than ninety (90) days and have payment or performance obligations that are not
material, Buyer shall assume all of such agreements as a part of the Assumed
Liabilities. At Closing, Seller shall assign and Buyer shall assume the Assumed
Liabilities. Such agreement for assignment and assumption pertaining to CATV
Instruments and Seller Contracts shall, to the extent reasonably possible, be in
the form of Exhibit B. Such agreement for assignment and assumption pertaining
to Real Property shall, to the extent reasonably possible, be in the form of
Exhibit C.
4.2 Limitation of Liability
4.2.1 Buyer's Liability. It is expressly understood and
agreed that Buyer shall not be liable for, and does not assume, any obligations
or liabilities of Seller of any kind or nature, other than (a) Seller's
obligations to subscribers of the CATV Systems with respect to (i) subscriber
deposits held by Seller (and for which Buyer receives credit) as of the Closing
Date which are refundable, and (ii) subscriber advance payments held by Seller
(and for which Buyer receives credit) as of the Closing Date for services to be
rendered in connection with the operation of the CATV Systems subsequent to the
Closing Date; and (b) obligations accruing after Closing under the Assumed
Liabilities expressly assumed by Buyer pursuant to the terms of Section 4.1.
Except as otherwise set forth herein, Buyer shall be under no obligation to, and
shall not, assume any obligation, liability or indebtedness of Seller or the
CATV Systems.
4.2.2 Termination of or Indemnification Against Agreements
not Assumed. Seller in its discretion may terminate as of Closing any and all
agreements with third parties which affect the Assets or the CATV Systems which
Buyer does not expressly assume; provided, however, any agreements not
terminated shall be subject to Seller's representations and warranties set forth
in Section 5.7.3.
4.3 Sales and Transfer Taxes; Third-Party Consents. Seller and Buyer
shall each pay one-half of any and all (a) costs, fees, transfer, use and
similar taxes, state sales taxes that may be due as a consequence of the
consummation of the transactions contemplated by this Agreement, and (b) costs,
fees and expenses directly assessed or charged by any governmental authority or
any independent third-party in connection with obtaining a Required Consent.
SECTION 5. REPRESENTATIONS AND WARRANTIES OF SELLER
To induce Buyer to enter into this Agreement, Seller represents and
warrants to Buyer as follows:
5.1 Organization and Authority. Seller is a California limited
partnership duly formed, validly existing and in good standing under the laws of
the State of California and is qualified to transact business in all other
jurisdictions in which the failure to so qualify would
11
18
have a material adverse effect on its business or properties; openly and
lawfully does business under the names listed in Schedule 1.14, but no other
names; has full power and authority to execute, deliver, and perform this
Agreement; has all requisite power and authority to carry on its business as
currently conducted and to own, lease, use, and operate the Assets at the places
they are located and in the manner in which the CATV Systems are operated; and
has taken all partnership action required by law, its agreement of limited
partnership and otherwise, as the case may be, and as of Closing shall have used
its commercially reasonable efforts to have obtained all Required Consents and
shall have received all necessary partnership consents and approvals, including
without limitation the approval of all of the partners of Seller to authorize
the execution, delivery, and performance of this Agreement. With respect to the
CATV Systems, Seller has not, within the two (2) year period immediately
preceding the date of this Agreement, changed its name, been the surviving
entity of a merger or consolidation, or acquired all or substantially all of the
assets of any person, company or entity.
5.2 Schedules. The Schedules to this Agreement, as the same may be
amended or supplemented pursuant to Section 15.9 , list all of the material
Assets owned, held, or used for the performance of any CATV Instrument or Seller
Contract and for the lawful conduct of the CATV Systems. All Schedules to this
Agreement, as the same may be amended or supplemented pursuant to Section 15.9,
are true, accurate, and complete in all material respects. Seller shall update
the Schedules at Closing and certify that such updated Schedules are true,
accurate, and complete in all material respects as of the Closing Date.
5.3 No Breach or Violation. Subject to the rights of Seller's Lender
(which rights shall be extinguished simultaneously with Closing), the execution,
delivery, and performance of this Agreement will not (a) conflict with or result
in a breach or violation by Seller of, or (b) constitute default by Seller
under, or (c) create or impose any Security Interest or right of termination,
cancellation, or acceleration with respect to any of the Assets pursuant to, any
statute, ordinance, rule, regulation, or order, or any material agreement,
lease, instrument, document or arrangement affecting the CATV Systems or the
Assets or any part thereof, to which Seller is a party or by which Seller or the
Assets are bound. This Agreement constitutes the legal, valid, and binding
obligation of Seller, enforceable in accordance with its terms.
5.4 Title to Assets. Seller has good, marketable and indefeasible
title, both legal and equitable, to all of the Assets which are owned, and a
valid leasehold interest in all of the Assets which are leased; and the Assets
are free and clear of all Security Interests of any kind or nature, subject only
to (a) Permitted Exceptions (as defined in Section 11.4.2) with respect to Real
Property, (b) any property taxes not delinquent, and (c) those Security
Interests disclosed in Schedule 5.4, which Security Interests shall be removed
and released at or prior to Closing, unless assumed by Buyer.
12
19
5.5 Real Property. With respect to all Real Property:
5.5.1 Zoning. To the best of Seller's knowledge, at Closing
the Real Property and the improvements located thereon and the continuation of
business presently being conducted thereon do not and will not violate any
applicable material zoning laws.
5.5.2 Access; Utilities. Except as disclosed in Schedule
5.5.2, the Real Property is served by electrical power and services reasonably
necessary for the normal and intended use of the Real Property in connection
with the operation of the CATV Systems.
5.5.3 Effectiveness of Leases. All leases of Real Property
are currently in full force and effect and are valid and enforceable in
accordance with their respective terms under all applicable laws. Seller is in
compliance with all of the material requirements and obligations under all such
leases. There is no assertion or claim pending, or to the best of Seller's
knowledge threatened, by any party that Seller is in default or otherwise not in
compliance with all such leases.
5.5.4 Easements. Seller owns and possesses all easements and
rights-of-way necessary for the operation, maintenance, repair, replacement, and
current location of all cables, lines, towers, poles, equipment, and other
facilities used or useful in connection with the operation of the CATV Systems.
Schedule 5.5.4 lists all material and non-material easements and rights-of-way,
other than easements and rights-of-way for which authorization is granted
pursuant to Section 621(a)(2) of the Cable Communications Policy Act of 1984, as
amended (47 U.S.C. Sec. 541(a)(2)), that are necessary or desirable with respect
to the operation of the CATV Systems.
5.5.5 Environmental Matters
(a) Definitions. For purposes of this Section 5.5.5,
the following terms shall have the following meanings:
(i) Hazardous Substance. "Hazardous Substance"
shall mean any chemical, substance, material, or waste,
including without limitation asbestos, PCBs and formaldehyde,
that is defined, classified, listed, or designated as
hazardous, toxic, or radioactive, or by other similar term,
by any federal, state, or local environmental statute,
regulation, rule, order, or ordinance presently in effect.
(ii) Other Property. "Other Property" shall
mean any property that becomes contaminated with any
Hazardous Substance as a result of operations or other
activities on, or as a result of any contamination of, the
Real Property.
13
20
(iii) Environmental Laws. "Environmental Laws"
shall mean all federal, state and local laws and regulations
in effect as of the Closing Date relating to emissions,
discharges, releases or threatened releases of pollutants,
contaminants, chemicals or industrial, hazardous or toxic
materials or wastes into the environment (including without
limitation the atmosphere, ambient water, surface water,
ground water or land surface or sub-surface) or otherwise
relating to the manufacture, processing, distribution, use,
treatment, storage, disposal, transport, or handling of
Hazardous Substances.
(b) Presence. Except as set forth on Schedule 5.5.5,
Seller has no knowledge of: (i) any storage, spill, release, discharge,
emission, or disposal of any Hazardous Substance that has occurred or
is presently occurring in, upon, or onto the Real Property in violation
of any Environmental Law; or (ii) the presence of any underground
storage tank on the Real Property.
(c) Pending Proceedings. Except as set forth on
Schedule 5.5.5, there is no pending, or to the best of Seller's
knowledge threatened, civil or criminal litigation, notice of
violation, investigation or administrative proceeding arising out of
the business or activities of Seller, including without limitation any
pending, or to the best of Seller's knowledge threatened, litigation,
notice, investigation or proceeding relating in any way to the
Environmental Laws.
5.6 Required Consents. Schedule 5.6 sets forth a true, correct and
complete list of all Required Consents to be obtained from governmental
agencies, franchising authorities, lessors, and any other third parties whose
consents and approvals are reasonably necessary or required for Seller to sell,
transfer, assign, convey and deliver the Assets to Buyer and for Buyer to
conduct the business of the CATV Systems and to own, lease, use, and operate, as
the case may be, the Assets at the places and in the manner in which the CATV
Systems and Assets are presently conducted or used and will be conducted or used
on the Closing Date.
5.7 CATV Instruments and Seller Contracts
5.7.1 Effectiveness. Except as disclosed in Schedule 1.2, the
CATV Instruments and Seller Contracts (i) are currently in full force and
effect, (ii) are valid and enforceable in accordance with their respective terms
under all applicable federal, state, and local laws and (iii) include all
material licenses, rights of entry, permits, and other rights and
authorizations, necessary to enable Seller to operate the CATV Systems as and in
the manner in which they presently are conducted and in accordance with all
applicable federal, state and local laws. Seller has no knowledge of any default
under or violation of any material provision of any CATV Instrument or Seller
Contract. Except as disclosed in Schedule 1.2, there is no dispute, legal
action, governmental proceeding or investigation, pending, or to the best of
Seller's knowledge threatened, for the purpose of modifying, revoking,
terminating, suspending, canceling, or reforming any CATV Instrument or Seller
Contract, or seeking damages or other relief with respect thereto. Except as
disclosed in Schedule 1.2, Seller is in material compliance
14
21
with the applicable requirements of all governing or regulatory authorities
(including without limitation the FCC and the Register of Copyrights) relating
to the CATV Instruments and Seller Contracts, including, without limitation, all
requirements relating to notification, filing, document delivery, reporting,
posting, maintenance of logs and records and payment of fees or other amounts
due. Except as set forth in Schedule 5.11, there is no pending, or to the best
of Seller's knowledge threatened, assertion or claim in writing by any
governmental authority or party to any CATV Instrument or Seller Contract that
operations pursuant to such CATV Instruments or Seller Contracts have been
improperly conducted or maintained. As of Closing, a request for renewal has
been filed under Section 626 of the Cable Communications Policy Act of 1984 with
respect to all franchises expiring within thirty-six (36) months of the date of
this Agreement. Seller shall deliver to Buyer copies of all such renewal
notices.
5.7.2 Copies. True, correct and complete copies of all
material CATV Instruments and Seller Contracts and any amendments to the CATV
Instruments and the Seller Contracts to the date of this Agreement have been
delivered by Seller to Buyer.
5.7.3 Status of CATV Instruments and Seller Contracts Not
Assumed. At Closing, Seller either (a) will have terminated all CATV Instruments
and Seller Contracts that are not assumed by Buyer under Section 4.1, or (b)
will indemnify Buyer pursuant to Section 14, until the applicable statutes of
limitations have run, for any and all Third Party Claims and Direct Claims (as
such terms are defined in Section 14) against Buyer arising directly or
indirectly from such CATV Instruments and Seller Contracts that are not assumed
by Buyer under Section 4.1 and not terminated by Seller in accordance with (a)
above.
5.8 FCC Compliance
5.8.1 General Compliance. As of Closing, Seller shall be duly
authorized under applicable CATV Instruments and FCC rules, regulations, and
orders to distribute all of the off-air television and radio broadcast signals
presently being carried to the subscribers of the CATV Systems and to utilize
all carrier frequencies generated by the CATV Systems, and shall be duly
licensed to operate all the property, equipment and facilities, including,
without limitation, any business radio and any CATV relay service system, being
operated in connection with the CATV Systems. As of Closing, the operation of
the CATV Systems and of any FCC-licensed facility used in conjunction with the
operation of the CATV Systems shall be in material compliance with the FCC's
rules and regulations and, to the extent applicable, the rules and regulations
of the Federal Aviation Administration, and Seller has received no notice, and
otherwise has no reason to know, of any claimed default or violation with
respect to the foregoing. Seller shall deliver to Buyer copies of all current
and past reports and filings necessary for Buyer to evaluate Seller's compliance
with FCC rules and regulations. As of Closing, Seller will have materially
complied with and will have provided Buyer with true, correct and complete
copies of all valid Syndicated Exclusivity, Network Nonduplication and Sports
Blackout requests and all notices received by Seller with respect to any of the
signals carried on the CATV Systems. In addition, Seller shall provide Buyer
with true and correct copies of the following if and to the extent the same are
available:
15
22
(i) The CATV Systems' political file maintained
pursuant to Section 76.207 of the FCC's rules.
(ii) The CATV Systems' advertising and sponsorship
identification file maintained pursuant to Section 76.221(f) of the
FCC's rules.
(iii) The CATV Systems' paid political advertising
file maintained pursuant to Section 76.221(d) of the FCC's rules.
(iv) The CATV Systems' file on commercial matter on
children's programs maintained pursuant to Section 76.225(c) of the
FCC's rules.
(v) The CATV Systems' proof of performance test data,
including an identification of the instruments, a description of the
procedures utilized, and a statement of the qualifications of the
person performing the tests, from the semi-annual performance tests
required pursuant to Section 76.601(c) of the FCC's rules.
(vi) The CATV Systems' written policy statement and
all records relating to indecent leased access programming pursuant to
Section 76.701(h) of the FCC's rules, and a schedule of Seller's
commercial leased access rates pursuant to Section 76.970(e) of the
FCC's rules.
(vii) Records of complaints from subscribers of the
CATV system concerning the quality of the television signals delivered
together with Seller's correspondence and other records of how such
complaints were resolved.
(viii) Letters to off-air broadcasters sent pursuant
to Section 76.58 of the FCC's rules.
(ix) FCC Forms 393, 1200, 1210 and 1215 as submitted
to the FCC and/or any of the CATV Systems' franchising authorities,
together with any correspondence, notices or other documentation
related thereto.
(x) The CATV Systems' model notices to subscribers
sent pursuant to Sections 76.56(d)(3), 76.309(c)(3), 76.607, 76.630(a),
76.630(d), 76.630(e), 76.802, 76.931, 76.932, 76.964, 76.952, and
76.980(d) of the FCC's rules, and the notice sent to subscribers
pursuant to Section 624(d) of the Communications Act of 1934, as
amended.
5.8.2 CLI Compliance. As of Closing, Seller shall have
materially complied with its obligations in connection with the CLI Rules
including, without limitation, (a) using reasonably adequate CLI monitoring
equipment, (b) maintaining appropriate log books and other record-keeping
pursuant to and in accordance with Section 76.601(e) of the FCC's rules, and
16
23
(c) promptly correcting any radiation leakage discovered by Seller in connection
with its monitoring obligations under the CLI Rules.
5.8.3 Tests and Compliance with Standards. During the period
beginning not more than thirty (30) days prior to the execution of this
Agreement and ending not more than forty-five (45) days after the execution of
this Agreement, Seller shall have completed each of the following tests in the
manner specified below and shall have certified to Buyer that the CATV Systems
comply with the standards set forth in Sections 5.8.3(a) and (e), and that, to
the extent the CATV Systems serves greater than 1,000 subscribers, the CATV
Systems comply with the standards set forth in Sections 5.8.3(a), (b), (c), (d)
and (e). (When conducting any of the following tests, the CATV Systems shall be
operated at the power levels specified in the CATV Systems' technical design.)
(a) Signal Leakage and CLI Certification. Pursuant to
the rules of the FCC and in accordance with the standards generally
accepted by qualified engineers in the CATV industry, Seller shall
complete a ground-based signal leakage test on the CATV Systems and
shall certify to the Buyer that the CATV Systems' CLI, as determined by
using the Ii method, shall be equal to or less than 58. Results of the
signal leakage test, together with a log covering the three year period
immediately preceding the date of this Agreement of all detected leaks
and a description of the repairs effected, shall be delivered to Buyer
promptly following completion of the testing.
(b) Proof of Performance. Seller shall perform an
end-to-end swept frequency response test of all the trunk facilities of
the CATV Systems to 330 MHz, and demonstrate a "peak-to-valley" ratio
of less than 3dB between adjacent channels and less than 10dB between
all other channels.
(c) Carrier to Noise. Seller shall perform carrier to
noise ratio testing on six (6) channels reasonably spaced across the
330mHz spectrum of each CATV System and shall demonstrate a ratio of
better than 43 db on such six (6) channels in each such CATV System.
(d) Hum Modulation. Seller shall perform hum
modulation testing on one (1) channel of each CATV System and shall
demonstrate hum disturbances of less than three percent on such
channels.
(e) Aeronautical Frequencies. All aeronautical
frequencies used by the CATV Systems shall be maintained within 5 KHz
+/- of the authorized offset frequency.
5.8.4 System Repair. To the extent the CATV Systems or any
portion thereof are not in compliance with CLI Rules, or with the other
standards prescribed in Section 5.8.3, Seller will take the necessary steps so
as to have caused the CATV Systems to be in full compliance with such rules and
standards (collectively, the "Remedial Steps"), no later than
17
24
thirty (30) days prior to Closing. Seller shall have completed the Remedial
Steps at its sole cost and expense, and otherwise shall have thereafter
maintained the CATV Systems in compliance with the CLI Rules and with the
standards prescribed in Section 5.8.3. In the event Buyer and Seller are unable
to agree whether appropriate Remedial Steps have been taken to bring the CATV
Systems into compliance with the standards prescribed in Section 5.8.3, Buyer
and Seller shall appoint a mutually acceptable engineering firm to conduct
appropriate tests, in accordance with the rules of the FCC and the standards
generally accepted by qualified engineers in the CATV industry, to certify the
CATV Systems' compliance with the standards of Section 5.8.3, which firm shall
render a written report to Buyer and Seller within thirty (30) calendar days
after it has been retained, and whose fees shall be paid one-half by Buyer and
one-half by Seller. In the event that Seller's actual direct costs incurred in
undertaking the Remedial Steps exceeds Seven Thousand Two Hundred Twenty Two
Dollars ($7,222), and Buyer has finally determined not to waive the then
outstanding Remedial Steps, Seller may in its discretion elect to terminate this
Agreement in accordance with Section 8.2(f).
5.8.5 Payment of Fines. Seller has, prior to Closing, paid in
full any and all fines or penalties levied or assessed by the FCC as a result of
the failure of any portion of the CATV Systems to comply with the CLI Rules or
standards prescribed in Section 5.8.3. Seller shall pay in full any such fines
or penalties levied or assessed by the FCC after Closing, to the extent that
such fines or penalties (a) relate to the period prior to Closing, and (b) have
been determined to be valid.
5.9 Copyrights, Patents and Trademarks
5.9.1 Copyright Filings. Except as set forth in Schedule
5.9.1, Seller has timely made all requisite filings with and payments to the
Register of Copyrights and is otherwise in material compliance with all
applicable rules and regulations of the Copyright Office. Seller shall deliver
to Buyer copies of all current and past reports and filings within the past
three (3) years reasonably necessary to evidence such compliance with Copyright
Office rules and regulations.
5.9.2 Copyright Infringement. In addition to any other of
Seller's warranties hereunder, Seller hereby covenants, warrants and represents
that the Assets and the programming offered over the CATV Systems are free and
clear of any rightful claim of any third person against Seller or the CATV
Systems by way of copyright infringement resulting from Seller's retransmission
of such programming. Seller further warrants that the tier or channel location
of the off-air broadcast signals and other program services which are offered
over the CATV Systems will not result in additional reportable gross receipts
under applicable rules and regulations of the Copyright Office.
5.9.3 Payment of Fines and Copyright Royalties. Seller has,
prior to Closing, paid in full any and all fines or penalties levied or assessed
by the Copyright Office as a result of the failure to timely or accurately file
Statements of Account for the CATV Systems. Seller shall pay in full any such
fines or penalties levied or assessed by the Copyright Office after Closing, to
18
25
the extent that such fines or penalties (a) relate to the period prior to
Closing, and (b) have been determined to be valid.
5.9.4 Patents, Trademarks. Seller does not possess any
patent, patent right, trademark, copyright or other proprietary intellectual
property and is not a party to any license or royalty agreement with respect to
any patent, trademark, or copyright except for licenses respecting program
material and obligations under the Copyright Act of 1976 applicable to CATV
systems generally.
5.10 Assets and CATV Business
5.10.1 Generally. Except as expressly set forth in the
Schedules to this Agreement and subject to any waiver with respect to the CATV
Equipment pursuant to Section 11.1, at Closing all Assets shall be in operating
condition, ordinary wear and tear excepted. None of the CATV Systems, or the
buildings, structures, or appurtenances used in the CATV Systems, violate
applicable laws, ordinances, codes, regulations or restrictive covenants, the
enforcement of which would involve a material cost to correct, would materially
detract from their value, or would materially interfere with their use. Except
as expressly set forth in the Schedules, the CATV Systems are properly located
and materially comply with all applicable laws, rules and regulations. Seller
has not received any notice heretofore not complied with, from any federal,
state, local or other governmental authority or agency having jurisdiction over
the CATV Systems or the Assets, or any insurance or inspection body, that the
CATV Systems or the Assets fail to materially comply with any applicable law,
ordinance, regulation, building or zoning law, or the requirements of any public
authority or body. The CATV Systems and the Assets are suitable for continued
use in the manner in which they are presently operated without the need for
repairs or replacement, except for the repairs and maintenance normally arising
in the ordinary course of business of a cable system of similar age and
geographic location.
5.10.2 Cable Plant. All cable used in the CATV Systems is
coaxial, and, except for such conditions as might be expected for a cable system
of its age and geographic location, is water-tight and joined and connected
according to normal and customary industry standards.
5.11 Litigation and Proceedings. Except as set forth in Schedule 5.11,
there is no litigation at law, or in equity, and there is no other proceeding or
investigation pending or, to Seller's knowledge, threatened against, or which
may adversely affect, Seller, or which involves the possibility of any judgment,
order, award or other decision affecting Seller and (i) which might impair the
ability of Seller to perform under this Agreement, (ii) could have any adverse
effect on the CATV Systems, or might impair the quality of title to the Assets,
or (iii) might adversely affect the rights, title, or interest of Seller in and
to the Assets, and Seller does not know of any basis for such litigation or
proceedings. Seller is not materially in default in any manner with respect to
any order, writ, injunction, or decree of any court or federal, State,
municipal, or other governmental department, commission, board, bureau, agency,
or instrumentality which relates to the operation of the CATV Systems, and
Seller has materially
19
26
complied with all laws, rules, or regulations applicable to the CATV Systems and
the operation thereof.
5.12 Tax Returns; Other Reports. Seller has duly and timely filed in
proper form all federal, state, local, and foreign income, franchise, sales,
use, property, excise, payroll, and other tax returns and all other reports
(whether or not relating to taxes) required to be filed by law with any
governmental authority or agency thereof. All taxes, fees and assessments of
whatever nature due or payable by Seller pursuant to said returns, reports, or
otherwise, have been paid. There are no tax audits pending and no outstanding
agreements or waivers extending the statutory period of limitations applicable
to any federal, state, or local income tax return for any period.
5.13 Dissenters' Rights. Neither the sale and transfer of the Assets
pursuant to this Agreement, nor Buyer's ownership, possession, or use of the
Assets from and after the Closing because of such sale and transfer, will result
in or be subject to, the imposition of any liability upon Buyer for appraisal
rights or any other liability of any nature whatsoever owing to any
participation interest holder in Seller or any other person.
5.14 Employment Matters
5.14.1 Employees. Schedule 5.14.1 contains a true and
complete list of the names, positions, current hourly wages or annual salary,
and other compensation amounts of all employees of the CATV Systems. Seller has
materially complied with all applicable laws relating to the employment of
labor, including, without limitation, ERISA, and those relating to wages, hours,
collective bargaining, unemployment insurance, worker's compensation, equal
employment opportunity and the payment and withholding of taxes. On or within
two weeks after the Closing Date, Seller will pay its employees (except those
employees who are not hired by Buyer) all accrued, if any, compensation,
including vacation, sick pay, and other benefits accrued as of the Closing Date
(except for amounts owing under the terms of Seller's benefit plans, which
amounts shall be provided in accordance with the terms of such plans).
5.14.2 Employment Relationship. Seller has no employment
agreements, either written or oral, with any person which would require Buyer to
employ any person after the Closing Date. Seller shall terminate the employment
of each of its employees as of the Closing Date (except those employees who are
not hired by Buyer).
5.14.3 Unions. Seller is not a party to any contract with any
labor organization, and neither has 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 its employees nor has
Seller received any requests from any party for recognition as a representative
of employees for collective bargaining purposes.
20
27
5.14.4 Benefits. Except as set forth on Schedule 5.14.4,
employees of the CATV Systems are not eligible for benefits under benefit plans
(within the meaning of Section 3(3) of ERISA) adopted by Seller.
5.14.5 Plans. Seller shall have the sole responsibility for
maintenance and/or distribution of benefits accrued under any qualified plans
maintained by Seller pursuant to the plan provisions of all such plans sponsored
by Seller, if any. Buyer will not assume any liability for (a) any such accrued
benefits or (b) any fiduciary or administrative responsibility to account for or
dispose of any such accrued benefits maintained under any qualified plans
sponsored by Seller.
5.14.6 Seller's Responsibility. All welfare plan claims and
short- or long-term disability plan obligations incurred on or before the
Closing, if any, shall remain the sole responsibility of Seller. Eligible
indemnity plan expenses attributable to any of Seller's covered employees or
dependents who are confined to a hospital or medical institution on the date of
the Closing will continue to be the responsibility of Seller to the extent
required under Seller's applicable plans.
5.14.7 Health Care Continuation. There has been no material
failure to comply with the continuation health care requirements of the Code or
related acts, laws, rules and regulations as such requirements have applied or
currently apply to any current or former employee of Seller or any spouse,
former spouse, dependent child, or former dependent child of any such employee
under any group health plan maintained by or for Seller on or prior to the
Closing Date.
5.14.8 Miscellaneous Federal Acts. Seller's present
employment practices materially comply with all rules and standards set by the
Americans With Disabilities Act of 1990, Pub. L. 101-36, as amended, and the
Family and Medical Leave Act of 1993, Pub. L. 103-3 including any regulations
promulgated thereunder.
5.14.9 FCC Filings. Schedule 5.14.9 contains true, correct
and complete copies of Seller's FCC Form 395-A filings, which Seller filed on or
before the applicable deadlines, beginning with the Form 395-A filed two years
before such form filed at the latest applicable deadline.
5.15 Subscribers Fees and Rates. The monthly rates currently charged by
Seller for each of the services offered on the CATV Systems are as set forth in
Schedule 1.7. Except as set forth in Schedule 5.15, Seller has not been ordered
by the FCC or any of the CATV Systems' local franchising authorities to reduce
the rates charged for any of the regulated services and equipment listed in
Schedule 1.7 nor is any such order threatened.
5.16 Insolvency Proceedings. No insolvency proceedings of any
character, including without limitation bankruptcy, receivership,
reorganization, composition or arrangement with creditors, voluntary or
involuntary, affecting Seller or the CATV Systems are pending or
21
28
threatened. Seller has not made an assignment for the benefit of creditors or
taken any action with a view to, or that would constitute a valid basis for, the
institution of any such insolvency proceedings. On the Closing Date, Seller (i)
will have sufficient capital to carry on its business and transactions, (ii)
will be able to pay its debts as they mature or become due, and (iii) will own
assets the fair market value of which will be greater than the sum of all
liabilities of Seller not specifically assumed by Buyer pursuant to the terms of
this Agreement.
5.17 Finders and Brokers. Neither Seller nor its officers, partners or
employees has entered into any contract, arrangement, or understanding with any
person or firm which may result in the obligation of Seller or Buyer to pay any
finder's, brokerage, or agent's fees, commission or other like payment or
compensation. For the two year period prior to the date of this Agreement,
Seller has not entered into any agreement, whether written, oral, express or
implied, directly or indirectly regarding the sale or other disposition of the
CATV Systems. At Closing, Seller shall defend, indemnify and hold Buyer harmless
from and against any claims asserted against Buyer for any finder's, brokerage,
or agent's fees, commission or other like payments or compensation as a result
of Seller's activities.
5.18 Effect of Certificates. All certificates required to be delivered
by Seller under this Agreement shall be deemed to be additional representations
and warranties of Seller.
5.19 Citizenship. Seller is not a "foreign person" as defined in
Section 1445(f)(3) of the Code. On the Closing Date, Seller will deliver to
Buyer an affidavit to that effect, verified as true and sworn to under penalty
of perjury by a duly-authorized agent of Seller. The affidavit shall also set
forth Seller's name, address, taxpayer identification number, and such
additional information as may be required to exempt the transaction contemplated
by this Agreement from the withholding provisions of Section 1445 of the Code.
Buyer shall have the right to furnish copies of the affidavit to the Internal
Revenue Service.
5.20 Overbuilds; Competition. To the best of Seller's knowledge, no
area presently served by the CATV Systems or within the scope of any of Seller's
CATV franchises is presently subject to an overbuild situation or subject to
competition from a multipoint distribution service ("MDS"), multichannel
multipoint distribution service ("MMDS") or other wireless cable services. To
the best of Seller's knowledge, no person or firm other than Seller has been
granted a CATV franchise, or a license to provide MDS, MMDS or other wireless
cable services in any of the communities (or any of the unincorporated areas)
presently served by the CATV Systems or within the geographical scope of any of
Seller's CATV franchises. Seller has no current knowledge, without independent
inquiry, of any person or firm that (a) intends to construct or operate a CATV
system or to provide MDS, MMDS or other wireless cable services within any area
served by the CATV Systems or any area within the geographical scope of any of
Seller's CATV franchises, or (b) intends to apply for a CATV franchise or a
license to provide MDS, MMDS or other wireless cable services covering any area
served by the CATV Systems or any area within the geographical scope of any of
Seller's CATV franchises.
22
29
5.21 Financial Statements. Seller's unaudited financial statements
(unless audited at Buyer's expense), including without limitation balance
sheets, income statements and any and all other related documents, the most
recent of which are attached as Schedule 5.21: (i) have been prepared in
accordance with generally accepted accounting principles applied on a consistent
basis throughout the period involved and as compared with prior periods; (ii)
are true, correct, complete and accurate in all material respects subject, in
the case of any interim statements, to year-end adjustments where applicable,
and (iii) fairly present Seller's financial position, income, expenses, assets,
liabilities, shareholders' equity and the results of operation of the CATV
Systems as of the date and for the period indicated. There has been no material
adverse change in the business, assets, properties, prospects, or condition
(financial or otherwise) of the CATV Systems since the preparation of the most
recent financial statements. No event has occurred and, except as may be
disclosed in the Seller's Certificate delivered pursuant to Section 9.1, no
event will have occurred prior to Closing that would make the financial
statements delivered to Buyer misleading in any material respect.
5.22 Free CATV Service. Except as set forth in Schedule 5.22 to this
Agreement, there is no agreement, obligation or other requirement for Seller to
provide free CATV service to any person, entity or firm.
5.23 Full Disclosure. No representation or warranty by Seller in this
Agreement or any Schedule or Exhibit to this Agreement, or any statement, list,
document or certificate furnished or to be furnished by Seller pursuant to this
Agreement, contains or will contain any untrue statement of material fact, or
omits or will omit to state a material fact required to be stated therein or
necessary to make the statements contained therein not misleading or necessary
in order to provide a prospective purchaser of the Assets and CATV Systems with
complete and proper information as to such assets and business.
SECTION 6. BUYER'S REPRESENTATIONS AND WARRANTIES
6.1 Organization and Authority. Buyer represents and warrants to Seller
that Buyer is a limited partnership duly formed and validly existing under the
laws of the State of Washington; has full power and authority to execute,
deliver and perform this Agreement; and has taken all partnership action
required by law, its limited partnership agreement and otherwise to authorize
the execution, delivery and performance of this Agreement. This Agreement
constitutes the legal, valid and binding obligation of Buyer enforceable in
accordance with its terms.
6.2 Litigation and Proceedings. Except as set forth in Schedule 6.2,
there is no litigation at law, or in equity, and there is no other proceeding or
investigation pending or, to Buyer's knowledge, threatened against, or which may
adversely affect, Buyer, or which involves the possibility of any judgment,
order, award or other decision which might impair the ability of Buyer to
perform under this Agreement, and Buyer does not know of any basis for such
litigation or proceedings.
23
30
6.3 Finders and Brokers. Neither Buyer nor its officers, partners or
employees has entered into any contract, arrangement, or understanding with any
person or firm, which may result in the obligation of Seller or Buyer to pay any
finder's, brokerage, or agent's fees, commission or other like payment or
compensation. Buyer shall defend, indemnify and hold Seller harmless from and
against any claims asserted against Seller for any finder's, brokerage, or
agent's fees, commission or other like payments or compensation as a result of
Buyer's activities.
6.4 Status of Assumed Liabilities. After Closing, Buyer shall perform
and pay any and all obligations due under the Assumed Liabilities which accrue
after the Closing Date and will forever indemnify Seller for any and all Third
Party Claims and Direct Claims (as such terms are defined in Section 14) against
Seller arising directly or indirectly from the Assumed Liabilities.
6.5 Effect of Certificates. All certificates required to be delivered
by Buyer under this Agreement shall be deemed to be additional representations
and warranties of Buyer.
6.6 Citizenship. Buyer is not a "foreign person" as defined in Section
1445(f)(3) of the Code. On the Closing Date, Buyer will deliver to Seller an
affidavit to that effect, verified as true and sworn to under penalty of perjury
by a duly-authorized agent of Buyer. The affidavit shall also set forth Buyer's
name, address, taxpayer identification number, and such additional information
as may be required to exempt the transaction contemplated by this Agreement from
the withholding provisions of Section 1445 of the Code. Seller shall have the
right to furnish copies of the affidavit to the Internal Revenue Service.
SECTION 7. CONDUCT PENDING CLOSING
7.1 Access to Premises and Records. Between the date of execution and
delivery of this Agreement and the Closing Date, Seller shall allow Buyer, its
accountants, auditors, engineers and representatives full access, on not less
than three (3) business days' prior notice, at mutually agreed upon reasonable
times, to all of the premises and books and records of Seller and the CATV
Systems and shall furnish to Buyer and its representatives all information
regarding the business and properties of Seller. Buyer shall have the
opportunity to perform CLI testing, other FCC-related systems performance
testing, and environmental site assessments of the Assets pursuant to Section
11.1 with Seller's full cooperation and assistance prior to the Closing,
provided that such audit and other procedures do not unreasonably interfere with
the operations of the CATV Systems. Buyer shall have the opportunity to perform
a field audit of Seller's accounts and such other procedures commonly performed
in an audit conducted by an independent certified public accounting firm with
Seller's full cooperation and assistance prior to the Closing, provided that
such audit and other procedures do not unreasonably interfere with the
operations of the CATV Systems. Seller also shall cooperate with Buyer and its
accountants, auditors and representatives to enable Buyer to generate the type
of financial information required under Form 8-K to be filed by Buyer with the
United States Securities and Exchange
24
31
Commission pursuant to Section 13 or Section 15(d) of the Securities Exchange
Act of 1934, as amended, and the rules and regulations promulgated thereunder.
7.2 Continuity and Maintenance of Operations. Seller shall continue to
operate the CATV Systems, shall maintain the Assets (including maintenance and
replenishment of all inventories of spare equipment and parts reasonably
adequate for the needs of the CATV Systems, including without limitation those
listed in Schedule 1.2), and shall keep all of its business books, records, and
files all in the ordinary course of business in accordance with past practices,
consistently applied. Unless required by law, Seller shall not, without prior
written consent of Buyer, which consent shall not be unreasonably withheld, (i)
change the rate charged for Basic Package Services or any premium services, (ii)
add or delete any program services, or (iii) rearrange the CATV Systems' channel
line-ups. Seller shall not sell, transfer, assign, or permit the creation of any
Security Interest on any of the Assets (other than the lien of Seller's Lender,
which lien will be extinguished simultaneously with Closing) without the prior
written consent of Buyer, which consent shall not be unreasonably withheld.
Except as otherwise required under the terms of this Agreement, Seller may amend
or cancel any CATV Instruments, any Seller Contract or any other contract or
agreement which is necessary or appropriate for the maintenance of the Assets or
the operation of the CATV Systems, but only in the ordinary course of business.
Seller specifically acknowledges that any amendment or cancellation of any
franchise or lease agreement shall be deemed not to be in the ordinary course of
business. Seller shall not itself, nor shall Seller permit any of its directors,
officers, shareholders, agents or employees, or any of its partners or its
partners', directors, officers, shareholders, agents, or employees to pay any of
Seller's accounts receivable from the CATV Systems' subscribers outstanding on
the date of this Agreement or hereafter; provided, however, that such persons
shall be permitted to make payment for CATV services received by them at their
own dwellings.
7.3 Existing Relationships. Except as otherwise required by this
Agreement, Seller shall use its best efforts to preserve the CATV Systems as a
going concern and to preserve existing relationships with suppliers, customers,
governmental entities and others having business dealings with Seller, all in
accordance with Seller's ordinary course of business consistent with past
practices.
7.4 Employees; Employment Relationship. All of Seller's employees shall
be and remain Seller's employees, with Seller having full authority and control
over their actions, and Buyer shall not assume the status of an employer or a
joint employer of, or incur or be subject to any liability or obligation of an
employer with respect to, any such employees unless and until actually hired by
Buyer. Seller shall be solely responsible for any and all liabilities and
obligations Seller may have to its employees, including without limitation
compensation, severance pay, and accrued vacation time and long-term disability,
if applicable. Seller shall comply with the provisions of the Worker Adjustment
and Retraining and Notification Act and similar laws, if applicable, and shall
be solely responsible for any and all liabilities, penalties, fines, or other
sanctions that may be assessed or otherwise due under such laws on account of
the closing of the transaction contemplated by this Agreement and the dismissal
or termination of any of Seller's employees by Seller at or prior to Closing.
Seller shall use its best efforts to
25
32
preserve Seller's relationship with its employees and shall pay to those
employees all salaries, commissions, benefits and other compensation to which
they are entitled for services rendered prior to Closing. Seller shall not,
without the prior written consent of Buyer, which consent shall not be withheld
unreasonably, change the compensation of any employees of the CATV Systems where
such changes would be inconsistent with Seller's past practices consistently
applied. As soon as administratively feasible, Buyer and Seller will arrange for
the transfer to Buyer's 401(k) plan of the accounts in Seller's Phoenix American
Incorporated 401(k) Plan of former employees of Seller who are subsequently
employed by Buyer, if any, as a result of the sale of the CATV Systems.
7.5 Buyer's Right to Employ. Seller consents to Buyer discussing with
any of Seller's employees, at any time within the thirty (30) day period prior
to Closing, the possibility of their employment by Buyer after the Closing and
to Buyer hiring any of those employees after the Closing. Seller agrees and
acknowledges, however, that Buyer is under no obligation to offer employment to
any of those employees. Current employees of Seller which are hired by Buyer, if
any, shall not be considered to be in the employ of Buyer until such time as
they have been formally hired by Buyer and satisfy the active work requirement
of completing one full hour of active service for Buyer.
7.6 Approvals. To the extent reasonably possible, Seller shall deliver
to Buyer for Buyer's review and approval a copy of Seller's request for each
Required Consent, together with any franchise, agreement, lease, document,
instrument or paper to be executed by or on behalf of any governmental entity,
franchising authority, lessor or other third party, prior to delivery of such to
any such party. Such consents shall be in forms reasonably acceptable to Buyer.
Subject to Section 4.3, Seller shall use its best efforts to obtain each of the
Required Consents, including without limitation the payment of standard
processing fees, charges and expenses, but Seller shall not be required to pay
any extraordinary or unreasonable fees or expenses. Subject to Section 4.3,
Buyer shall reasonably cooperate with and assist Seller in obtaining the
Required Consents; provided, however, that such cooperation and assistance shall
not require Buyer to undertake any extraordinary or unreasonable measures to
obtain such approvals and consents, including, without limitation, the payment
of any extraordinary or unreasonable fees or expenses, or the initiation or
prosecution of legal proceedings. Subject to Section 4.3, Buyer and Seller shall
reasonably cooperate in obtaining written leases of Real Property that can be
duly recorded in the records of the appropriate governmental agency.
7.7 News Releases and Media Notification. Prior to Closing, any and all
news releases or other notification of the local media with respect to the
transactions contemplated in this Agreement shall be subject to the prior
consent of both Seller and Buyer, which consent shall not be unreasonably
withheld.
7.8 Written, Executed Easements. With respect to material easements
listed in Schedule 5.5.4 that are not in a properly recordable form, Seller
shall use its best efforts to obtain written easements that are assignable to
Buyer, executed by the proper third parties, that accurately set forth the legal
descriptions and scope of such easements or rights-of-way;
26
33
provided, however, that with respect to non-material easements listed in
Schedule 5.5.4, Seller need not use its best efforts to obtain written easements
that are assignable to Buyer.
SECTION 8. CLOSING; CLOSING DATE; TERMINATION
8.1 Closing Date. Subject to the terms and conditions of this
Agreement, Closing shall be conducted at the offices of Buyer or such other
location on a Closing Date as may be mutually agreed to by the parties. Timing
of the Closing shall be subject to the following terms: Closing shall take place
not later than November 1, 1995, if Seller has then obtained all Required
Consents and has complied with all other terms and conditions of this Agreement;
provided, however, that the Closing may be postponed by either party for an
aggregate maximum period of sixty (60) days from the later of (i) November 1,
1995, or (ii) the date on which Seller has obtained all Required Consents and
has complied with all other terms and conditions of this Agreement.
8.2 Termination. This Agreement may be terminated at any time prior to
Closing:
(a) by the mutual written consent of Seller and Buyer;
(b) by Buyer in its sole and absolute discretion, if Seller
fails to demonstrate to Buyer's reasonable satisfaction that at the
Closing Date the Aggregated Systems (i) serve at least five thousand
six hundred fifty (5,650) Equivalent Subscribers, or (ii) generate
Monthly Revenue in excess of One Hundred Fifty Six Thousand Two Hundred
Seventy Five Dollars ($156,275);
(c) by Buyer in its reasonable discretion, if Seller or the
CATV Systems are subject to an order of the FCC or any of the CATV
Systems' local franchising authorities to materially reduce any of the
rates charged to the CATV Systems' subscribers;
(d) by either Seller or Buyer, in the event of a material
breach or misrepresentation under this Agreement by the other party
unless (i) such breach is cured within fifteen (15) days after written
notice thereof is given by the party alleging such material breach or
misrepresentation, or (ii) the alleged breaching party has given
written notice providing reasonable assurance to the nonbreaching party
that it is exercising its diligent best efforts to cure the alleged
breach; provided that in no circumstance shall the period to cure
exceed forty-five (45) days after the original written notice was
given;
(e) by either party in such party's sole and absolute
discretion, if the transactions contemplated by this Agreement shall
not have been consummated on or before November 30, 1995; or
(f) by Seller in accordance with Section 5.8.4.
27
34
8.3 Effect of Termination. In the event this Agreement is terminated
pursuant to Section 8.2:
(a) this Agreement will thereafter be void and have no force
and effect, except that Sections 5.17, 14 and 15.7 and this Section 8.3
will remain in effect;
(b) nothing in this Section 8.3 shall be deemed to release
either party from any liability for any breach by such party of the
terms and provisions of this Agreement or any failure by such party to
perform its obligations hereunder. Nothing in this Section 8.3 or
elsewhere in this Agreement shall impair the right of either party,
prior to termination of this Agreement pursuant to Section 8.2, to
pursue all legal remedies for breach of contract and damages or to
compel specific performance by the other party of its obligations
hereunder; and
(c) in the event this Agreement is terminated pursuant to
Section 8.2(a), (b), (c), (e) or (f), neither Seller nor Buyer shall be
liable to each other for any legal or equitable remedies.
SECTION 9. SELLER'S OBLIGATIONS AT AND PRIOR TO CLOSING
Unless delivery is required prior to Closing by the terms of this
Agreement, Seller, at its sole cost and expense, shall deliver to Buyer at the
Closing all of the following (collectively, the "Seller Closing Documents"):
9.1 Transaction Documents. A ▇▇▇▇ of sale, an assignment and assumption
agreement, assignment and assumption of franchises, assignment and assumption of
leases, the Seller's certificate, the noncompetition agreement and the opinion
of Seller's legal counsel, each substantially in the forms of Exhibits A, B, C,
D, E, F and K.
9.2 Closing Documents Checklist. The documents, certificates and papers
listed on the Closing Documents Checklist, in the form of Exhibit H, together
with such other deeds, assignments, certificates, and other documents,
instruments, and agreements as shall be necessary or appropriate to vest in
Buyer all right, title, and interest in and to the Assets free and clear of all
Security Interests (except for Permitted Exceptions and liabilities assumed by
Buyer pursuant to Section 4.1) and all right, title, and interest of Seller
arising under or by virtue of each CATV Instrument and Seller Contract expressly
assumed in writing by Buyer, and as may otherwise be reasonably required by
Buyer.
9.3 Security Interest Searches. UCC searches, tax lien searches,
pending litigation searches and judgment searches of the county and state public
records from each county in which any of the Assets are located, within
forty-five (45) days after the execution of this Agreement. Buyer, at its sole
expense, shall obtain any and all updates of such security interest searches. To
the extent that any Security Interests appear on the aforementioned UCC
searches, Seller shall
28
35
deliver full and complete releases of such Security Interests in form reasonably
satisfactory to Buyer at Closing unless assumed by Buyer. Seller also shall
deliver evidence of the dismissal of any suits or the satisfaction of any liens
or judgments, all in form reasonably satisfactory to Buyer.
9.4 Tax Certificates. Except as specifically waived by Buyer in
writing, Seller shall deliver to Buyer certificates, if and to the extent
available, from each appropriate taxing authority stating that all applicable
state and/or local taxes, such as personal property taxes, due in connection
with the transactions contemplated by this Agreement have been timely paid in
full and that no obligation or liability is outstanding in connection therewith.
SECTION 10. BUYER'S OBLIGATIONS AT CLOSING
At Closing, Buyer shall deliver to Seller: (a) payment of the portion of the
Purchase Price required by Section 3.1; (b) the Note (in the form of Exhibit G);
(c) assignment and assumption agreements (in substantially the forms of Exhibits
B, C and D) evidencing Buyer's assumption and agreement to pay and discharge, in
accordance with the terms of each, the Assumed Liabilities, and (d) the Buyer's
Certificate (in substantially the form of Exhibit I) (collectively, the "Buyer's
Closing Documents").
SECTION 11. CONDITIONS OF BUYER'S OBLIGATIONS
Buyer's obligations to close hereunder are subject to the satisfaction
of all of the following conditions, each of which must be satisfied on or before
the Closing Date and any of which may be waived in writing by Buyer.
11.1 Tests and Inspections Before Closing.
11.1.1 Technical Tests. During the period beginning not more
than thirty (30) days prior to the execution of this Agreement and ending not
more than forty-five (45) days after the execution of this Agreement, Seller
shall have caused to be performed on the CATV Systems the tests specified in
Section 5.8.3, in the manner and according to the test criteria specified
therein, and the results and findings of such tests shall be satisfactory to
Buyer in its sole discretion. Within thirty (30) days prior to the Closing Date,
Buyer, at Buyer's expense and with Seller's permission and reasonable
cooperation, shall have re-tested the CATV Systems, and Seller shall have either
(a) certified compliance with the CLI Rules and all of the technical standards
specified in Section 5.8, or (b) effected Remedial Steps so as to bring the CATV
Systems into compliance with all of such rules and technical standards. With
respect to the latter series of tests, the results and findings of such tests
shall not indicate a material variance from the test criteria applicable to the
CATV Systems.
29
36
11.1.2 Environmental Site Assessments. Within forty-five (45)
days after the execution of this Agreement, Buyer, at its sole expense, may
conduct "Level I" environmental site assessments for any of the Real Property,
provided that such audits shall not include any intrusive soil or ground water
testing. The results and findings of such audits shall be satisfactory to Buyer
in its sole discretion.
11.1.3 Financial Inspection. Within thirty (30) days after
the execution of this Agreement, Buyer and its accountants and representatives
shall have commenced generating the financial information required by Form 8-K,
as more particularly described in Section 7.1. Seller shall provide Buyer's
accountants with a standard representation letter certifying the fairness of the
presentation of Seller's financial position, the completeness of the information
provided, and the absence of any other irregularities, communications or
transactions not otherwise disclosed. The results and findings of such financial
inspections shall be satisfactory to Buyer in its sole discretion.
11.1.4 Due Diligence. Provided that Seller has delivered to
Buyer all of the documents referred to in Section 5 (except for third party
consents) within thirty (30) days after the execution of this Agreement, Buyer
shall have completed its due diligence review of all such documents within
thirty (30) days after the execution of this Agreement.
11.2 Approvals and Consents
11.2.1 Franchises. All franchising authorities shall have
consented to the assignment and assumption of the respective franchises, if
applicable, and shall have waived in writing all rights, if any, they may have
to purchase all or any part of the CATV Systems.
11.2.2 Other Required Consents. All of the other Required
Consents shall have been obtained and delivered to Buyer, except to the extent
that Seller and Buyer execute a memorandum at Closing specifying any Required
Consent that Buyer agrees need not be obtained until after the Closing Date or
Required Consents for assignment of agreements which Buyer does not agree to
assume. Buyer shall have received from Seller evidence reasonably satisfactory
to Buyer that no material terms or conditions of the CATV Instruments and Seller
Contracts have been or will be amended, modified or changed prior to or
effective with the Closing.
11.3 Performance by Seller of Covenants and Accuracy of
Representations and Warranties
11.3.1 Performance of Covenants. Seller shall have performed
all of its agreements and covenants under this Agreement to the extent such are
required to be performed at or prior to Closing, and all of Seller's
representations and warranties shall be true and correct as of Closing.
30
37
11.3.2 Operability. Between the date of this Agreement and
the Closing Date, the CATV Systems shall not have suffered, on or prior to
Closing, any loss, claim, casualty, or calamity that has a material adverse
effect on the Assets or the CATV Systems, whether or not disclosed in Seller's
amended Schedules and whether or not covered by insurance. Seller shall bear the
risk of loss prior to Closing with respect to the Assets and the CATV Systems as
a result of any loss, claim, casualty, or calamity.
11.3.3 Restraint of Proceedings. No action, proceeding or
investigation shall have been instituted or threatened prior to Closing, to set
aside or modify the transactions provided for in this Agreement or to enjoin or
prevent its consummation or which would impair the ability of Buyer to realize
the benefits of such transactions.
11.3.4 No Governmental Action. No investigation, action or
proceeding shall have been commenced by the Department of Justice or Federal
Trade Commission or any other governmental entity challenging or seeking to
enjoin the consummation of this transaction and neither Buyer nor Seller shall
have been notified of a present intention by the Assistant Attorney General in
charge of the Antitrust Division of the Department of Justice, the Director of
the Bureau of Competition of the Federal Trade Commission or any governmental
entity (or their respective agents or designees) to commence, or recommend the
commencement of, such an investigation, action or proceeding.
11.3.5 Equivalent Subscribers and Monthly Revenue. Seller
shall have demonstrated to Buyer's reasonable satisfaction that the Aggregated
Systems (i) serve at least five thousand six hundred fifty (5,650) Equivalent
Subscribers, or (ii) generate Monthly Revenue in excess of One Hundred Fifty Six
Thousand Two Hundred Seventy Five Dollars ($156,275).
11.3.6 Updated Schedules. Buyer shall have received updated
Schedules, dated and true, complete and correct as of the Closing Date, which
are reasonably satisfactory to Buyer and Seller.
11.3.7 Closing Documents. Buyer shall have received all of
the Seller Closing Documents in form reasonably satisfactory to Buyer.
11.4 Conveyance of Title to Assets
11.4.1 Security Interests. Buyer shall have received
documentation reasonably satisfactory to it of the release and discharge of any
and all Security Interests, suits or judgments on or against Seller, the Assets
or the CATV Systems, except to the extent Buyer assumes such Security Interests
pursuant to Section 4.1.
11.4.2 Title Insurance. Seller shall, at least forty-five
(45) days prior to the Closing Date, deliver to Buyer the commitment(s) of a
title insurance company reasonably satisfactory to Buyer (the "Title Company")
agreeing to issue to Buyer ALTA lessee's extended coverage title insurance
policies and ALTA owner's extended coverage title insurance policies
31
38
insuring Buyer's interests in the Real Property, in each case subject only to
(i) standard printed exceptions, (ii) inchoate liens for current taxes and
assessments not yet delinquent, (iii) standard utility and roadway easements,
covenants and restrictions, whether or not of record, that do not individually
or in the aggregate materially detract from the value of, or impair the use of
the Real Property affected thereby, (iv) existing zoning or similar laws or
ordinances that do not interfere with the operation of the CATV Systems, (v)
Security Interests specifically assumed by Buyer pursuant to Section 4.1, (vi)
survey exceptions that do not individually or in the aggregate materially
detract from the value of, or impair the use of, the Real Property affected
thereby, and (vii) standard mineral or water rights exceptions (collectively,
the "Permitted Exceptions"). If a preliminary title binder indicates an
exception other than a Permitted Exception that would impair the marketability
or use of the Real Property in any material respect, Seller shall, at its
expense, cause such exception to be removed on or before the Closing Date. At
Closing Seller shall deliver to Buyer an affidavit or indemnification agreement
that shall be sufficient to cause the Title Company to affirmatively insure
against the existence of outstanding rights that could form the basis for
mechanic's, materialmen's or similar liens, unrecorded documents, claims of
parties in possession, and judgments, bankruptcies or other charges against any
persons whose names are the same as or similar to Seller's name. Buyer shall be
responsible for the payment of (i) all surveys and other documents required by
the Title Company to issue such policies, and (ii) all title insurance premiums.
Buyer and Seller shall mutually establish reasonable values for the properties
to be insured.
11.5 Financing Commitment. Within forty-five (45) days after the date
of this Agreement, Buyer shall have received a financing commitment from Buyer's
lenders in a form and substance satisfactory to Buyer in its sole and absolute
discretion.
SECTION 12. CONDITIONS OF SELLER'S OBLIGATIONS
Seller's obligations to close are subject to all of the following
conditions, any of which may be waived in writing by Seller.
12.1 Performance by Buyer. Buyer shall have performed all of its
agreements and covenants under this Agreement to the extent such are required to
be performed at or prior to Closing.
12.2 Buyer's Certificate. At Closing, Buyer shall certify to Seller
that Buyer's representations and warranties set forth in this Agreement are true
and correct as of Closing.
12.3 Operability. Between the date of this Agreement and the Closing
Date, the CATV Systems shall not have suffered, on or prior to Closing, any
loss, claim, casualty, or calamity that has a material adverse effect on the
Assets or the CATV Systems, whether or not disclosed in Seller's amended
Schedules and whether or not covered by insurance. Seller shall bear the risk of
loss on or prior to Closing with respect to the Assets and the CATV Systems as a
result of any loss, claim, casualty, or calamity.
32
39
12.4 Restraint of Proceedings. No action, proceeding or investigation
shall have been instituted or threatened on or prior to Closing, to set aside or
modify the transactions provided for in this Agreement or to enjoin or prevent
its consummation or which would impair the ability of Seller to realize the
benefits of such transactions.
12.5 No Governmental Action. No investigation, action or proceeding
shall have been commenced by the Department of Justice or Federal Trade
Commission or any other governmental entity challenging or seeking to enjoin the
consummation of this transaction and neither Buyer nor Seller shall have been
notified of a present intention by the Assistant Attorney General in charge of
the Antitrust Division of the Department of Justice, the Director of the Bureau
of Competition of the Federal Trade Commission or any governmental entity (or
their respective agents or designees) to commence, or recommend the commencement
of, such an investigation, action or proceeding.
12.6 Closing Documents. Seller shall have received all of the Buyer's
Closing Documents in form reasonably satisfactory to Seller.
SECTION 13. NONCOMPETITION AGREEMENT
Seller shall enter into a noncompetition agreement with Buyer, in the
form of Exhibit F.
SECTION 14. INDEMNIFICATION
14.1 Survival of Representations, Warranties and Covenants. The
representations, warranties and covenants of each of Buyer and Seller made
pursuant to this Agreement shall survive the Closing for the following periods
after the Closing Date:
(a) The representations, warranties and covenants set forth
in Sections 5.4, 5.17, 6.3 and 6.4 shall survive without limitation as to time.
(b) The representations, warranties and covenants set forth
in Section 5.7.3 shall survive, for each CATV Instrument and Seller Contract,
until the applicable statutes of limitations have run.
(c) All other representations, warranties and covenants shall
survive for two (2) years.
The date of expiration of any representation, warranty or covenant shall be
referred to herein as the "Termination Date." Representations, warranties and
covenants under this Agreement shall be of no further force or effect after the
applicable Termination Date. Any claim for indemnification with respect to any
alleged breach of any representation, warranty or covenant
33
40
not asserted by notice given as herein provided that specifically identifies a
particular breach and the underlying facts thereto may not be pursued and is
irrevocably waived and released after such time. Any and all claims for
indemnification under this Section 14 must be based on either a Third Party
Claim or a Direct Claim (as such terms are hereinafter defined).
14.2 Limitations of Liability.
14.2.1 For purposes of this Section 14:
(i) "Indemnification Payment" means any amount of
Indemnifiable Losses required to be paid pursuant to this Agreement;
(ii) "Indemnitee" means any person or entity entitled
to indemnification under this Agreement;
(iii) "Indemnifying Party" means any person or entity
required to provide indemnification under this Agreement;
(iv) "Indemnifiable Losses" means any losses,
liabilities, costs, fines, penalties, damages (actual, punitive or
other), and expenses and any claims, demands or suits by any person or
entity, including, without limitation, any federal governmental
authority or any state, county, town, municipality, special political
subdivision, or any agency, department or division related thereto, and
costs and expenses actually incurred in connection with any actions,
suits, demands, assessments, judgments and settlements and reasonable
attorneys' fees and expense, in such case (x) reduced by the amount of
insurance proceeds recovered from any person or entity as a result of
the Indemnifiable Losses involved and (y) provided, that the underlying
liability or obligation is not solely the result of any action taken or
omitted to be taken by the Indemnitee;
(v) "Third Party Claim" means any claim or
commencement of any action, proceeding, or investigation by any entity
or person that is not a party to this Agreement or an affiliate of such
a party; and
(vi) "Direct Claim" means any claim by an Indemnitee
on account of an Indemnifiable Loss that does not result from a Third
Party Claim.
14.2.2 As between Seller and any affiliate of Seller, on the
one hand, and Buyer and any affiliate of Buyer, on the other hand, the rights
and obligation set forth in this Section 14 will be the exclusive rights and
obligations with respect to the liabilities and obligations referred to in
Section 14.3 and any breach of the representations, warranties or covenants
contained in this Agreement, except for any liability, obligation or breach that
results from the actual fraud under the common law, not otherwise implied or
imputed, by a party to this Agreement.
34
41
14.2.3 Notwithstanding any other provision of this Agreement
or of any applicable law, no Indemnitee will be entitled to make a claim against
an Indemnifying Party under Section 14.3.1 or Section 14.3.2 until the aggregate
amount of claims that may be asserted for such Indemnifiable Losses incurred by
the Indemnitee exceeds Two Thousand Eight Hundred Eighty Nine Dollars
($2,889.00), after which amount the Indemnitee may claim for the entire
aggregate amount of such claims.
14.2.4 Notwithstanding any other provision of this Agreement,
the indemnification obligations of Seller under Section 14.3.1 and of Buyer
under Section 14.3.2 will not exceed Three Hundred Sixty One Thousand One
Hundred Dollars ($361,100).
14.2.5 Notwithstanding anything to the contrary contained
herein, no Indemnifying Party shall be liable to or obligated to indemnify any
Indemnitee hereunder for any consequential, special, multiple, punitive or
exemplary damages including, but not limited to, damages arising from loss or
interruption of business, profits, business opportunities or goodwill, loss of
use of facilities, loss of capital, claims of customers, or any costs or expense
related thereto, except to the extent such damages have been recovered by a
third person and (a) are the subject of a Third Party Claim for which
indemnification is available under the express terms of this Section 14, or (b)
relate to a Third Party Claim asserted after the applicable statute of
limitations has run.
14.3 Indemnification.
14.3.1 Subject to the other sections of this Section 14,
Seller will indemnify, defend and hold harmless Buyer and its affiliates, and
their respective directors, officers, agents and representatives from all
Indemnifiable Losses relating to, resulting from or arising out of (i) a breach
by Seller of any of the representations, warranties or covenants contained in
this Agreement, except for any such breach of representations, warranties or
covenants which was specified on Seller's Schedules or Closing Certificate all
of which are waived upon Closing, or (ii) any Third Party Claim, whether filed,
asserted, or sought before or after the Closing Date, in respect of the
operations of the CATV Systems or the ownership or operation of the Assets or
CATV Systems by Seller, on or prior to the Closing Date, regardless of whether
known or unknown, asserted or unasserted, on the Closing Date.
14.3.2 Subject to the other sections of this Section 14,
Buyer will indemnify, defend and hold harmless Seller and its affiliates, and
their directors, officers, agents and representatives from all Indemnifiable
Losses relating to, resulting from or arising out of (i) a breach by Buyer of
any representations, warranties or covenants contained in this Agreement, except
for any such breach of representations, warranties or covenants which was
specified on Buyer's Closing Certificate all of which are waived upon Closing,
or (ii) any Third Party Claim, filed, asserted, or sought after the Closing
Date, in respect to the ownership or operation of the Assets or the CATV Systems
by Buyer or its affiliates after the Closing Date.
35
42
14.3.3 Payments made under this Section 14.3 shall be treated
by Buyer and Seller as purchase price adjustments and Buyer and Seller shall
file all tax returns consistent with such treatment. Notwithstanding anything to
the contrary contained herein, Buyer shall not be indemnified or reimbursed for
any adjustment to the basis of any asset resulting from any adjustment to the
purchase price or any additional or reduced taxes resulting from any such basis
adjustment.
14.4 Defense of Claims.
14.4.1 If any Indemnitee receives notice of the assertion of
any Third Party Claim against such Indemnitee, with respect to which an
Indemnifying Party is obligated to provide indemnification under this Agreement,
the Indemnitee will give such Indemnifying Party reasonably prompt written
notice thereof, but in any event not later than thirty (30) calendar days after
receipt of actual notice of such Third Party Claim; provided, however, that the
failure of the Indemnitee to notify the Indemnifying Party during the required
notification period shall only relieve the Indemnifying Party from its
obligation to indemnify the Indemnitee pursuant to this Section 14 to the extent
that Indemnifying Party is materially prejudiced by such failure (whether as a
result of the forfeiture of substantive rights or defenses or otherwise); and
provided, however, that the Indemnitee must, in any event, notify the
Indemnifying Party prior to the Termination Date as required pursuant to Section
14.1 in order for such party to be indemnified. The Indemnifying Party shall be
entitled, upon written notice to the Indemnitee, to assume the investigation and
defense thereof with counsel reasonably satisfactory to the Indemnitee. Whether
or not the Indemnifying Party elects to assume the investigation and defense of
any Third Party Claim, the Indemnitee shall have the right to employ separate
counsel and to participate in the investigation and defense thereof, provided,
however, that the Indemnitee shall pay the fees and disbursements of such
separate counsel unless (i) the employment of such separate counsel has been
specifically authorized in writing by the Indemnifying Party, (ii) the
Indemnifying Party has failed to assume the defense of such Third Party Claim
within a reasonable time after receipt of notice thereof with counsel reasonably
satisfactory to such Indemnitee, or (iii) the named parties to the proceeding in
which such claim, demand, action or cause of action has been asserted include
both the Indemnifying Party and the Indemnitee and, in the reasonable judgment
of counsel to such Indemnitee, there exists one or more defenses or claims that
may be available to the Indemnitee that are in conflict with those available to
the Indemnifying Party. Notwithstanding the foregoing, the Indemnifying Party
shall not be liable for the fees and disbursements of more than one counsel for
all Indemnified Parties in connection with any one proceeding or any similar or
related proceedings arising from the same general allegations or circumstances.
Without the prior written consent of the Indemnitee, the Indemnifying Party will
not enter into any settlement of any Third Party Claim that would lead to
liability or create any financial or other obligation on the part of the
Indemnitee unless such settlement includes as an unconditional term thereof the
release of the Indemnitee from all liability in respect of such Third Party
Claim.
14.4.2 Any Direct Claim will be asserted by giving the Indemnifying
Party reasonably prompt written notice thereof, but in any event not later than
thirty (30) calendar days after the
36
43
Indemnitee actually becomes aware of the incurrence thereof, and the
Indemnifying Party will have a period of thirty (30) calendar days within which
to respond in writing to such Direct Claim; provided, however, that the failure
of the Indemnitee to notify the Indemnifying Party shall only relieve the
Indemnifying Party from its obligation to indemnify the Indemnitee pursuant to
this Section 14 to the extent the Indemnifying Party is materially prejudiced by
such failure (whether as a result of the forfeiture of substantive rights or
defenses or otherwise); and provided, however, that the Indemnitee must, in any
event, notify the Indemnifying Party prior to the Termination Date as required
pursuant to Section 14.1 in order for such party to be indemnified. If the
Indemnifying Party does not so respond within such thirty (30) calendar day
period, the Indemnifying Party will be deemed to have rejected such claim, in
which event the Indemnitee will be free to pursue such remedies as may be
available to the Indemnitee on the terms and subject to the provisions of this
Section 14.
14.4.3 If after the making of any Indemnification Payment, the amount
of the Indemnifiable Loss to which such payment relates is reduced by recovery,
settlement or otherwise under any insurance coverage, or pursuant to any claim,
recovery, settlement or payment by or against any other entity, the amount of
such reduction (less any costs, expenses, premiums incurred in connection
herewith) will promptly be repaid by the Indemnitee to the Indemnifying Party.
Upon making any Indemnification Payment, the Indemnifying Party will, to the
extent of such Indemnification Payment, be subrogated to all rights of the
Indemnitee against any third party that is not an affiliate of the Indemnitee in
respect to the Indemnifiable Loss to which the Indemnification Payment relates;
provided that (i) the Indemnifying Party shall then be in compliance with its
obligations under this Agreement in respect of such Indemnifiable Loss and (ii)
until the Indemnitee recovers full payment of its Indemnifiable Loss, all claims
of the Indemnifying Party against such third party on account of said
Indemnification Payment will be subrogated and subordinated in right of payment
to the Indemnitee's rights against such third party. Without limiting the
generality or effect of any other provision of this Section 14, each such
Indemnitee and Indemnifying Party will duly execute upon request all instruments
reasonably necessary to evidence and perfect the above-described subrogation and
subordination rights.
14.5 Extension of Due Date of Note. If Buyer has submitted a claim for
Indemnifiable Losses pursuant to this Section 14 and there remains pending a
claim for Indemnifiable Losses on the date payment of the Note is due, Buyer, in
addition to its right to offset described in Section 3.3.3, shall be entitled to
postpone payment of the Note until the claim for Indemnifiable Losses has been
resolved pursuant to Section 14.
14.6 Dispute Resolution Regarding Indemnification Claims. If either
Seller or Buyer rejects a claim for indemnification by the other party, Seller
and Buyer shall submit the dispute to binding arbitration in accordance with the
alternative dispute resolution procedures set forth in Exhibit J.
14.7 Offset. Buyer shall first satisfy any liability of Seller to Buyer
under this Section 14 by offset against any amount due under the Note.
37
44
SECTION 15. MISCELLANEOUS
15.1 Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of Washington.
15.2 Assignment and Delegation of Agreement. Neither party may assign
this Agreement or any interest in this Agreement without the prior written
consent of the other party, which consent shall not be unreasonably withheld;
provided, however, that:
(a) Buyer may assign and delegate, at or prior to Closing, all or a
part of its rights and obligations under this Agreement to one or more entities
formed and controlled by Buyer without the prior written consent of Seller; in
no event shall any such assignment and delegation relieve Buyer from any
liability under this Agreement, including without limitation the payment of the
Purchase Price and the Note; and
(b) Seller may assign, delegate and transfer, at or prior to Closing,
all or a part of its rights and obligations under this Agreement to one or more
entities affiliated with Seller, whether due to merger, consolidation or
otherwise, without the prior written consent of Buyer, but with prior notice to
Buyer; and Seller currently anticipates merging and consolidating PCI One
Incorporated into Phoenix Cable Incorporated.
15.3 Entire Agreement; Amendments. This Agreement constitutes and
embodies the entire agreement and understanding between the parties with respect
to the subject matter hereof and this Agreement supersedes all prior or
contemporaneous written or oral agreements and understandings between the
parties with respect thereto. This Agreement may not be modified or amended
except by a written instrument executed by the parties.
15.4 Binding Effect. Notwithstanding the provisions of Section 15.2,
this Agreement shall be binding upon and shall inure to the benefit of the
parties to this Agreement and their respective permitted successors and assigns.
15.5 Additional Agreements. Seller and Buyer shall sign any additional
agreements and other documents necessary or desirable to carry out the terms of
this Agreement.
15.6 Efforts. Subject to the terms and conditions herein provided, each
of the parties hereto agrees to use all reasonable efforts to take, or cause to
be taken, all actions and to do, or cause to be done, all things necessary,
proper or advisable under applicable laws and regulations to consummate and make
effective the transactions contemplated by this Agreement, including using all
reasonable efforts to obtain all necessary waivers, consents and approvals to be
provided by each of them hereunder, and to effect all necessary registrations
and filings, including, but not limited to, submissions of information requested
by governmental authorities.
38
45
15.7 Expenses. Except as otherwise expressly provided in this
Agreement, each party shall pay all of its expenses, including attorneys' and
accountants' fees, in connection with the negotiation of this Agreement, the
performance of its obligations hereunder, and the consummation of the
transactions contemplated by this Agreement.
15.8 Execution in Multiple Counterparts. This Agreement may be executed
in one or more identical counterparts, and all of such counterparts, when taken
together, shall be deemed to constitute the original of this Agreement.
15.9 Schedules and Exhibits. Each of the Schedules and Exhibits listed
below shall be incorporated into and shall for all purposes be deemed a part of
this Agreement:
Schedule 1.2 - Assets
Schedule 1.7 - Description of CATV Systems
Schedule 1.11 - Equivalent Billing Units
Schedule 1.14 - Excluded Assets
Schedule 3.4 - Allocation of Purchase Price
Schedule 4.1 - Seller's Obligations Assumed by Buyer
Schedule 5.4 - Security Interests
Schedule 5.5.2 - Real Property Not Served with Electricity
or Telephone
Schedule 5.5.4 - Easements to be Obtained
Schedule 5.5.5 - Environmental Matters
Schedule 5.6 - Required Consents
Schedule 5.9.1 - Copyright Filing Matters
Schedule 5.11 - Litigation and Proceedings
Schedule 5.14.1 - Employees
Schedule 5.14.4 - Employee Benefit Plans
Schedule 5.14.9 - Form 395-A Filings
Schedule 5.15 - Rate Reduction Orders
Schedule 5.21 - Seller's Financial Statements
Schedule 5.22 - Free CATV Service
Schedule 6.2 - Litigation Matters
Exhibit A - ▇▇▇▇ of Sale
Exhibit B - Assignment and Assumption Agreement
Exhibit C - Assignment and Assumption of Franchises
Exhibit D - Assignment and Assumption of Leases
Exhibit E - Seller's Certificate
Exhibit F - Noncompetition Agreement
Exhibit G - Note
Exhibit H - Closing Documents Checklist
Exhibit I - Buyer's Certificate
Exhibit J - Alternative Dispute Resolution Procedures
Exhibit K - Opinion of Seller's Legal Counsel
39
46
Except as otherwise provided in Section 4.1, any of such Schedules and
Exhibits may be later amended or revised by the mutual consent of the parties.
Such Schedules and Exhibits, as so amended or revised, shall be incorporated
into and shall for all purposes be deemed a part of this Agreement.
15.10 Waiver. No waiver of or with respect to any term, provision,
requirement, or condition of this Agreement, nor consent by a party to the
breach of or departure from any of the terms, provisions, requirements or
conditions hereof by the other party, shall in any event be binding on or
effective against the waiving or non-breaching party unless it be in writing and
signed by such party, and then such waiver shall be effective only in the
specific instance and for the purpose for which given.
15.11 Counsel. Each party has been represented by its own counsel in
connection with the negotiation and preparation of this Agreement and,
consequently, each party hereby waives the application of any rule of law that
would otherwise be applicable in connection with the interpretation of this
Agreement, including but not limited to any rule of law to the effect that any
provisions of this Agreement shall be interpreted or construed against the party
whose counsel drafted the provision.
15.12 Captions and Headings. The captions and headings are inserted in
this Agreement for convenience only, and shall in no event be deemed to define,
limit, or describe the scope or intent of this Agreement, or of any provision
hereof, nor in any way affect the interpretation of this Agreement.
15.13 Notices. All notices and communications required or permitted to
be given under any of the provisions of this Agreement shall be in writing and
shall be deemed to have been duly given when delivered by messenger, by
overnight delivery service, by facsimile transmission (receipt confirmed), or
mailed by first class certified mail, return receipt requested, addressed to the
parties at the addresses set forth below or at such other addresses as either
party shall notify the other in accordance with this Section 15.13:
If to Buyer:
Northland Communications Corporation
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ and ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
and to:
▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
▇▇▇▇ ▇▇▇▇▇▇▇ & Cleveland
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
40
47
If to Seller:
Phoenix Cable Income Fund
▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
and to:
▇▇▇▇▇▇ ▇▇▇▇▇▇, Esq.
Thelen, Marrin, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
15.14 Legal Expenses. If any proceeding is brought by either party to
enforce or interpret any term or provision of this Agreement, the substantially
prevailing party in such proceeding shall be entitled to recover, in addition to
all other relief as set forth in this Agreement, such party's reasonable
attorneys' and experts' fees and expenses.
15.15 Severability; Invalidity. If any provision of this Agreement is
held to be invalid, such invalidity shall not render invalid the remainder of
this Agreement or the remainder of which such invalid provision is a part. If
any provision of this Agreement is so broad as to be held unenforceable, such
provision shall be interpreted to be only so broad as is enforceable.
15.16 Time of the Essence. Time is of the essence in this Agreement.
15.17 Seller's Best Knowledge. As used throughout this Agreement, the
phrase "to the best of Seller's knowledge" means the actual or constructive
knowledge of any of the officers of Seller, after due investigation of the CATV
Systems and discussion with the personnel of such CATV Systems.
BUYER: NORTHLAND CABLE PROPERTIES FIVE
LIMITED PARTNERSHIP
By Northland Communications Corporation,
Managing General Partner
By /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
---------------------------
Its Vice President
------------------------
41
48
SELLER: PHOENIX CABLE INCOME FUND
By Phoenix Cable Incorporated, General Partner
By /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
--------------------------------
Its President
-----------------------------
42