Exhibit 10.17
ASSET PURCHASE AGREEMENT
BY AND BETWEEN
FRONTIERVISION OPERATING PARTNERS, L.P.
AND
TCI CABLEVISION OF VERMONT, INC., AND
WESTMARC DEVELOPMENT JOINT VENTURE
DATED AS OF
May 12, 1997
TABLE OF CONTENTS
SECTION 1. DEFINITIONS............................................................................................1
1.1 Adjustment Time............................................................................................1
1.2 Affiliate..................................................................................................1
1.3 Assets.....................................................................................................2
1.4 Basic Services.............................................................................................2
1.5 Business...................................................................................................2
1.6 Business Day...............................................................................................2
1.7 Closing....................................................................................................2
1.8 Encumbrance................................................................................................2
1.9 Environmental Law..........................................................................................3
1.10 Equipment.................................................................................................3
1.11 Equivalent Basic Subscribers (or EBSs)....................................................................3
1.12 ERISA Affiliate...........................................................................................4
1.13 Expanded Basic Service....................................................................................4
1.14 FCC.......................................................................................................4
1.15 GAAP......................................................................................................4
1.16 Governmental Authority....................................................................................4
1.17 Governmental Permits......................................................................................4
1.18 Hazardous Substances......................................................................................4
1.19 Intangibles...............................................................................................5
1.20 Legal Requirement.........................................................................................5
1.21 Losses....................................................................................................5
1.22 Pay TV....................................................................................................5
1.23 Pay Unit..................................................................................................5
1.24 Permitted Encumbrances....................................................................................5
1.25 Person....................................................................................................6
1.26 Rate Regulatory Matters...................................................................................6
1.27 Rate Order................................................................................................6
1.28 Real Property.............................................................................................6
1.29 Required Consents.........................................................................................7
1.30 Seller Contracts..........................................................................................7
1.31 Service Area..............................................................................................7
1.32 System....................................................................................................7
1.33 Third Party...............................................................................................7
1.34 Other Definitions.........................................................................................7
SECTION 2. SALE OF ASSETS.........................................................................................8
SECTION 3. CONSIDERATION..........................................................................................8
3.1 Purchase Price.............................................................................................8
3.2 Adjustments to Purchase Price..............................................................................9
3.3 Determination of Adjustments..............................................................................10
SECTION 4. ASSUMED LIABILITIES AND EXCLUDED ASSETS...............................................................11
4.1 Assignment and Assumption.................................................................................11
4.2 Excluded Assets...........................................................................................12
SECTION 5. REPRESENTATIONS AND WARRANTIES OF SELLERS.............................................................12
5.1 Organization and Qualification............................................................................13
5.2 Authority and Validity....................................................................................13
5.3 No Conflict; Required Consents............................................................................14
5.4 Assets....................................................................................................14
5.5 Governmental Permits......................................................................................14
5.6 Seller Contracts..........................................................................................15
5.7 Real Property.............................................................................................15
5.8 Environmental Matters.....................................................................................16
5.9 Compliance with Legal Requirements........................................................................17
5.10 Patents, Trademarks and Copyrights.......................................................................18
5.11 Legal Proceedings........................................................................................19
[5.12 Tax Returns; Other Reports..............................................................................19
5.13 Employment Matters.......................................................................................19
[5.14 Subscriber Numbers......................................................................................20
5.15 Finders and Brokers......................................................................................21
5.16 Systems and Business Information.........................................................................21
5.17 Financial Statements.....................................................................................21
SECTION 6. BUYER'S REPRESENTATIONS AND WARRANTIES................................................................22
6.1 Organization and Qualification............................................................................22
6.2 Authority and Validity....................................................................................22
6.3 No Conflicts; Required Consents...........................................................................22
6.4 Finders and Brokers.......................................................................................23
6.5 Financial Statements......................................................................................23
6.6 Disclaimer of Warranty....................................................................................24
SECTION 7. ADDITIONAL COVENANTS..................................................................................24
7.1 Access to Premises and Records............................................................................24
7.2 Continuity and Maintenance of Operations; Financial Statements............................................24
7.3 Employee Matters..........................................................................................27
7.4 Franchise Extensions; Franchise Renewals Required Consents................................................29
7.5 HSR Notification..........................................................................................32
7.6 No Shopping...............................................................................................32
7.7 Lien and Judgment Searches................................................................................32
7.8 Transfer Taxes............................................................................................33
7.9 Distant Broadcast Signals.................................................................................33
7.10 Updated Schedules........................................................................................33
7.11 Use of Names and Logos...................................................................................33
7.12 Satisfaction of Conditions...............................................................................34
7.13 Confidentiality and Publicity............................................................................34
7.14 Bulk Transfers...........................................................................................34
7.15 Transitional Billing Services...........................................................................34
7.16 Notice of Certain Matters................................................................................35
7.17 MDU Access Agreements....................................................................................35
SECTION 8. CONDITIONS PRECEDENT..................................................................................35
8.1 Conditions to the Obligations of Buyer and Sellers........................................................35
8.2 Conditions to the Obligations of Buyer....................................................................36
8.3 Conditions to Obligations of Sellers......................................................................37
8.4 Waiver of Conditions......................................................................................38
SECTION 9. CLOSING...............................................................................................38
9.1 The Closing; Time and Place...............................................................................38
9.2 Sellers' Delivery Obligations.............................................................................38
9.3 Buyer's Delivery Obligations..............................................................................39
SECTION 10. TERMINATION..........................................................................................40
10.1 Termination Events.......................................................................................40
10.2 Effect of Termination....................................................................................41
SECTION 11. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION..........................................41
11.1 Survival of Representations and Warranties...............................................................41
11.2 Indemnification by Seller................................................................................41
11.3 Indemnification by Buyer.................................................................................42
11.4 Third Party Claims.......................................................................................43
11.5 Limitations on Indemnification - Sellers.................................................................44
11.6 Limitations on Indemnification - Buyer...................................................................44
SECTION 12. MISCELLANEOUS........................................................................................44
12.1 Parties Obligated and Benefited..........................................................................44
12.2 Notices..................................................................................................45
12.3 Attorneys' Fees..........................................................................................47
12.4 Right to Specific Performance............................................................................47
12.5 Waiver...................................................................................................47
12.6 Captions.................................................................................................47
12.7 Choice of Law............................................................................................47
12.8 Terms....................................................................................................47
12.9 Rights Cumulative........................................................................................47
12.10 Further Actions.........................................................................................47
12.11 Time....................................................................................................48
12.12 Late Payments...........................................................................................48
12.13 Counterparts............................................................................................48
12.14 Entire Agreement........................................................................................48
12.15 Severability............................................................................................48
12.16 Construction............................................................................................48
12.17 Expenses................................................................................................48
12.18 Risk of Loss; Condemnation..............................................................................49
LIST OF EXHIBITS AND SCHEDULES
EXHIBITS
A - ▇▇▇▇ of Sale
B - Assumption Agreement
C - Opinion of Sellers' Counsel
D - FCC Opinion
E - Noncompetition Agreement
F - Opinion of Buyer's Counsel
G - Form of Franchise Consent
SCHEDULES
1 - The Business (including Rate Schedule)
2 - Governmental Permits
3 - Seller Contracts
4 - Required Consents
5 - Owned Equipment and Vehicles
6 - Real Property
7 - Encumbrances to Be Discharged Prior to Closing
8 - Proceedings and Judgments
9 - Employee Matters
10 - Excluded Assets
ASSET PURCHASE AGREEMENT
This Asset Purchase Agreement ("Agreement") is made as of the
12th day of May, 1997, by and between FrontierVision Operating Partners, L.P., a
Delaware limited partnership ("Buyer"), and TCI Cablevision of Vermont, Inc., a
Delaware corporation ("TCI Vermont") and WestMarc Development Joint Venture, a
Colorado general partnership ("WestMarc") (each referred to as a "Seller" and
collectively as "Sellers").
RECITALS
TCI Vermont is engaged in the business of providing cable
television service to subscribers in and around St. Albans and Swanton, Vermont.
WestMarc is engaged in the business of providing cable
television service to subscribers in and around Morrisville, ▇▇▇▇▇▇▇, ▇▇▇▇ Park,
Morristown, North Hyde Park, Hardwick, East Hardwick, Hartford, Hartland and
Norwich, Vermont and Lebanon, Enfield, Canaan, Hanover, Sunapee and Newport, New
Hampshire.
Buyer desires to purchase and Sellers desire to sell
substantially all the assets of Sellers used or useful in connection with the
Business (as defined herein).
AGREEMENT
In consideration of the above recitals and the mutual
agreements stated in this Agreement, the parties agree as follows:
SECTION 1. DEFINITIONS.
In addition to terms defined elsewhere in this Agreement, the
following capitalized terms, when used in this Agreement, will have the meanings
set forth below:
1.1 Adjustment Time. 12.01 a.m. (local Denver time) on the
Closing Date or, in the event that the net Base Purchase Price proceeds due and
payable to Sellers at the Closing are not received by Sellers at or prior to
9:00 a.m. (local Denver time) on the Closing Date, 12:01 a.m. (local Denver
time) on the calendar day following the Closing Date.
1.2 Affiliate. With respect to any Person, any other Person
controlling, controlled by or under common control with such Person, with
"control" for such purpose meaning the possession, directly or indirectly, of
the power to direct or cause the direction of the
management and policies of a Person, whether through the ownership of voting
securities or voting interests, by contract or otherwise.
1.3 Assets. All properties, privileges, rights, interests and
claims, real and personal, tangible and intangible, of every type and
description that are owned, leased, held, used or useful in the Business in
which either Seller has any right, title or interest or in which either Seller
acquires any right, title or interest on or before the Closing Date, including
Governmental Permits, Intangibles, Seller Contracts, Equipment, Real Property,
accounts receivable and deposits relating to the Business that are held by third
parties for the account of either Seller or for security for either Seller's
performance of its obligations, but excluding any Excluded Assets.
1.4 Basic Services. The lowest tier of service offered to
subscribers of a System which includes broadcast and satellite service
programming for which such subscribers pay a fixed monthly fee to a Seller.
1.5 Business. The cable television business conducted by
Sellers as of any applicable date through one or more Systems in and around the
Service Area, as described on Schedule 1.
1.6 Business Day. Any day other than Saturday, Sunday or a day
on which banking institutions in Denver, Colorado or New York, New York are
required or authorized to be closed.
1.7 Closing. The consummation of the transactions contemplated
by this Agreement, as described in Section 9, the date of which is referred to
as the Closing Date.
1.8 Encumbrance. Any security interest, security agreement,
financing statement filed with any Governmental Authority, conditional sale or
other title retention agreement, any lease, consignment or bailment given for
purposes of security, any mortgage, lien, indenture, pledge, option, right of
first refusal, encumbrance, adverse interest, constructive trust or other trust,
claim, attachment, exception to or defect in title or other ownership interest
(including but not limited to reservations, rights of entry, possibilities of
reverter, encroachments, easements, rights-of-way, restrictive covenants, leases
and licenses) of any kind, which constitutes an interest in or claim against
property, whether arising pursuant to any Legal Requirement, Governmental
Permit, Seller Contract or otherwise.
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1.9 Environmental Law. Any Legal Requirement relating to
pollution or protection of public or employee health, safety or welfare or the
environment, including those relating to emissions, discharges, releases or
threatened releases of Hazardous Substances into the environment (including
ambient air, surface water, ground water or land), or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of Hazardous Substances.
1.10 Equipment. All electronic devices, trunk and distribution
coaxial and optical fiber cable, amplifiers, power supplies, conduit, vaults and
pedestals, grounding and pole hardware, subscriber's devices (including
converters, encoders, transformers behind television sets and fittings), headend
hardware (including origination, earth stations, transmission and distribution
system), test equipment, vehicles and other tangible personal property owned,
leased, used or held for use in the Business, including all of the foregoing
described on Schedule 5 (and with respect to leased Equipment, on Schedule 3).
1.11 Equivalent Basic Subscribers (or EBSs). As of any date of
determination and for each franchise area served by a System, an active customer
for Basic Services or Expanded Basic Services either in a single household, a
commercial establishment or in a multi-unit dwelling (including a hotel unit);
provided, however, that the number of customers in a multi-unit dwelling or
commercial establishment that obtain service on a "bulk-rate" basis shall be
determined on a System by System basis by dividing the gross bulk-rate ▇▇▇▇▇▇▇▇
for Basic Services and Expanded Basic Services (but not ▇▇▇▇▇▇▇▇ from a la carte
tiers or premium services, installation or other non-recurring charges,
converter rental or from any outlet or connection other than the first or from
any pass-through charge for sales, taxes, line-itemized franchise fees, fees
charged by the FCC and the like) attributable to such multi-unit dwelling or
commercial establishment during the most recent billing period ended prior to
the date of determination (but excluding ▇▇▇▇▇▇▇▇ in excess of a single month's
charge) by the rate charged at the time of determination to individual
households for the highest level of Basic Services and Expanded Basic Services
offered by such System. For purposes of this definition, an "active customer"
shall mean any person, commercial establishment or multi-unit dwelling as of any
date of determination that (i) is subscribing to and pays for Basic Services or
Expanded Basic Services at the standard, non-discounted monthly service fee
applicable to such level of service (or, in the case of a commercial
establishment or multi-dwelling unit, the "bulk-rate" applicable to such
customer); (ii) has paid for at least one month's Basic Service or Expanded
Basic Services at the fee or rate described in (i) above; (iii) has no
outstanding balance (other than de minimis charges not in excess of $5.00) more
than two months past due from the earliest date for which the service giving
rise to such balance was provided, (iv) (A) has not required or requested
service
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disconnection, (B) is not currently subject to a service disconnection order for
non-payment, and (C) has not been subject to a service disconnection order for
non-payment within the past three months; and (v) was not solicited by Sellers
within 90 days prior to the date of determination by any promotions or by offers
of discounts other than those in the ordinary course of business consistent with
the applicable Seller's past practices.
1.12 ERISA Affiliate. As to any Person, any trade or business,
whether or not incorporated, which together with such Person would be deemed a
single employer within the meaning of Section 4001 of ERISA.
1.13 Expanded Basic Service. Any level of video programming
service greater than Basic Services provided over a System regardless of service
tier other than: Basic Services, any new product tier, any migrated product tier
and video programming offered on a per channel (and packages of such per channel
services) or per program basis.
1.14 FCC Federal Communications Commission.
1.15 GAAP. Generally accepted accounting principles as in
effect from time to time in the United States of America.
1.16 Governmental Authority. The United States of America,
any state, commonwealth, territory or possession of the United States of America
and any political subdivision or quasi-governmental authority of any of the
same, including any court, tribunal, department, commission, board, bureau,
agency, county, municipality, province, parish or other instrumentality of any
of the foregoing.
1.17 Governmental Permits. All franchises, approvals,
authorizations, permits, licenses, certifications, easements, registrations,
qualifications, leases, variances and similar rights obtained from any
Governmental Authority and used or held for use in the Business, including all
amendments and modifications thereto and any renewals thereof, including those
set forth on Schedule 2.
1.18 Hazardous Substances. Any pollutant, contaminant,
chemical, industrial, toxic, hazardous or noxious substance or waste which is
regulated by any Governmental Authority, including (a) any petroleum or
petroleum compounds (refined or crude), flammable substances, explosives,
radioactive materials or any other materials or pollutants which pose a hazard
or potential hazard to the Real Property or to Persons in or about the Real
Property or
4
cause the Real Property to be in violation of any laws, regulations or
ordinances of federal, state or applicable local governments, (b) asbestos or
any asbestos-containing material of any kind or character, (c) polychlorinated
biphenyls ("PCBs"), as regulated by the Toxic Substances Control Act, 15
U.S.C.' 2601 et seq., (d) any materials or substances designated as "hazardous
substances" pursuant to the Clean Water Act, 33 U.S.C.' 1251 et seq., (e)
"economic poison," as defined in the Federal Insecticide, Fungicide and
Rodenticide Act, 7 U.S.C.' 135 et seq., (f) "chemical substance," "new chemical
substance" or "hazardous chemical substance or mixture" pursuant to the Toxic
Substances Control Act, 15 U.S.C.' 2601 et seq., (g) "hazardous substances"
pursuant to the Comprehensive Environmental Response, Compensation, and
Liability Act, 42 U.S.C.' 9601 et seq. and (h) "hazardous waste" pursuant to
the Resource Conservation and Recovery Act, 42 U.S.C.' 6901 et seq.
1.19 Intangibles. All intangible assets, including subscriber
lists, accounts receivable, claims (excluding any claims relating to Excluded
Assets), patents, copyrights and goodwill, if any, owned, used or held for use
in the Business.
1.20 Legal Requirement. Applicable common law and any statute,
ordinance, code, or other law, rule, regulation, order, technical or other
written standard or policy or procedure enacted, adopted or applied by any
Governmental Authority, including judicial decisions applying common law or
interpreting any other Legal Requirement, in each case, as amended.
1.21 Losses. Any claims, losses, liabilities, damages,
Encumbrances, penalties, costs and expenses, including interest that may be
imposed in connection therewith, expenses of investigation, reasonable fees and
disbursements of counsel and other experts, and the cost to any Person making a
claim or seeking indemnification under this Agreement with respect to funds
expended by such Person by reason of the occurrence of any event with respect to
which indemnification is sought.
1.22 Pay TV. Premium programming services selected by and sold
to subscribers on a per channel or per program basis.
1.23 Pay Unit. Each per channel Pay TV service subscribed for
by any subscriber of a System.
1.24 Permitted Encumbrances. The following Encumbrances: (a)
liens securing taxes, assessments and governmental charges not yet due and
payable, (b) any zoning law
5
or ordinance or any similar Legal Requirement, (c) any right reserved to any
Governmental Authority to regulate the affected property, (d) as to Real
Property interests, any Encumbrance reflected in the public records and that
does not individually or in the aggregate interfere with the right or ability to
own, use or operate the Real Property or to convey good, marketable and
indefeasible fee simple title to such Real Property or diminish the value of the
Real Property, and (e)Tower Space Lease Agreement dated January 1, 1993, and
Landlord's Waiver and Consent dated September 23, 1994, between TCI Vermont and
Vermont RSA Limited Partnership and Contel Cellular, Inc., provided that
"Permitted Encumbrances" will not include any Encumbrance which secures or
otherwise relates to a monetary obligation or could prevent or inhibit in any
way the conduct of the business of the affected System and provided further that
classification of any Encumbrance as a "Permitted Encumbrance" will not affect
any liability Sellers may have for such Encumbrance, including pursuant to any
indemnity obligation under this Agreement.
1.25 Person. Any natural person, corporation, partnership,
trust, unincorporated organization, association, limited liability company,
Governmental Authority or other entity.
1.26 Rate Regulatory Matters Any matter or any effect on
either Seller or any of the Systems or the Business arising out of or related to
the Communications Act of 1934, as amended (including all of the provisions of
the Cable Communications Policy Act of 1984, as amended, the Cable Television
Consumer Protection and Competition Act of 1992, as amended, and the
Telecommunications Act of 1996), any regulations adopted thereunder, or any
other federal, state or local law or regulation dealing with, limiting or
affecting the rates which can be charged by cable television systems to their
customers (whether for programming, equipment, installation, service or
otherwise).
1.27 Rate Order Any final order or decision, or any tolling
order or accounting order pursuant to 47 C.F.R. 76.933, issued by a federal,
state or local Governmental Authority relating to a Rate Regulatory Matter.
1.28 Real Property. All assets held by either Seller and used
or held for use in the Business consisting of realty, including appurtenances,
improvements and fixtures located on such realty, and any other interests in
real property, including fee interests, leasehold interests and easements, wire
crossing permits, rights of entry (except agreements related to multiple
dwelling units), including those described on Schedule 6.
6
1.29 Required Consents. All franchises, licenses,
authorizations, approvals and consents required under Governmental Permits
(including any Governmental Permit that is extended or renewed in connection
with the transactions contemplated by this Agreement), Seller Contracts or by
any Legal Requirement or otherwise for (a) Sellers to transfer the Assets and
the Business to Buyer, (b) Buyer to conduct the Business and to own, lease, use
and operate the Assets at the places and in the manner in which the Business is
conducted as of the date of this Agreement and on the Closing Date and (c) Buyer
to assume and perform the Governmental Permits and Seller Contracts assigned to
Buyer hereunder and the other Assumed Liabilities.
1.30 Seller Contracts. All contracts and agreements, other
than Governmental Permits, pertaining to the ownership, operation and
maintenance of the Assets or the Business or used or held for use in the
Business, including those described on Schedule 3 or, in the case of contracts
and agreements relating to Real Property, on Schedule 6.
1.31 Service Area. The area in which Sellers operate the
Business, specifically in and around St. Albans, Swanton, Morrisville, ▇▇▇▇▇▇▇,
▇▇▇▇ Park, Morristown, North Hyde Park, Hardwick, East Hardwick, Hartford,
Hartland and Norwich, Vermont and Lebanon, Enfield, Canaan, Hanover, Sunapee and
Newport, New Hampshire.
1.32 System. A complete cable television reception and
distribution system operated in the conduct of the Business, consisting of one
or more headends, subscriber drops and associated electronic and other
equipment, and which is, or is capable of being without modification, operated
as an independent system without interconnections to other systems. Any systems
which are interconnected or which are served in total or in part by a common
headend will be considered a single System.
1.33 Third Party. Any Person other than Seller or Buyer and
their respective Affiliates.
1.34 Other Definitions. The following terms are defined in the
Sections indicated:
Term Section
---- -------
Action 11.4
Antitrust Division 7.5
Assumed Liabilities 4.1
Base Purchase Price 3.1
Buyer Damages 11.5
7
Closing Date 1.6
Desired Employees 7.3.1
Employee Benefit Plans 5.13.2
ERISA 5.13.1
Estoppel Certificates 7.4.2
Excluded Assets 4.2
Excluded Liabilities 4.1
Final Adjustments Report 3.3.2
Financial Statements 6.5
FTC 7.5
Hired Employee 7.3.6
HSR Act 7.5
Indemnified Party 11.4
Indemnifying Party 11.4
1992 Cable Act 5.9.4
Preliminary Adjustments Report 3.3.1
Purchase Price 3.1
Retained Employees 7.3.1
SEC 7.1
Seller Damages 11.6
Taking 12.18.2
Transaction Documents 5.2
SECTION 2. SALE OF ASSETS.
Subject to the terms and conditions set forth in this
Agreement, at the Closing, Sellers will sell, transfer, assign and deliver to
Buyer, and Buyer will purchase from Sellers, all of each Seller's rights, titles
and interests in, to and under the Assets free and clear of all Encumbrances
except for Permitted Encumbrances. All the Assets are intended to be transferred
to Buyer, whether or not described in the Schedules.
SECTION 3. CONSIDERATION.
3.1 Purchase Price. Subject to the satisfaction or waiver of
Buyer's closing conditions set forth in Sections 8.1 and 8.2, at Closing Buyer
will pay to Sellers total cash consideration of Thirty-Four Million Five Hundred
Thousand Dollars ($34,500,000) subject to adjustment pursuant to this Section 3
("Purchase Price"). The Purchase Price is subject
8
to adjustment as provided in Sections 3.2 and 3.3 and will be adjusted downward
by One Thousand Six Hundred Five Dollars ($1,605.00) for each EBS less than
21,500 EBS as of the end of the month prior to the Closing Date. The Purchase
Price shall be allocated to TCI Vermont in the amount of Eight Million One
Hundred Thousand Dollars ($8,100,000) and to WestMarc in the amount of Twenty
Six Million Four Hundred Thousand Dollars ($26,400,000) (to be ratably adjusted
to reflect adjustments to the Purchase Price). The Buyer and Sellers shall
mutually agree upon the allocation of the Purchase Price among the Assets for
all purposes (including financial, accounting and tax purposes). Sellers and
Buyer shall each file their respective tax returns, including IRS Form 8594, in
a manner consistent with the agreed upon allocations. Neither Sellers nor Buyer
shall revoke or amend IRS Form 8594 without the written consent of the other
party.
3.2 Adjustments to Purchase Price. The Purchase Price will be
adjusted as follows:
3.2.1 Adjustments on a pro rata basis as of the
Adjustment Time will be made for all prepaid expenses (but only to the extent
the full benefit thereof will be realizable by Buyer within 12 months after the
Adjustment Time), accrued expenses (including real and personal property taxes),
prepaid income, subscriber prepayments and accounts receivable related to the
Business, all as determined in accordance with GAAP consistently applied, and to
reflect the principle that all expenses and income attributable to the Business
for the period prior to the Adjustment Time are for the account of Sellers, and
all expenses and income attributable to the Business for the period after the
Adjustment Time are for the account of Buyer except that there shall be no
adjustment for, and Sellers shall remain solely liable with respect to, all
Excluded Liabilities. Sellers will receive no credit for any subscriber accounts
receivable (i) any portion of which is 90 days or more past due as of the
Adjustment Time or (ii) from subscribers whose accounts are inactive and Sellers
shall remit to Buyer from and after the Adjustment Time all payments received by
Sellers in respect of the accounts receivable.
3.2.2 Buyer's account shall be credited for the amount of
all advance payments to, or funds of third parties on deposit with, either
Seller as of the Adjustment Time, relating to the Business, including advance
payments and deposits by subscribers served by the Business for converters,
encoders, decoders, cable television service and related sales. Buyer's account
shall be credited for the economic value of all accrued vacation time credited
to the Hired Employees as of the Adjustment Time pursuant to Section 7.3.6(a),
where economic value is the amount equal to the cash compensation that would be
payable to each such employee at his or her current level of compensation for a
period equal to such employee's accrued vacation.
9
3.2.3 The Purchase Price will be adjusted, if necessary
as contemplated by Section 7.4.2.
3.3 Determination of Adjustments. Preliminary and final
adjustments to the Purchase Price will be determined as follows:
3.3.1 Not later than a date Sellers reasonably believe is
at least 10 Business Days prior to the Closing Date, Sellers will deliver to
Buyer a report (the "Preliminary Adjustments Report"), certified as to
completeness and accuracy by each Seller, showing in detail the preliminary
determination of the adjustments referred to in Section 3.1 and Section 3.2,
which are calculated as of the Adjustment Time (or as of any other time agreed
by the parties) and any documents substantiating the adjustments proposed in the
Preliminary Adjustments Report. The Preliminary Adjustments Report will include
a complete list of subscribers, a detailed calculation of the number of
Equivalent Basic Subscribers and a schedule setting forth advance payments made
to or by each Seller and deposits made by each Seller, as well as accounts
receivable information relating to the Business (showing sums due and their
respective aging as of the Adjustment Time). Each Seller also will furnish to
Buyer its billing report for the most current period as of the Adjustment Time.
Following receipt of such Preliminary Adjustments Report and supporting
information as Buyer shall reasonably request, Buyer shall have five Business
Days to review such Preliminary Adjustments Report and supporting information
and to notify Sellers of any disagreements with Sellers' estimates. If Buyer
provides a notice of disagreement with Sellers' estimates of the adjustments
referred to in Section 3.1 or Section 3.2 within such five Business Day period,
Buyer and Sellers shall negotiate in good faith to resolve any such dispute and
to reach an agreement prior to the Closing on such estimated adjustments as of
the Adjustment Time. The estimate so agreed upon by Buyer and Sellers (or if
Buyer fails to provide a notice of disagreement with Sellers' estimates of such
adjustments within the time provided) the estimates of such adjustments set
forth in the Preliminary Adjustments Report initially delivered by Sellers to
Buyer shall be the basis for determining the adjusted Purchase Price which shall
be paid to Sellers at Closing (the "Base Purchase Price"). Any disagreements
that may exist with respect to the Preliminary Adjustments Report, if any, shall
be resolved in connection with the preparation of the Final Adjustments Report
pursuant to Sections 3.3.2 and 3.3.3.
3.3.2 Within 60 days after the Closing, Sellers will
deliver to Buyer a report (the "Final Adjustments Report"), similarly certified
by each Seller, showing in detail the final determination of all adjustments
which were not calculated as of the Adjustment Time and
10
containing any corrections to the Preliminary Adjustments Report, together with
any documents substantiating the adjustments proposed in the Final Adjustments
Report or reasonably requested by Buyer. Buyer will provide Sellers with
reasonable access to all records which Buyer has in its possession and which are
necessary for Sellers to prepare the Final Adjustments Report.
3.3.3 Within 30 days after receipt of the Final
Adjustments Report, Buyer will give Sellers written notice of Buyer's
objections, if any, to the Final Adjustments Report. If Buyer makes any such
objection, the parties will agree on the amount, if any, which is not in dispute
within 30 days after Sellers' receipt of Buyer's notice of objections to the
Final Adjustments Report. Any undisputed amount shall be payable within three
Business Days after agreement on the undisputed portion of the Final Adjustments
Report. Any amounts which remain disputed after such 30 day period may be
submitted by Sellers, on the one hand, or Buyer, on the other hand, by written
notice to the other party, to a mutually acceptable Big Six accounting firm, as
that term is currently understood in the accounting industry, whose
determination will be conclusive and binding on the parties and shall be made as
soon as practicable after the date of submission. Sellers and Buyer will bear
equally the fees and expenses payable to such firm in connection with such
determination. The payment required after determination of all disputed amounts
will be made by the responsible party by wire transfer of immediately available
funds to the other party within three Business Days after the final
determination.
SECTION 4. ASSUMED LIABILITIES AND EXCLUDED ASSETS.
4.1 Assignment and Assumption. As of the Closing Buyer will
assume and after the Closing will pay, discharge and perform the following (the
"Assumed Liabilities"): (a) Sellers' obligations to subscribers of the Business
for (i) subscriber deposits held by Sellers as of the Adjustment Time and which
are refundable, in the amount for which Buyer received credit under Section 3.2,
(ii) subscriber advance payments held by Sellers as of the Adjustment Time for
services to be rendered by a System after the Adjustment Time, in the amount for
which Buyer received credit under Section 3.2 and (iii) the delivery of cable
television service to subscribers of the Business after the Adjustment Time; and
(b) obligations accruing and relating to the Systems and the period after the
Adjustment Time under Governmental Permits listed on Schedule 2 (to the extent
that such Governmental Permits are transferred to Buyer at Closing and excluding
Governmental Permits listed on Schedule 10) and Seller Contracts listed on
Schedule 3 and Schedule 6 (to the extent such Seller Contracts are assigned to
Buyer at Closing and excluding Seller Contracts listed on Schedule 10). Buyer
will not assume or have any responsibility for any liabilities or obligations of
Seller other than the Assumed Liabilities. In no
11
event will Buyer assume or have any responsibility for any liabilities or
obligations (i) associated with the Excluded Assets, or (ii) relating to any
claims or pending litigation or proceedings relating to the Business prior to
the Closing, or (iii) under capitalized leases or other financing arrangements
(it being understood that Sellers shall satisfy all such capitalized and
financing leases with respect to any of the Assets and obtain good title thereto
so that such Assets shall be transferred to Buyer at Closing free of any
interest of the lessors and otherwise in accordance with this Agreement), or
(iv) incurred after the date of this Agreement in violation of either Seller's
covenants made in this Agreement, or (v) under any Seller's or Seller's
Affiliate's employee pension, retirement or other benefit plan or collective
bargaining agreement except for such liabilities or obligations assumed by Buyer
pursuant to Section 7.3 or (vi) except for such liabilities or obligations
assumed by Buyer pursuant to Section 7.3. any obligation to any employee or
former employee of either Seller or any Affiliate of either Seller for salary,
wages or other employee compensation or benefits, including, without limitation,
severance benefits, vacation time or sick leave related to such period of time
the employee was employed by such Seller or any such Affiliate, however, arising
(including by virtue of the consummation of the transactions contemplated by
this Agreement), or (vii) except to the extent that the Purchase Price is
adjusted in favor of Buyer as provided in Section 3.2, and except as
specifically set forth herein, relate to the Business or otherwise arise out of
actions of either Seller prior to the Adjustment Time (such excluded obligations
and liabilities being sometimes collectively referred to herein as the "Excluded
Liabilities").
4.2 Excluded Assets. The Excluded Assets, which will be
retained by Sellers, will consist of the following: (a) programming contracts,
retransmission consent agreements and pole attachment agreements (except for any
of the foregoing set forth on Schedule 3); (b) Employee Benefit Plans; (c)
subject to Section 12.18 hereof, insurance policies and rights and claims
thereunder; (d) bonds, letters of credit, surety instruments and other similar
items; (e) cash and cash equivalents and notes receivable; (f) Sellers'
trademarks, trade names, service marks, service names, logos and similar
proprietary rights; (g) Sellers' rights under any agreement governing or
evidencing an obligation of either Seller for borrowed money; (h) Seller
Contracts for subscriber billing and all CSG equipment; (i) all equipment owned
or utilized by TCI Satellite Entertainment, Inc. (a/k/a "Primestar by TCI") and
which is enumerated on Schedule 10 (j) ad sales equipment owned by Adelphia
Communications, Inc.; and (k) the assets described on Schedule 10.
SECTION 5. REPRESENTATIONS AND WARRANTIES OF SELLERS.
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Each Seller, jointly and severally, represents and warrants to
Buyer, as of the date of this Agreement as follows:
5.1 Organization and Qualification. TCI Vermont is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware. WestMarc Joint Venture is a general partnership,
validly existing and in good standing under the laws of the State of Colorado.
Each Seller has all requisite corporate or partnership (as the case may be)
power and authority to own, lease and use the Assets owned, leased or used by it
and to conduct the Business as it is currently conducted. Each Seller is
qualified to do business and is in good standing under the laws of each
jurisdiction in which the ownership, leasing or use of the Assets owned, leased
or used by it or the nature of its activities makes such qualification
necessary, except in any such jurisdiction where the failure to be so qualified
and in good standing would not have a material adverse effect on either Seller,
the Business, the Assets or the Systems or on the ability of either Seller to
perform its obligations under this Agreement. Schedule 1 lists each Person which
owns a partnership interest in WestMarc. Schedule 1 sets forth (i) all of the
fictitious and trade names which each Seller has used or is currently using in
connection with the Business and, to the best of each Seller's knowledge, all
fictitious and trade names used by any prior owner or operator of the Assets in
the past five (5) years in connection with the business of the Systems, and (ii)
the location of the principal office of each Seller.
5.2 Authority and Validity. Each Seller has all requisite
corporate or partnership (as the case may be) power and authority to execute and
deliver, to perform its obligations under, and to consummate the transactions
contemplated by, this Agreement and all other documents and instruments to be
executed and delivered in connection with the transactions contemplated by this
Agreement (collectively, the "Transaction Documents") to which it is a party.
The execution and delivery by each Seller of, the performance by each Seller of
its obligations under, and the consummation by each Seller of the transactions
contemplated by, this Agreement and the Transaction Documents to which such
Seller is a party have been duly and validly authorized by all necessary action
by or on behalf of TCI Vermont and WestMarc. This Agreement has been, and when
executed and delivered by Sellers the Transaction Documents will be, duly and
validly executed and delivered by each Seller and the valid and binding
obligations of each Seller, enforceable against each Seller in accordance with
their terms, except as the same may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws now or hereafter in
effect relating to the enforcement of creditors' rights generally or by
principles governing the availability of equitable remedies.
13
5.3 No Conflict; Required Consents. Subject to receipt of the
Required Consents which are listed on Schedule 4 and subject to the requirements
of the HSR Act, the execution and delivery by each Seller, the performance of
each Seller under, and the consummation of the transactions contemplated by,
this Agreement and the Transaction Documents to which such Seller is a party do
not and will not: (a) conflict with or violate any provision of the charter or
bylaws of TCI Vermont or the partnership agreement of WestMarc; (b) violate any
provision of any Legal Requirement; (c) require any consent, approval or
authorization of, or filing of any certificate, notice, application, report or
other document with any Governmental Authority or other Person; or (d) (i)
conflict with, violate, result in a breach of or constitute a default under
(without regard to requirements of notice, lapse of time, or elections of other
Persons, or any combination thereof), (ii) permit or result in the termination,
suspension or modification of, or (iii) result in the acceleration of (or give
any Person the right to accelerate) the performance of either Seller under any
Seller Contract or other instrument evidencing any of the Assets or by which
either Seller or any of its assets is bound or affected except for purposes of
this clause (d) such violations, conflicts, breaches, defaults, terminations,
suspensions, modifications, and accelerations as would not, individually or in
the aggregate, have a material adverse effect on any System, the Business or
Sellers or on the ability of either Seller to perform its obligations under this
Agreement or the Transaction Documents to which such Seller is a party, or (e)
result in the creation or imposition of any Encumbrance upon any of the Assets.
5.4 Assets. Each Seller has exclusive, good and marketable
title to (or, in the case of Assets that are leased, valid leasehold interests
in) the Assets owned or leased by such Seller (other than Real Property, as to
which the representations and warranties in Section 5.7 apply). The Assets are
free and clear of all Encumbrances, except (a) Permitted Encumbrances and (b)
Encumbrances described on Schedule 7, all of which will be terminated, released
or, in the case of rights of refusal listed on Schedule 7, waived, as
appropriate, at or prior to the Closing. Except as described on Schedules 3 or
5, none of the Equipment is leased by Sellers from any other Person. All the
Equipment is in good operating condition and repair (ordinary wear and tear
excepted) and is suitable and adequate for continued use in the manner in which
it is presently used. The Assets constitute all the assets necessary to permit
Buyer to conduct the Business and to operate the Systems substantially as they
are being conducted and operated on the date of this Agreement and in compliance
with all Legal Requirements, Governmental Permits and Seller Contracts and to
perform all the Assumed Liabilities.
5.5 Governmental Permits. All Governmental Permits (including
expiration dates) and to the knowledge of Sellers each document relating thereto
or comprising a part thereof are listed by name and date on Schedule 2 or
Schedule 10. Complete and correct copies
14
of all such Governmental Permits documents have been delivered by Sellers to
Buyer. Except as set forth on Schedule 2, each Governmental Permit is in full
force and effect and is valid under all applicable Legal Requirements according
to its terms and the Seller party to each such Governmental Permit is not and,
to such Seller's knowledge, the other party thereto is not, in breach or default
of any terms or conditions thereunder. Except as set forth in Schedule 2, there
is no legal action, proceeding or investigation, pending or threatened, to
terminate, suspend or modify any Governmental Permit and each Seller is in
compliance with the terms and conditions of all the Governmental Permits to
which such Seller is a party and with other applicable requirements of all
Governmental Authorities (including the FCC, United States Copyright Office and
the Register of Copyrights) relating to the Governmental Permits or the
Business, including all requirements for notification, filing, reporting,
posting and maintenance of logs and records. Neither Seller has made (and to
each Seller's best knowledge, no prior holder has made) any commitments (oral or
written) to any Governmental Authority with respect to the Business or Systems
other than those contained in the Governmental Permits documents listed on
Schedule 2. Except as set forth on Schedule 2, no upgrade, modification or
rebuild is required for the Systems to comply with the corresponding
Governmental Permits or applicable Legal Requirements.
5.6 Seller Contracts. All Seller Contracts are described on
Schedule 3, Schedule 6 or Schedule 10. Complete and correct copies of all Seller
Contracts, including all instruments pertaining to the Real Property or Sellers'
interests therein, have been delivered by Sellers to Buyer. Except as noted on
Schedules 3 and 6, each Seller Contract is in full force and effect and
constitutes the valid, legal, binding and enforceable obligation of the Seller
party thereto and to the knowledge of Sellers each other party thereto and such
Seller is not and to such Seller's knowledge each other party thereto is not, in
breach or default of any terms or conditions thereunder.
5.7 Real Property.
5.7.1 All the Assets consisting of Real Property
interests are described on Schedule 6. Except as otherwise disclosed on Schedule
6, each Seller holds good, marketable and indefeasible fee simple title to the
Real Property shown as being owned by each Seller on Schedule 6 and the valid
and enforceable right to use and possess such Real Property, subject only to the
Permitted Encumbrances. Each Seller has valid and enforceable leasehold
interests and, to the knowledge of Sellers, enforceable rights to nondisturbance
and quiet enjoyment in Real Property shown as being leased by such Seller on
Schedule 6 and, with respect to other Real Property not owned or leased by such
Seller, such Seller has the valid and
15
enforceable right to use all such other Real Property pursuant to the easements,
licenses, rights-of-way or other rights described on Schedule 6, subject only to
Permitted Encumbrances. Except for routine repairs, all of the material
improvements, leasehold improvements and the premises of the Real Property are
in good condition and repair and are suitable for the purposes used. The current
use and occupancy of the Real Property do not constitute nonconforming uses
under any applicable zoning Legal Requirements.
5.7.2 The documents delivered by Sellers to Buyer as
evidence of each Seller Contract that is a lease of Real Property constitute the
entire agreement with the landlord in question. There are no leases or other
agreements, oral or written, granting to any Person other than the rightful
Seller the right to occupy or use any Real Property or, to the knowledge of each
Seller, the right to foreclose upon such Seller's leasehold interest, except as
described on Schedule 2 or Schedule 6. All easements, rights-of-way and other
rights appurtenant to, or which are necessary for the rightful Seller's current
use of, any Real Property are valid and in full force and effect, and such
Seller has not received any notice with respect to the termination, breach or
impairment of any of those rights. Except for routine repairs, all of the
material improvements, leasehold improvements and the premises of the Real
Property are in good condition and repair and are suitable for the purposes
used.
5.8 Environmental Matters.
5.8.1 Each Seller has complied with, and to the best of
each Seller's knowledge, the Real Property currently complies with and has
previously been operated in compliance with, all Environmental Laws. Neither
Seller has discovered, been made aware of, generated, released, stored, used,
treated, handled, discharged or disposed of any Hazardous Substances at, on,
under, in or about, or in any other manner affecting, any Real Property,
transported any Hazardous Substances to or from any Real Property or discharged
any Hazardous Substances from any Real Property into any body of water, directly
or indirectly or caused to be undertaken any other activities relating to the
Real Property which would support a claim or cause of action under any
Environmental Law, and, to each Seller's best knowledge, no other present or
previous owner, tenant, occupant or user of any Real Property or any other
Person has committed or suffered any of the foregoing. To the best of each
Seller's knowledge, no release of Hazardous Substances outside the Real Property
has entered or threatens to enter any Real Property, nor is there any pending or
threatened claim based on Environmental Laws which arises from any condition of
the land surrounding any Real Property. No claim or investigation based on
Environmental Laws which relates to any Real Property or any operations on it
(a) has
16
been asserted or conducted in the past or is currently pending against or with
respect to either Seller or, to each Seller's best knowledge, any other Person,
or (b) is threatened or contemplated.
5.9 Compliance with Legal Requirements.
5.9.1 The ownership, leasing and use of the Assets as
they are currently owned, leased and used and the conduct of the Business and
the operation of the Systems as they are currently conducted and operated do not
violate or infringe, in any material respect any Legal Requirement (except that
this sentence shall not apply to any Legal Requirements described in Section
5.5, 5.8, 5.9.3 and 5.9.4 as to which the representations and warranties set
forth in those subsections shall apply).
5.9.2 Except as set forth on Schedule 2 with respect to
the State of Vermont Public Service Board's failure to renew certain
Governmental Permits notwithstanding Sellers' timely renewal request in respect
thereof, a valid request for renewal has been duly and timely filed under
Section 626 (a) of the Cable Communications Policy Act of 1984, as amended, with
the proper Governmental Authority with respect to applicable Governmental
Permits with franchising authorities that have expired prior to or will expire
within 36 months after the date of this Agreement.
5.9.3 Each Seller has complied, and the Business is in
compliance, in all material respects, with (i) the specifications set forth in
Part 76, Subpart K of the rules and regulations of the FCC, (ii) Section 111 of
the U.S. Copyright Act of 1976, as amended, and the applicable rules and
regulations thereunder and the applicable rules and regulations of the U.S.
Copyright Office, the Register of Copyrights, the Copyright Royalty Tribunal and
(iii) the Communications Act of 1934 as amended, and the rules and regulations
thereunder, including any provisions thereof pertaining to signal leakage, to
utility pole make ready and to grounding and bonding of cable television systems
(in each case as the same is currently in effect).
5.9.4 Notwithstanding the foregoing, each Seller has used
its best efforts to comply in all material respects with the provisions of the
Cable Television Consumer Protection and Competition Act of 1992 and the
Telecommunications Act of 1996 and the FCC rules and regulations promulgated
thereunder (collectively, as amended, the "1992 Cable Act" and the
"Telecommunications Act", respectively) as such Legal Requirements relate to the
operation of the Business. All broadcast television station signals carried on
any of the Systems are being carried either pursuant to a valid must carry
election or a retransmission consent agreement authorizing the retransmission of
the station's signal and there is no dispute (or valid
17
basis therefor) with respect to the carriage (or channel position) or
non-carriage of any broadcast station by the Systems and each Seller has
complied in all other material respects with the must carry and retransmission
consent provisions of the 1992 Cable Act. Seller has used its best efforts to
establish rates charged to subscribers, effective since September 1, 1993, that
are permitted (except as would not have a material adverse effect on such rates)
under rules and regulations promulgated under the 1992 Cable Act and the
Telecommunications Act and any authoritative interpretation thereof now or then
in effect, whether or not such rates are or were subject to regulation at that
date by any Governmental Authority, including any local franchising authority
and/or the FCC, unless such rates were not subject to regulation pursuant to a
specific exemption from rate regulation contained in the 1992 Cable Act and the
Telecommunications Act other than the failure of any franchising authority to
have been certified to regulate rates or the failure of a valid rate complaint
to have been filed with the FCC. Sellers have made available to Buyer complete
and correct copies of all FCC Forms 393, 1200, 1205, 1210, 1215 and 1240
relating to rate regulation generally or specific rates charged to customers of
the Systems subject to regulation. Except as disclosed in Schedule 1 or Schedule
8, there have been no Rate Orders with respect to the Systems and there are no
pending or unresolved Rate Regulatory Matters.
5.9.5 Neither Seller has received any notice of any
violation by such Seller or the Business of any Legal Requirement applicable to
such Seller, the Business or the Systems or any notice or inquiry from the
United States Copyright Office concerning its copyright filings, statements of
account or royalty payments or any notice from any other Person to the effect
that the conduct of the Business or operations of the Systems as currently
conducted infringes on the rights of any Person and to such Seller's best
knowledge, there is no basis for the allegation of any such violation, notice or
inquiry.
5.9.6 Other than as disclosed in Schedule 2, Sellers are
not party to any leased commercial access agreement and have not received any
request or demand to lease channel capacity on any of the Systems pursuant to
Section 612 of the Communications Act of 1934, as amended. Sellers have
delivered true and complete copies to Buyer of all correspondence relating to
leased commercial access on the Systems, all leased commercial access agreements
relating to the Systems and all leased access rate cards for the Systems.
5.10 Patents, Trademarks and Copyrights. Each Seller has
timely and accurately made all requisite filings and payments with the United
States Copyright Office and Register of Copyrights. Sellers have delivered to
Buyer complete and correct copies of all current reports and filings, and all
reports and filings for the past five years, made or filed
18
pursuant to copyright rules and regulations with respect to the Business.
Neither Seller possesses any patent, patent right, trademark or copyright or is
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, as amended, applicable to cable
television systems generally. The Business and the System have been operated in
such a manner so as not to violate or infringe upon the rights of, or give rise
to any colorable claim of any Person for copyright, trademark, service ▇▇▇▇,
patent, license, trade secret infringement or the like.
5.11 Legal Proceedings. Except as set forth on Schedule 8,
there is no judgment or order outstanding, or any action, claim, suit,
proceeding, arbitration, investigation, hearing by or before any Governmental
Authority or any private arbitration tribunal pending, or to each Seller's best
knowledge, threatened, involving or affecting all or any part of the Assets,
Business or Sellers.
5.12 Tax Returns; Other Reports. Each Seller has duly and
timely filed in correct form all federal, state and local income, franchise,
sales, use, property, excise, payroll, unclaimed property and other tax returns
and all other reports (whether or not relating to taxes) required to be filed by
such Seller and has timely paid all taxes, fees and assessments of whatever
nature due and payable by such Seller the failure of which to be filed or paid
could affect, or result in the imposition of an Encumbrance upon, the Assets or
that could impose on Buyer any transferee liability for any taxes, penalties or
interest due or to become due from either Seller in regard to tax liabilities of
the Sellers arising before the Closing Date, except such amounts as are being
contested diligently and in good faith and are not in the aggregate material.
Except as set forth on Schedule 8, there are no outstanding agreements or
waivers extending the statutory period of limitations applicable to any federal,
state, local or foreign income tax return for any period, and except as set
forth on Schedule 8, there are no tax audits pending. Neither Seller has
received any notice of, nor does either Seller have any knowledge of, any
deficiency, assessment or audit, or proposed deficiency, assessment or audit
from any Governmental Authority which could affect, or result in the imposition
of an Encumbrance upon, the Assets or that could impose on Buyer any transferee
liability for any taxes, penalties or interest due or to become due from either
Seller in regard to tax liabilities of either of the Sellers arising before the
Closing Date.
5.13 Employment Matters.
5.13.1 Schedule 9 contains a complete and correct list of
names and positions of all employees of each Seller engaged in the Business.
Upon request of Buyer,
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Sellers will promptly provide Buyer with the current hourly wages or monthly
salaries and other compensation of each employee identified on Schedule 9. Each
Seller has complied in all respects with all Legal Requirements relating to the
employment of labor, including WARN, the Employee Retirement Income Security Act
of 1974, as amended ("ERISA"), continuation coverage requirements with respect
to group health plans, and those relating to wages, hours, collective
bargaining, unemployment compensation, worker's compensation, equal employment
opportunity, age and disability discrimination, immigration control and the
payment and withholding of taxes.
5.13.2 Each "employee benefit plan" or "multiemployer
plan" (as those terms are defined in ERISA) maintained by either Seller or any
Affiliate of either Seller is set forth on Schedule 9 (the "Employee Benefit
Plans"). Neither Seller nor its ERISA Affiliates is in violation of any
provision of ERISA. No "reportable event," (as defined in Section 4.43 of ERISA)
has occurred and is continuing with respect to any Employee Benefit Plan. No
"prohibited transaction," within the meaning of Title I of ERISA, has occurred
with respect to any such Employee Benefit Plan, and no "accumulated funding
deficiency" or "withdrawal liability" (both as defined in Title IV of ERISA)
exists with respect to any such Employee Benefit Plan. After the Closing, Buyer
will not be required, under ERISA, the Code or any collective bargaining
agreement, to establish, maintain or continue any Employee Benefit Plan
currently maintained by either Seller or any of its ERISA Affiliates.
5.13.3 Neither Seller is a party to any collective
bargaining agreements or has recognized or agreed to recognize or has any duty
to bargain with any labor organization or collective bargaining unit. Except as
set forth on Schedule 9, there are not pending any unfair labor practice charges
against either Seller, any demand for recognition or any other request or demand
from a labor organization for representative status with respect to any Person
employed by either Seller. To each Seller's best knowledge, its employees are
not engaged in organizing activity with respect to any labor organization.
Neither Seller has any employment agreement, either written or oral, express or
implied, that would require Buyer to employ any Person after the Closing Date.
5.14 Subscriber Numbers. As of the Closing Date, the Business
will have no fewer than 21,000 EBSs. Schedule 1 sets forth, with respect to each
franchise area (or other service area) in each System, the number of EBSs
(including the number of basic EBSs and bulk EBSs) and the number of Pay Units
in such area as of March 31, 1997, the most recent practicable date for which
such information is available. Schedule 1 also lists all of each Seller's
standard, non-discounted, non-bulk rates and charges for each franchise area (or
other service
20
area) at the date of this Agreement, together with all discounts offered or
applied to all such rates and charges.
5.15 Finders and Brokers. Neither Seller has employed any
financial advisor, broker or finder or incurred any liability for any financial
advisory, brokerage, finder's or similar fee or commission in connection with
the transactions contemplated by this Agreement for which Buyer could be liable.
5.16 Systems and Business Information. Schedule 1 lists each
of the Systems, each community served thereby, the channel lineup for each
System (including the basis for carriage of each broadcast signal) and the
respective bandwidth capabilities and channel capacity for each System. Sellers
have delivered to Buyer a description of the marketing programs, subscriber
installation policies and collection practices in effect for the Business as of
the date of this Agreement.
5.17 Financial Statements. Sellers have delivered to Buyer
complete and correct copies of an unaudited balance sheet and related statement
of income for the Systems, on a system by system basis, for and as of the years
ended 1993, 1994, 1995 and 1996 and the quarter ended March 31, 1997
(collectively, the "Systems Financial Statements"). The Systems Financial
Statements were prepared from the books and records of Sellers with respect to
the Systems and were prepared in accordance with GAAP applied on a consistent
basis throughout the period covered thereby and present fairly, in all material
respects, the Systems' financial position and results of operations, on a system
by system basis, as of the dates and for the periods indicated, subject only to
standard year-end adjustments (none of which was or would be material in amount)
and the omission of footnotes. The unaudited balance sheets included in the
Systems Financial Statements for the year ended 1996 is herein called the
Systems Balance Sheet. At the date of the Systems Balance Sheet, neither Seller
had any liability or obligation with respect to the Systems, whether accrued,
absolute, fixed or contingent (including liabilities for taxes or unusual
forward or long-term commitments), required by GAAP to be reflected or reserved
against therein that were not fully reflected or reserved against on the Systems
Balance Sheet, other than liabilities included in current liabilities, and none
of which was or would be material to the Business, financial condition or
results of operations of the Systems, nor to either Seller's best knowledge,
does any aspect of the Business form a basis for any claim by any Person which,
if asserted, could result in a liability not disclosed by or reserved against in
the Systems Balance Sheet. Since the date of the Systems Balance Sheet, Sellers
have conducted the Business in the ordinary and usual course consistent with
past practices in all material respects,
21
and there has not occurred any material adverse change in the Business, the
Assets or the Systems.
SECTION 6. BUYER'S REPRESENTATIONS AND WARRANTIES.
To induce Sellers to enter into this Agreement, Buyer
represents and warrants to Sellers, as of the date of this Agreement as follows:
6.1 Organization and Qualification. Buyer is a limited
partnership, validly existing under the laws of the State of Delaware and has
all requisite partnership power and authority to own, lease and use the assets
owned, leased or used by it and to conduct its business as it is currently
conducted. Buyer is duly qualified to do business and is in good standing under
the laws of each jurisdiction in which the ownership, leasing or use of the
assets owned, leased or used by it or the nature of Buyer's activities makes
such qualification necessary, except in any such jurisdiction where the failure
to be so qualified and in good standing would not have a material adverse effect
on Buyer or on the ability of Buyer to perform its obligations under this
Agreement.
6.2 Authority and Validity. Buyer has all requisite power and
authority to execute and deliver, to perform its obligations under, and to
consummate the transactions contemplated by, this Agreement and the Transaction
Documents to which Buyer is a party. The execution and delivery by Buyer of, the
performance by Buyer of its obligations under, and the consummation by Buyer of
the transactions contemplated by, this Agreement and the Transaction Documents
to which Buyer is a party have been duly and validly authorized by all necessary
action by or on behalf of Buyer. This Agreement has been, and when executed and
delivered by Buyer the Transaction Documents will be, duly and validly executed
and delivered by Buyer and the valid and binding obligations of Buyer,
enforceable against Buyer in accordance with their terms, except as the same may
be limited by applicable bankruptcy, insolvency, reorganization, moratorium or
similar laws now or hereafter in effect relating to the enforcement of
creditors' rights generally or by principles governing the availability of
equitable remedies.
6.3 No Conflicts; Required Consents. Subject to receipt of the
Required Consents as described on Schedule 4 and the requirements of the HSR
Act, the execution and delivery by Buyer, the performance of Buyer under, and
the consummation of the transactions contemplated by this Agreement and the
Transaction Documents to which Buyer is a party will not (a) violate any
provision of the partnership agreement or other organizational documents of
22
Buyer, (b) violate any Legal Requirement, (c) require any consent, approval or
authorization of, or filing with or notice to, any other Person (other than such
consents of lenders and limited partners of Buyer as have already been obtained)
or (d) (i) violate, conflict with or constitute a breach of or default under
(without regard to requirements of notice, passage of time or elections of any
Person), (ii) permit or result in the termination, suspension, modification of,
(iii) result in the acceleration of (or give any Person the right to accelerate)
the performance of Buyer under, any instrument or other agreement to which Buyer
is a party or by which Buyer or any of its assets is bound or affected, except
for purposes of this clause (d) such violations, conflicts, breaches, defaults,
terminations, suspensions, modifications and accelerations as would not,
individually or in the aggregate, have a material adverse effect on Buyer or on
the validity, binding effect or enforceability of this Agreement.
6.4 Finders and Brokers. Buyer has not employed any financial
advisor, broker or finder or incurred any liability for any financial advisory,
brokerage, finder's or similar fee or commission in connection with the
transactions contemplated by this Agreement for which Sellers could be liable.
6.5 Financial Statements Buyer has delivered to Sellers
complete and correct copies of its (a) audited balance sheets and related
statements of income, equity and cash flows for and as of the years ended 1995
and 1996 and all notes and schedules thereto and (b) the unaudited balance sheet
of Buyer, and the related unaudited statement of income for the quarter ended
March 31, 1997 (collectively, the "Financial Statements"). The Financial
Statements were prepared from the books and records of Buyer and were prepared
in accordance with GAAP applied on a consistent basis throughout the periods
covered thereby and present fairly, in all material respects, Buyer's financial
position, results of operations and changes in financial position as of the
dates and for the periods indicated, subject in the case of the unaudited
Financial Statements only to standard year-end adjustments (none of which will
be material in amount) and the omission of footnotes. The audited balance sheet
as of December 31, 1996 is herein called the Buyer Balance Sheet. At the date of
the Buyer Balance Sheet, Buyer had no liability or obligation, whether accrued,
absolute, fixed or contingent (including liabilities for taxes or unusual
forward or long-term commitments), required by GAAP to be reflected or reserved
against therein that were not fully reflected or reserved against on the Buyer
Balance Sheet, other than liabilities included in current liabilities, and none
of which was or would be material to the business, financial condition or
results of operations of Buyer, nor to Buyer's best knowledge does any aspect of
its business form a basis for any claim by any Person which, if asserted, could
result in a liability not disclosed by or reserved against in such Buyer Balance
Sheet.
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6.6 Disclaimer of Warranty Buyer acknowledges and agrees that
Sellers shall not be liable for or bound in any manner by, and Buyer has not
relied upon, any express or implied, oral or written, information, warranty,
guaranty, promise, statement, inducement, or representation pertaining to the
Business, the Assets and operations, prospects, income, expense, or liabilities
of the Business or the Systems except as is expressly set forth in Section 5,
elsewhere in this Agreement, the Transaction Documents or in the Schedules.
Buyer has conducted its own inspection of the Business and the Systems to its
own satisfaction and has independently investigated, analyzed, and appraised the
condition, value, prospects, and profitability thereof and the risk associated
therewith.
SECTION 7. ADDITIONAL COVENANTS.
7.1 Access to Premises and Records. Between the date of this
Agreement and the Closing Date, Sellers will give Buyer and its counsel,
accountants and other representatives full access, at times when a Seller is
present (if Sellers elect to be present), to all the premises and books and
records of the Business and to all the Assets and to the System personnel
provided that Buyer shall conduct its due diligence in a manner so as not to
unreasonably interfere with the operation of the Business and will furnish to
Buyer and such representatives all such documents, financial information, and
other information regarding the Business and the Assets as Buyer from time to
time reasonably may request. In addition, from and after the execution of this
Agreement (or May 15, 1997, whichever is later) Sellers shall give Buyer and its
counsel, accountants and other authorized representatives reasonable access to
Sellers' financial and other books and records and Sellers' employees, counsel,
accountants and other representatives for the purpose of complying with
applicable legal requirements, including preparing and auditing such Seller
financial statements as Buyer determines, in its judgment, are required or
advisable to comply with federal or state securities laws and the rules and
regulations of securities markets, as a result of the execution and delivery of
this Agreement or the consummation of the transactions contemplated hereby.
Buyer shall pay the cost of the audit of any such Seller financial statements.
7.2 Continuity and Maintenance of Operations; Financial
Statements. Except as Buyer may otherwise consent in writing, between the date
of this Agreement and the Closing:
7.2.1 Each Seller will conduct the Business and operate
the Systems only in the usual, regular and ordinary course consistent with past
practices (including making capital expenditures and fulfilling installation
requests in the ordinary course with respect to the
24
Business) and will (a)comply with all franchise terms and conditions from the
date of this Agreement until the Closing Date, (b) preserve its current business
intact, including preserving existing relationships with franchising
authorities, suppliers, customers and others having business dealings with such
Seller relating to the Business unless Buyer requests otherwise, (c) keep
available the services of its employees and agents providing services in
connection with the Business and (d) continue making marketing, advertising and
promotional expenditures in the ordinary course with respect to the Business.
7.2.2 Each Seller will maintain the Assets in good
repair, order and condition, will maintain in full force and effect, policies of
insurance with respect to the Business in such amounts and with respect to such
risks as customarily maintained by operators of cable television systems of the
size and geographic location as the Systems and will maintain its books, records
and accounts in the usual, regular and ordinary manner on a basis consistent
with past practices. Neither Seller will itself or will permit any of its
officers, directors, shareholders, agents or employees to, pay any of such
Seller's subscriber accounts receivable (other than for their own residences)
prior to the Closing Date. Each Seller will continue to implement its procedures
for disconnection and discontinuance of service to subscribers whose accounts
are delinquent in accordance with those in effect on the date of this Agreement.
7.2.3 Neither Seller will (a) sell, transfer or assign
any portion of the Assets or permit the creation of any Encumbrance on any
Asset, (b) modify, terminate, renew, suspend or abrogate any Governmental
Permits, Seller Contracts or any other contract or agreement (other than those
constituting Excluded Assets), (c) enter into any contract or commitment or
incur any indebtedness or other liability or obligation of any kind relating to
any System or the Business involving an expenditure in excess of $50,000, (d)
take or omit to take any action that would result in any of its representations
or warranties in this Agreement or in any Transaction Document not being true
and correct when made or as of the Closing, (e) engage in any marketing,
subscriber installation or collection practices that are inconsistent with its
past practices, or (f) implement any increase or decrease in the rates charged
to customers of the Systems or implement any channel line-up changes or
implement any programming retiering or repackaging, except as required by any
applicable laws or with Buyer's consent (which shall not be unreasonably
withheld). Sellers will reimburse the Buyer in connection with any credits due
to subscribers after the Closing as a result of Sprint promotions by the
Sellers, and Buyer agrees to credit such amounts to subscribers.
7.2.4 Each Seller promptly will deliver to Buyer true and
complete copies of (i) operating reports and any reports with respect to the
operations of the Business
25
prepared by or for such Seller at any time from the date of this Agreement to
the Closing Date and prior to the date of submission to the appropriate
Governmental Authority and (ii) within 30 days after the end of each quarter
ending between the date of this Agreement and the Closing Date an operating
income statement for the Business, which shall be prepared from the books and
records of the Sellers with respect to the Business and in accordance with GAAP
and shall present fairly, in all material respects, the operating income of the
Systems for the periods indicated, subject only to standard year-end adjustments
(none of which will be material in amount) and the omission of footnotes. Buyer
shall provide to Sellers its quarterly Financial Statements (as soon as they are
prepared after each quarter) between the date of this Agreement and the Closing.
7.2.5 The appropriate Seller will duly and timely file a
valid notice of renewal under Section 626 of the Cable Communications Policy Act
of 1984 with the appropriate Governmental Authority with respect to all cable
television franchises of the Business that will expire within 36 months after
any date between the date of this Agreement and the Closing Date.
7.2.6 Sellers will (i) take all actions required by
applicable Legal Requirements with respect to the proposed increase to the rates
to be charged to the customers of the Systems, (ii) provide all information
reasonably requested by any Governmental Authority with respect to such proposed
rate increases, and (iii) take all reasonable actions to defend and support the
past, current and proposed rates charged or to be charged to the customers of
the Systems on a basis consistent with all applicable Legal Requirements.
Sellers will furnish Buyer with any correspondence from or to any Governmental
Authority in respect of the foregoing. In addition, in acknowledgment that it
may be necessary for Buyer to defend and support the past, current and proposed
rates charged or to be charged to the customers of the Systems (a "Rate
Defense"), Sellers agree to provide to Buyer the following, promptly upon
request: (i) complete and correct copies of all FCC Forms 393, 1200, 1205, 1210,
1215 and 1240 relating to rate regulation generally or specific rates charged to
customers of the Systems that have been prepared by Sellers (either before or
after the date of this Agreement) for filing with the appropriate Governmental
Authorities; (ii) and, to the extent that Sellers have not completed such forms
with respect to any community and/or any level or tier of cable television
service because such forms have not been required to be filed with any
Governmental Authority pursuant to applicable Legal Requirements, such other
information, work papers and documents (including rate history information) in
the possession of Sellers or any of its Affiliates and reasonably necessary for
a Rate Defense, which information, work papers and documents shall be certified
by an executive officer of the applicable Seller to be true, complete and
accurate to the best of
26
Sellers' knowledge as of the date delivered. Each Seller will use (and cause its
Affiliates to use) reasonable efforts to preserve such forms, information, work
papers and documents.
7.3 Employee Matters.
7.3.1 Buyer may, but shall have no obligation to, employ
or offer employment to any employee of the Business (other than Retained
Employees). Not more than 60 days after the date of this Agreement, Sellers
shall provide to Buyer a list of all employees of the Systems, as of a recent
date, showing then-current positions, rates of compensation and dates of hire
and indicating which of such employees each Seller desires to retain as its
employees (the "Retained Employees"). Within 30 days after receipt of this list
(or such later date as Buyer and Sellers may mutually agree to), Buyer will
provide to Sellers in writing a list of employees Buyer or its Affiliates
desires to employ following the Closing, which list shall not include any
Retained Employees (the "Desired Employees"). Buyer shall notify Sellers prior
to distributing offer notices to the Desired Employees and shall coordinate all
hiring procedures relating to such Desired Employees with Sellers. Each Seller
agrees to cooperate in all reasonable respects with Buyer to allow Buyer to
evaluate and interview employees of the Business to make hiring decisions. As of
the Adjustment Time, each Seller shall terminate the employment of all its
employees who were employed incidental to the conduct of such Seller's Business
other than Retained Employees.
7.3.2 Sellers will pay or cause to be paid to all
employees employed in the Business all compensation, including salaries,
commissions, bonuses, deferred compensation, severance, insurance, pensions,
profit sharing, vacation (other than vacation which is allowed to be carried
over pursuant to Section 7.3.6(a)), sick pay and other compensation or benefits
to which they are entitled for periods prior to the Adjustment Time, including,
without limitation, all amounts, if any, payable on account of the termination
of their employment as of the Adjustment Time.
7.3.3 Each Seller will be responsible for maintenance and
distribution of benefits accrued under any employee benefit plan (as defined in
ERISA) maintained by such Seller pursuant to the provisions of such plans. Buyer
will not assume any obligation or liability for any such accrued benefits nor
any fiduciary or administrative responsibility to account for or dispose of any
such accrued benefits under any employee benefit plans maintained by either
Seller.
27
7.3.4 All claims and obligations under, pursuant to or in
connection with any welfare, medical, insurance, disability or other employee
benefit plans of Sellers or arising under any Legal Requirement affecting
employees of Sellers incurred on or before the Adjustment Time or resulting from
or arising from events or occurrences occurring or commencing on or before the
Adjustment Time will remain the responsibility of Sellers, whether or not such
employees are hired by Buyer after the Closing. Buyer will not have and assume
any obligation or liability under or in connection with any such plan.
7.3.5 Each Seller will remain solely responsible for, and
will indemnify and hold harmless Buyer from and against all Losses arising from
or with respect to, all salaries and all severance, vacation (except for
adjustments pursuant to Section 3.2.2), medical, sick, holiday, continuation
coverage and other compensation or benefits to which its employees may be
entitled, whether or not such employees may be hired by the Buyer, as a result
of their employment by it prior to the Adjustment Time, the termination of their
employment as of the Adjustment Time, the obligation, if any, to notify and/or
bargain with any labor organization, the consummation of the transactions
contemplated hereby or pursuant to any applicable Legal Requirement (including
without limitation WARN) or otherwise relating to their employment prior to the
Adjustment Time.
7.3.6 Notwithstanding anything to the contrary herein,
Buyer will (a) credit each employee of Sellers (other than a Retained Employee)
who is offered employment by Buyer prior to the Closing and becomes an employee
of Buyer after the Closing (a "Hired Employee") the lesser of the amount of
vacation accrued by him or her as an employee of Sellers through and including
the Adjustment Time or the vacation permitted to be accrued by employees of
Buyer in accordance with Buyer's standard practices (the economic value of which
shall be credited to Buyer's account in accordance with Section 3.2.2. hereof);
(b) permit each Hired Employee to participate in Buyer's employee benefit plans
to the same extent as similarly situated employees of Buyer and their
dependents; and (c) give each hired employee credit for his or her past service
with the Sellers as of the Adjustment Time (including past service with any
prior owner or operator of seller) for purposes of eligibility and vesting under
Buyer's employee benefit and other plans to the same extent as other similarly
situated employees of Buyer except that for purposes of the Buyer's 401-k plan,
Hired Employees shall be treated as employees of the Buyer who have been hired
as of the Adjustment Time; and (d) not subject any Hired Employee to any waiting
periods or limitations on benefits for pre-existing conditions under Buyer's
employee benefit plans, including any group health plans, except to the extent
such employees were subject to such limitations under Sellers' employee benefit
plans.
28
7.3.7. If Buyer discharges without cause within 180 days
after Closing any former employees of either Seller hired by Buyer at Closing,
and such employees would have been entitled to severance payments pursuant to
such Seller's severance benefits plan if such employees had been discharged
without cause by such Seller in accordance with Section 7.3.1 and not hired by
Buyer as of Closing, then Buyer shall pay severance benefits to such employees
in accordance with such Seller's severance benefit plan to the extent such plan
would have paid severance to any such employees.
7.3.8 Nothing in this Section 7.3 or elsewhere in this
Agreement shall be deemed to make any employee of the parties a third party
beneficiary of this Agreement.
7.4 Franchise Extensions; Franchise Renewals Required
Consents.; Estoppel Certificates
7.4.1 Each Seller shall use its reasonable efforts to
obtain, as promptly as possible a three year (from the Closing Date) extension
(a "Franchise Extension") of each Governmental Permit that is expired as of the
date of this Agreement (or that will expire prior to Closing) in form and
substance satisfactory to Buyer. Sellers agree and acknowledge that Buyer's
obligation in Section 7.4.2 to consent to a Franchise Renewal Requirement with
respect to a Franchise Renewal does not extend to Franchise Extensions and that
nothing in this Agreement (including Section 7.4.2) shall obligate Buyer to make
any payment to any Governmental Authority or to any other Person in assisting
Sellers in obtaining any Franchise Extension or to accept any adverse change in
any Governmental Permit or to accept any adverse condition in any Required
Consent with respect to a Governmental Permit in respect of which Sellers are
seeking a Franchise Extension.
7.4.2 In the event either Seller fails to obtain a
Franchise Extension that satisfies Section 7.4.1 with respect to such a
Governmental Permit, each Seller will use its reasonable efforts to obtain, as
promptly as possible and at its expense (except as set forth herein), a renewal
of each Governmental Permit that is expired as of the date of this Agreement (or
that will expire prior to Closing), each such renewed Governmental Permit (a
"Franchise Renewal") to have a term that will expire not less than ten years
after the Closing Date and otherwise in form and substance satisfactory to
Buyer. Each Seller will use its reasonable efforts to obtain in writing, as
promptly as possible (at its own expense pursuant to Section 12.17 hereof) all
the Required Consents and any other consent, authorization or approval required
to be obtained by such Seller in connection with the transactions contemplated
by this Agreement, in form and substance satisfactory to Buyer and deliver to
Buyer copies of such Required Consents
29
and such other consents, authorizations or approvals promptly after they are
obtained by such Seller. Buyer will cooperate with Sellers to obtain all
Required Consents, Franchise Extensions and all Franchise Renewals, provided,
however, that except as expressly provided below in this Section 7.4.2, Buyer
shall have no obligation to (i) make any payment to any Governmental Authority
or to any other Person in assisting Sellers in obtaining any of the Required
Consents, Franchise Extensions or Franchise Renewals, or (ii) to accept any
adverse change in any Governmental Permit (including any Franchise Extension or
Franchise Renewal) or Seller Contract to be assigned to Buyer hereunder, or
(iii) to accept any adverse condition in any Required Consent with respect to
any such Governmental Permit (including any Franchise Extension or Franchise
Renewal) or Seller Contract, and neither Seller will agree to any such adverse
change or adverse condition without Buyer's consent. Notwithstanding the
foregoing, Sellers and Buyer hereby agree that to the extent that a Governmental
Authority requires Buyer to agree that it will upgrade, modify or rebuild a
System or provide public education and government facilities and equipment
including institutional networks for a System (other than any such upgrade,
modification, rebuild or programming that is required to bring a System into
compliance with Sellers' existing Governmental Permits as currently in effect or
with applicable Legal Requirements as currently in effect, which shall be the
sole responsibility of Sellers) as a condition to obtaining a Franchise Renewal
(any such condition, a "Franchise Renewal Requirement"), Buyer will consent to
such Franchise Renewal Requirement to the extent that the costs and expenses
that would be incurred in complying with such Franchise Renewal Requirements
does not exceed $3,000,000 (it being understood that Buyer shall have no
obligation to accept any such Franchise Renewal Requirements to the extent that
the costs and expenses that would be incurred in complying with them would
exceed $3,000,000), provided that Buyer shall be responsible for the first Two
Million Dollars ($2,000,000.00) of all costs and expenses incurred in complying
with any such Franchise Renewal Requirements and Sellers shall be responsible
for one-half of the costs and expenses greater than Two Million Dollars
($2,000,000.00) and less than Two Million Five Hundred Thousand Dollars
($2,500,000.00). Buyer's engineers and Sellers' engineers shall attempt in good
faith to agree prior to the Closing on the amount of such costs and expenses
that will be incurred in complying with all Franchise Renewal Requirements.
Costs payable by Sellers pursuant to this Section 7.4.2 that are not disputed by
Buyer's engineers and Sellers' engineers are payable as a Purchase Price
adjustment at the Closing. In the event of a disagreement in regard to the
amount of any or all of such costs, Buyer and Sellers will agree on a mutually
acceptable engineering firm which shall resolve the disputed amount of such
costs (and whose decision shall be final and binding on the parties) no later
than fifteen business days after the date on which the dispute was submitted to
such firm. To the extent such determination affects the amount of Sellers'
obligation with respect to such costs and expenses as described above, the
Purchase Price shall be appropriately adjusted (if such
30
determination is made prior to the Closing) or the appropriate party shall make
an appropriate payment to the other party (if such determination is made after
the Closing) within three days after receipt of the decision of the engineering
firm. Sellers and Buyer will share equally all fees and expenses payable to such
firm in connection with such determination. Seller shall not be responsible for
costs in excess of Two Million Five Hundred Thousand Dollars ($2,500,000.00).
Buyer and Sellers shall mutually agree whether Form 394 shall be filed with
Government Authorities in connection with franchise consents. Any application or
other instrument requesting a Required Consent, Franchise Extension or Franchise
Renewal shall be reasonably acceptable to Buyer and, in the case of a Required
Consent for the transfer of a franchise substantially in the form attached
hereto as Exhibit G. The parties will furnish each other with any correspondence
from or to any Governmental Authority or other Person in respect of obtaining
the Required Consents, Franchise Extensions or Franchise Renewals and will
otherwise keep the other parties informed regarding the status with respect to
obtaining the Required Consents, Franchise Extensions or Franchise Renewals.
Buyer shall have the right, at its own expense, to participate in any hearings
or proceedings before the FCC or other Governmental Authorities with respect to
obtaining the Required Consents, Franchise Extensions or Franchise Renewals.
From and after the Closing, with respect to any Governmental Permit or Seller
Contract in respect of which Buyer, in its discretion, waived the requirement
under this Agreement that a Required Consent, Franchise Extension or Franchise
Renewal be obtained and that such Governmental Permit or Seller Contract be
assigned to Buyer at Closing, each Seller will provide reasonable assistance to
Buyer in connection with giving Buyer the benefit thereof and obtaining the
Required Consent, Franchise Extension or Franchise Renewal in respect thereof.
7.4.3. Each Seller shall use its reasonable efforts to
provide to Buyer, at or prior to the Closing, estoppel certificates (the
"Estoppel Certificates") satisfactory to Buyer of the lessor of each leasehold
interest included in the Real Property the transfer of which to Buyer does not
require such lessor's consent. To the extent any of the Governmental Permit
documents listed on Schedule 2 or delivered to Buyer refer to or incorporate by
reference any documents not listed on Schedule 2, Sellers will use their
reasonable best efforts to obtain confirmation from the franchising authority
which issued such Governmental Permit (either as part of the transfer resolution
with respect to a Required Consent, by separate letter or by any other means
acceptable to Buyer) substantially to the effect that the Governmental Permit
documents separately listed on Schedule 2 with respect to the Governmental
Permit issued by such franchising authority constitute all of the franchise
documents pertaining to such Governmental Permit and that none of the documents
referred to or incorporated by reference in such Governmental Permit documents
(unless such incorporated or referenced document is itself
31
separately listed by name and date on Schedule 2 and was delivered to Buyer)
exists or contains any franchise commitments or obligations that would be
binding upon Buyer after Closing. In addition Sellers will provide an opinion of
local counsel that each Seller, as the case may be, has the authority under
local law to own and operate such systems, including but not limited to, those
franchise areas whose franchise has no expiration date.
7.5 HSR Notification. As soon as practicable after the
execution of this Agreement, but in any event no later than 15 Business Days
after such execution, Sellers and Buyer will each complete and file, or cause to
be completed and filed, any notification and report required to be filed under
the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act of 1976, as amended (the "HSR
Act"); and each such filing shall request early termination of the waiting
period imposed by the HSR Act. The Buyer and Sellers shall each pay one-half of
the required filing fee. The parties shall use their reasonable best efforts to
respond as promptly as reasonably practicable to any inquiries received from the
Federal Trade Commission (the "FTC") and the Antitrust Division of the
Department of Justice (the "Antitrust Division") for additional information or
documentation and to respond as promptly as reasonably practicable to all
inquiries and requests received from any other Governmental Authority in
connection with antitrust matters. The parties shall use their respective
reasonable efforts to overcome any objections which may be raised by the FTC,
the Antitrust Division or any other Governmental Authority having jurisdiction
over antitrust matters.
7.6 No Shopping. Neither Seller, nor their stockholders or
partners or any agent or representative of any of them will, during the period
commencing on the date of this Agreement and ending with the earlier to occur of
the Closing or the termination of this Agreement in accordance with its terms,
directly or indirectly (a) solicit or initiate the submission of proposals or
offers from any Person for, (b) participate in any discussions pertaining to or
(c) furnish any information to any Person other than Buyer relating to, any
direct or indirect acquisition or purchase of all or any portion of the Assets.
7.7 Lien and Judgment Searches. Sellers will obtain, the
expense of which shall be paid one-half by Sellers and one-half by Buyer, and
deliver to Buyer, the results of a lien and docket search (including UCC, state
and federal tax lien and judgment and real estate searches with respect to each
of the names listed in Schedule 1), conducted by a professional search company
of records in the offices of the secretaries of state in each state and county
clerks in each county where there exist tangible Assets, and in the state and
county where Sellers' principal offices are located and of the dockets of the
clerk of each federal and state court sitting in the city, county or other
applicable political subdivision where Sellers' principal offices
32
or the tangible Assets may be located, including copies of all financing
statements or similar notices or filings (and any continuation statements)
discovered by such search company. Buyer may obtain, at its expense, real estate
title searches and real estate surveys for each of the fee estates included in
the Real Property. Buyer may obtain, the expenses of which shall be Buyer's sole
responsibility, title commitments for owner's title insurance policies for each
of the fee estates included in the Real Property.
7.8 Transfer Taxes. Any state or local sales, use, transfer or
similar taxes or fees or any other charge (including filing, recording and
vehicle registration fees) imposed by any Governmental Authority arising from or
payable by reason of the transfer of any of the Assets (including Real Property)
pursuant to this Agreement will be paid one-half by Buyer and one-half by
Sellers. All transfer and similar taxes or assessments, including transfer fees
and similar assessments for or under Governmental Permits or Seller Contracts
arising from or payable by reason of the conveyance of the Assets will be paid
one-half by Buyer and one-half by Sellers.
7.9 Distant Broadcast Signals. Unless otherwise restricted or
prohibited by any Governmental Authority or applicable Legal Requirement, if
requested by Buyer, Sellers will delete immediately prior to the Closing Date
any distant broadcast signals which Buyer determines will result in unacceptable
liability on the part of Buyer for copyright payments with respect to continued
carriage of such signals after the Closing.
7.10 Updated Schedules. Not less than five Business Days prior
to Closing, Sellers will deliver to Buyer revised copies of Schedules 1 through
10 which shall have been updated and marked to show any changes occurring
between the date of this Agreement and the date of delivery; provided, however,
that for purposes of each Seller's representations and warranties and covenants
in this Agreement, all references to the Schedules will mean the version of the
Schedules delivered with this Agreement on the date of signing, and provided
further that if the effect of any such updates to Schedules is to disclose any
one or more additional properties, privileges, rights, interests or claims as
Assets, Buyer, at or before Closing, will have the right (to be exercised by
written notice to Sellers) to cause any one or more of such items to be
designated as and deemed to constitute Excluded Assets for all purposes under
this Agreement.
7.11 Use of Names and Logos. For a period of 60 days after the
Closing Date, Buyer will be entitled to use all trademarks, tradenames, service
marks, service names, logos and similar proprietary rights of Sellers and all
derivations and abbreviations of such names and related marks to the extent
incorporated in or on the Assets transferred to it at the Closing.
33
Notwithstanding the foregoing, Buyer will not be required to remove or
discontinue using any such tradename or ▇▇▇▇ that is affixed to converters or
other items in or to be used in subscriber homes or properties, or as are used
in a similar fashion making such removal or discontinuation impracticable for
Buyer.
7.12 Satisfaction of Conditions. Each party will use its best
efforts to satisfy, or to cause to be satisfied, the conditions to the
obligations of the other party to consummate the transactions contemplated by
this Agreement, as set forth in Section 9 and to take such other actions as
shall be reasonably necessary to give full effect to the transactions
contemplated by this Agreement provided that Buyer shall not be obligated to
take any action that it has no obligation to take pursuant to Section 7.4.
7.13 Confidentiality and Publicity. Neither party will issue
any press release or make any other public announcement or any oral or written
statements to either Seller's employees concerning this Agreement or the
transactions contemplated hereby except as required by applicable Legal
Requirements, without the prior written consent of the other party. Each party
will hold, and will cause its employees, consultants, advisors and agents to
hold the terms of this Agreement in confidence; provided that (a) such party may
use and disclose such information once it has become publicly disclosed (other
than by such party in breach of its obligations under this Section) or which
rightfully has come into the possession of such party (other than from the other
party) and (b) to the extent that such party may be compelled by Legal
Requirements to disclose any of such information, but the party proposing to
disclose such information will first notify and consult with the other party
concerning the proposed disclosure, to the extent reasonably feasible. Each
party also may disclose such information to employees, consultants, advisors,
agents and actual or potential lenders whose knowledge is necessary to
facilitate the consummation of the transactions contemplated by this Agreement.
The obligation by each party to hold information in confidence pursuant to this
Section will be satisfied if such party exercises the same care with respect to
such information as it would exercise to preserve the confidentiality of its own
similar information. Notwithstanding the foregoing, this Agreement may be
submitted to attorneys for US West who agree in writing to be bound by a
confidentiality agreement reasonably satisfactory to Buyer.
7.14 Bulk Transfers. Buyer waives compliance by Sellers with
Uniform Commercial Code Article 6 relating to the transactions contemplated
hereby.
7.15 Transitional Billing Services Each Seller will provide to
Buyer, upon request, access to and the right to use its billing system
computers, software and related fixed assets
34
in connection with the Systems acquired by Buyer for a period of up to 90 days
following the Closing to allow for conversion of existing billing arrangements
("Transitional Billing Services"). Buyer will notify Sellers at least 10 days
prior to the Closing as to whether it desires Transitional Billing Services from
Sellers. All Transitional Billing Services, if any, that are requested by Buyer
will be provided on terms and conditions reasonably satisfactory to Sellers;
provided, however, that the amount to be paid by Buyer will not exceed the cost
to Sellers of providing such Transitional Billing Services. Sellers will notify
Buyer, upon the request of the Buyer, at least 45 days prior to the Closing, of
the cost to Sellers of providing such Transitional Billing Services.
7.16 Notice of Certain Matters. Sellers shall promptly give
notice to Buyer of (i) any fact, event, circumstances or action the existence or
occurrence of which has caused or is reasonably likely to cause any of either
Seller's representations or warranties under this Agreement not to be true in
any material respect, (ii) any damage, destruction or loss (whether or not
covered by insurance) materially and adversely affecting any of the Assets or
the Systems, (iii) any notice of violation or complaint under any Governmental
Permit, (iv) any complaint, challenge or other inquiry from any Governmental
Authority with respect to Sellers' past, current or proposed rates for cable
services and equipment charged by the Systems, and (v) any other event or change
in circumstances which, if not corrected prior to the Closing, would prevent
either Seller from fulfilling any condition to Closing set forth in this
Agreement.
7.17 MDU Access Agreements Sellers will use their reasonable
best efforts to obtain, prior to the Closing on terms reasonably acceptable to
Buyer, written access agreements with the appropriate party for the three
largest MDU accounts at the date of this Agreement as described in Schedule 3,
Section G. If consent to transfer is to be required, such agreements shall
either include a consent to the transfer of such agreement to Buyer, subject to
the occurrence of the Closing, or Sellers shall obtain such consent by separate
instrument.
SECTION 8. CONDITIONS PRECEDENT
8.1 Conditions to the Obligations of Buyer and Sellers. The
obligations of each party to consummate the transactions contemplated by this
Agreement are subject to the satisfaction, at or before the Closing, of the
following, which may be waived by the parties to the extent permitted by
applicable Legal Requirements:
8.1.1 HSR Act Filings. All filings required under the HSR
Act have been made and the applicable waiting period has expired or been earlier
terminated without the
35
receipt of any objection or the commencement or threat of any litigation by a
Governmental Authority of competent jurisdiction to restrain the consummation of
the transactions contemplated by this Agreement.
8.1.2 Absence of Litigation. No action, suit or
proceeding is pending or threatened by or before any Governmental Authority and
no Legal Requirement has been enacted, promulgated or issued or become or deemed
applicable to any of the transactions contemplated by this Agreement by any
Governmental Authority, which would (a) prohibit Buyer's ownership or operation
of all or a material portion of any System, the Business or the Assets, (b)
compel Buyer to dispose of or hold separate all or a material portion of any
System, the Business or the Assets as a result of any of the transactions
contemplated by this Agreement, (c) if determined adversely to Buyer's interest,
materially impair the ability of Buyer to realize the benefits of the
transactions contemplated by this Agreement or have a material adverse effect on
the right of Buyer to exercise full rights of ownership of the Systems or (d)
prevent or make illegal the consummation of any transactions contemplated by
this Agreement.
8.2 Conditions to the Obligations of Buyer. The obligations of
Buyer to consummate the transactions contemplated by this Agreement are subject
to the satisfaction, at or before the Closing, of the following conditions,
which may be waived by Buyer to the extent permitted by applicable Legal
Requirements:
8.2.1 Representations and Warranties. The representations
and warranties of each Seller in this Agreement and any Transaction Document, if
specifically qualified by materiality, are true in all respects and, if not so
qualified, are true in all material respects, at and as of the Closing with the
same effect as if made at and as of the Closing.
8.2.2 Performance of Agreements. Each Seller has
performed in all material respects all obligations and agreements and complied
in all material respects with all covenants and conditions in this Agreement and
any Transaction Document to be performed or complied with by such Seller at or
before the Closing.
8.2.3 Deliveries. Each Seller has delivered the items and
documents required to be delivered by it pursuant to this Agreement, including
those required under Section 9.2.
8.2.4 Franchise Extensions; Franchise Renewals; Consents.
Sellers have delivered to Buyer evidence, in form and substance satisfactory to
Buyer, that all of the
36
Franchise Extensions, Franchise Renewals and Required Consents have been
obtained or given (or deemed to have been given pursuant to Section 617 of the
Communications Act of 1934, as amended, also known as 47 U.S.C. 537) and are in
full force and effect without the imposition of any adverse change or condition,
except for (i) any such change or condition that Buyer accepts or (ii) any
Franchise Renewal Requirement that Buyer is obligated to accept under Section
7.4.2 hereof. The FCC shall have consented, to the extent such consent is
legally required, to the transfer to Buyer of all Governmental Permits issued by
the FCC, and the time for filing petitions for reconsideration of such consents
shall have passed.
8.2.5 Retransmission Consent. With respect to any
retransmission consent agreements for broadcast signals carried on the Systems
that are pending or are included as part of the Excluded Assets, all required
retransmission consents for continued carriage of such broadcast signals shall
have been obtained on terms reasonably acceptable to Buyer.
8.2.6 No Material Adverse Change. There has not been any
material adverse change in either Seller, the Business, the Assets or the
Systems since the date of this Agreement.
8.2.7 Equivalent Basic Subscribers. As of the Closing,
the Systems shall be serving, in the aggregate, not less than 21,000 Equivalent
Basic Subscribers.
8.2.8 Pole Agreements. With respect to any pole
attachment agreements that are pending as of the Closing, an interim
authorization for the continued maintenance of the Systems' pole attachments
shall have been obtained on terms reasonably acceptable to Buyer.
8.3 Conditions to Obligations of Sellers. The obligations of
each Seller to consummate the transactions contemplated by this Agreement are
subject to the satisfaction, at or before the Closing, of the following, which
may be waived by such Seller, to the extent permitted by applicable Legal
Requirements:
8.3.1 Representations and Warranties. All representations
and warranties of Buyer contained in this Agreement and any Transaction Document
are, if specifically qualified by materiality, true and correct in all respects
and, if not so qualified, are true and correct in all material respects, in each
case on and as of the Closing Date with the same effect as if made on and as of
the Closing Date, except for changes permitted or contemplated by this
Agreement.
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8.3.2 Performance of Agreements. Buyer has performed in
all material respects all obligations and agreements, and complied in all
material respects with all covenants and conditions in this Agreement and any
Transaction Document to be performed or complied with by Buyer at or before the
Closing.
8.3.3 Deliveries. Buyer has delivered the items and
documents required to be delivered by it, pursuant to this Agreement, including
those required under Section 9.3.
8.4 Waiver of Conditions. Any party may waive in writing any
or all of the conditions to its obligations under this Agreement.
SECTION 9. CLOSING.
9.1 The Closing; Time and Place. The Closing will be held on a
date agreed upon by Buyer and Seller that is within 15 days after all conditions
to the Closing contained in Sections 8.1.1 and 8.2.4 of this Agreement (other
than those based on acts to be performed at the Closing) have been satisfied or
waived provided that neither party shall be deemed to have waived any other
conditions imposed for its benefit by virtue of this sentence. The Closing will
be held at 9:00 a.m. local Denver time at Sellers' office located at ▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, or will be conducted by mail or fax or at
such place and time as Buyer and Sellers may agree.
9.2 Sellers' Delivery Obligations.
At the Closing, Sellers will deliver (or caused to be
delivered) to Buyer the following:
(a) a ▇▇▇▇ of Sale and Assignment in the form attached as
Exhibit A;
(b) a special warranty deed in a form reasonably
acceptable to Buyer (and complying with applicable state laws) with respect to
each parcel of owned Real Property, duly executed and acknowledged and in
recordable form;
(c) motor vehicle title certificates and such other
transfer instruments as Buyer may deem necessary or advisable to transfer the
Assets to Buyer and to
38
perfect Buyer's rights in the Assets free and clear of all Encumbrances except
Permitted Encumbrances;
(d) duly executed releases and other termination
instruments, in form satisfactory to Buyer, of all Encumbrances affecting any of
the Assets (other than Permitted Encumbrances);
(e) a certificate, dated the Closing Date, signed on
behalf of each Seller by the CEO, President or a Vice President of each Seller,
stating that the conditions set forth in Sections 8.2.1 and 8.2.2 are satisfied;
(f) a manually executed original of any instrument
evidencing receipt of a Required Consent and any Estoppel Certificate received
by Sellers;
(g) an opinion of ▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq., Sellers' counsel,
addressed to Buyer and its lenders, dated the Closing Date, in the form attached
as Exhibit C and an opinion of ▇▇▇▇, Raywid & ▇▇▇▇▇▇▇▇▇, L.L.P., Seller's
special communications counsel, addressed to Buyer and its lenders, dated the
Closing Date, in the form attached as Exhibit D;
(h) a Noncompetition Agreement, duly executed by each
Seller and each Affiliate of Seller listed on the signature pages thereto, in
the form attached as Exhibit E;
(i) pursuant to Section 7.4.3, an opinion of Downs,
▇▇▇▇▇▇▇ & ▇▇▇▇▇▇, P.C., Sellers' local Vermont and New Hampshire counsel,
addressed to Buyer and its lenders, dated the Closing Date to the substantive
effect contemplated by Section 7.4.3 and otherwise in form and substance
reasonably acceptable to Buyer and its lenders;
(j) Tax Clearance Certificates or letters issued by the
Department of Revenue (or other appropriate Governmental Authorities) of the
State of Vermont and the State of New Hampshire, respectively, certifying that
the Sellers have paid all taxes due and payable as of the Closing Date or other
date as close as possible to the Closing Date; and
(k) such other documents as Buyer may reasonably request
in connection with the transactions contemplated by this Agreement.
9.3 Buyer's Delivery Obligations.
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At the Closing, Buyer will deliver (or caused to be
delivered) to Sellers the following:
(a) the Base Purchase Price pursuant to Section 3.
(b) an Assumption Agreement in the form attached as
Exhibit B.
(c) (i) a certificate, dated the Closing Date, signed on
behalf of Buyer by the chief executive officer or a vice president of Buyer,
stating that the conditions set forth in Sections 8.3.1 and 8.3.2 are satisfied;
and (ii) such other documents as Sellers may reasonably request in connection
with the transactions contemplated by this Agreement.
(d) an opinion of Dow, ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇, Buyer's
counsel, addressed to each Seller and dated the Closing Date, in the form
attached as Exhibit F.
SECTION 10. TERMINATION.
10.1 Termination Events. This Agreement may be terminated and
the transactions contemplated by this Agreement may be abandoned:
10.1.1 At any time by the mutual written agreement of
Buyer and Sellers;
10.1.2 By Sellers, on the one hand, or Buyer, on the
other hand, at any time, if the other is in material breach or default of any of
its covenants, agreements or other obligations in this Agreement or in any
Transaction Document, or if any of its representations in this Agreement or in
any Transaction Document is not true in all material respects when made or when
otherwise required by this Agreement or any Transaction Document to be true and
such breach or default or failure to be true is not cured or waived within 30
days of receipt of notice of such breach or default;
10.1.3 By Sellers, on one hand, or Buyer, on the other
hand, upon written notice to the other, if the Closing has not occurred on or
before December 31, 1997, for any reason other than a material breach or default
by such party of its respective covenants, agreements or other obligations under
this Agreement, or any of its representations in this Agreement not being true
and accurate in all material respects when made or when otherwise required by
this Agreement to be true and accurate in all material respects;
40
10.1.4 As otherwise provided in this Agreement.
10.2 Effect of Termination. If this Agreement is terminated
pursuant to Section 10.1, all obligations of the parties under this Agreement
will terminate, except for the obligations set forth in Sections 7.13 and 12.17.
Termination of this Agreement pursuant to Sections 10.1.2, 10.1.3 or 12.18 will
not limit or impair any remedies that any party may have with respect to a
breach or default by the other of its covenants, agreements or obligations under
this Agreement.
SECTION 11. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION.
11.1 Survival of Representations and Warranties. The
representations and warranties of each Seller in this Agreement and in the
Transaction Documents to be delivered by such Seller pursuant to this Agreement
will survive the Closing for the period of the applicable statute of limitations
(except that representations and warranties relating to matters of title shall
survive indefinitely). The representations and warranties of Buyer in this
Agreement and in the Transaction Documents to be delivered by Buyer pursuant to
this Agreement will survive the Closing for the period of the applicable statute
of limitations. The covenants and agreements of the parties in this Agreement
and in the Transaction Documents to be delivered by Seller or Buyer pursuant to
this Agreement, will survive the Closing and will continue in full force and
effect without limitation. All representations, warranties and covenants shall
be unaffected by (and shall not be deemed waived by) any investigation, audit,
appraisal or inspection at any time made by or on behalf of any party hereto or
by any notice or information delivered by any party hereto (including the
updated Schedules to be delivered to Buyer pursuant to Section 7.10).
11.2 Indemnification by Seller. Each Seller will, jointly and
severally, indemnify and hold harmless Buyer and its shareholders and its and
their respective Affiliates, and the shareholders, directors, officers,
employees, agents, successors and assigns and any Person claiming by or through
any of them, as the case may be, from and against:
(a) all Losses resulting from or arising out of (i) any
breach of any representation or warranty made by either Seller in this Agreement
or any Transaction Document, (ii) any breach of any covenant, agreement or
obligation of either Seller contained in this Agreement or any Transaction
Document, (iii) any act or omission of either Seller with respect to, or any
event or circumstance related to, the ownership or operation of the Assets or
the conduct of the Business, which act, omission, event or circumstance occurred
or existed prior to or at the Closing Date, without regard to whether a claim
with respect to such matter is
41
asserted before or after the Closing Date, including any matter described on
Schedule 8, (iv) any claim that the transactions contemplated by this Agreement
violates WARN, or any similar state or local law or fraudulent conveyance laws
or UCC Article 6 of any jurisdiction, (v) any rate refund ordered by any
Governmental Authority for periods prior to the Closing Date, (vi) any and all
of the Excluded Liabilities, including any liabilities arising at any time under
any Governmental Permit or Seller Contract not assigned to Buyer at Closing,
(vii) any claim for brokerage or agent's or finder's commissions or compensation
in respect of the transactions contemplated by this Agreement by any Person
purporting to act on behalf of Sellers; and (viii) all costs, if any, for which
Seller is responsible pursuant to Section 7.4.2 hereof; and
(b) all claims, actions, suits, proceedings, demands,
judgments, assessments, fines, interest, penalties, costs and expenses
(including settlement costs and reasonable legal, accounting, experts' and other
fees, costs and expenses) incident or relating to or resulting from any of the
foregoing.
11.3 Indemnification by Buyer. Buyer will indemnify and hold
harmless each Seller and each Seller's shareholders, directors, officers,
employees, agents, successors and assigns, and any Person claiming by or through
any of them, as the case may be, from and against:
(a) all Losses resulting from or arising out of (i) any
breach of any representation or warranty made by Buyer in this Agreement or any
Transaction Document, (ii) any breach of any covenant, agreement or obligation
of Buyer contained in this Agreement or any Transaction Document, (iii) any act
or omission of Buyer with respect to, or any event or circumstance related to,
the ownership or operation of the Assets or the conduct of the Business, which
act, omission, event or circumstance occurred or existed after the Closing, (iv)
the failure by Buyer to perform any of its obligations in respect of the Assumed
Liabilities, (v) any claim for brokerage or agent's or finder's commissions or
compensation in respect of the transactions contemplated by this Agreement by
any Person purporting to act on behalf of Buyer, and (vi) all costs for which
Buyer is responsible pursuant to Section 7.4.2 hereof; and
(b) all claims, actions, suits, proceedings, demands,
judgments, assessments, fines, interest, penalties, costs and expenses
(including settlement costs and reasonable legal, accounting, experts' and other
fees, costs and expenses) incident or relating to or resulting from any of the
foregoing.
42
11.4 Third Party Claims. Promptly after the receipt by any
party of notice of any claim, action, suit or proceeding by any Person who is
not a party to this Agreement (collectively, an "Action"), which Action is
subject to indemnification under this Agreement, such party (the "Indemnified
Party") will give reasonable written notice to the party from whom
indemnification is claimed (the "Indemnifying Party"). The Indemnified Party
will be entitled, at the sole expense and liability of the Indemnifying Party,
to exercise full control of the defense, compromise or settlement of any such
Action unless the Indemnifying Party, within a reasonable time after the giving
of such notice by the Indemnified Party, (a) admits in writing to the
Indemnified Party the Indemnifying Party's liability to the Indemnified Party
for such Action under the terms of this Section 11, (b) notifies the Indemnified
Party in writing of the Indemnifying Party's intention to assume such defense,
(c) provides evidence reasonably satisfactory to the Indemnified Party of the
Indemnifying Party's ability to pay the amount, if any, for which the
Indemnified Party may be liable as a result of such Action and (d) retains legal
counsel reasonably satisfactory to the Indemnified Party to conduct the defense
of such Action. The other party will cooperate with the party assuming the
defense, compromise or settlement of any such Action in accordance with this
Agreement in any manner that such party reasonably may request. If the
Indemnifying Party so assumes the defense of any such Action, the Indemnified
Party will have the right to employ separate counsel and to participate in (but
not control) the defense, compromise or settlement of the Action, but the fees
and expenses of such counsel will be at the expense of the Indemnified Party
unless (i) the Indemnifying Party has agreed to pay such fees and expenses, (ii)
any relief other than the payment of money damages is sought against the
Indemnified Party or (iii) the Indemnified Party will have been advised by its
counsel that there may be one or more defenses available to it which are
different from or additional to those available to the Indemnifying Party, and
in any such case that portion of the fees and expenses of such separate counsel
that are reasonably related to matters covered by the indemnity provided in this
Section 11 will be paid by the Indemnifying Party. No Indemnified Party will
take any unilateral action at any time which may affect the liability of the
Indemnifying Party. No Indemnified Party will settle or compromise any such
Action for which it is entitled to indemnification under this Agreement without
the prior written consent of the Indemnifying Party or take any unilateral
action (other than actions expressly required or permitted by the provisions of
this Agreement) at any time which may affect the liability of the Indemnifying
Party, unless the Indemnifying Party has failed, after reasonable notice, to
undertake control of such Action in the manner provided in this Section 11.4. No
Indemnifying Party will settle or compromise any such Action (A) in which any
relief other than the payment of money damages is sought against any Indemnified
Party or (B) in the case of any Action relating to the Indemnified Party's
liability for any tax, if the effect of such settlement would be an increase in
the liability of the Indemnified Party for the payment of any tax for any period
43
beginning after the Closing Date, unless the Indemnified Party consents in
writing to such compromise or settlement.
11.5 Limitations on Indemnification - Sellers. Sellers will
not be liable for indemnification arising solely under (a)(i) through (a)(vii)
of Section 11.2 for (a) any Losses of or to Buyer or any other person entitled
to indemnification from Sellers or (b) any claims, actions, suits, proceedings,
demands, judgments, assessments, fines, interest, penalties, costs and expenses
(including settlement costs and reasonable legal, accounting, experts' and other
fees, costs and expenses) incidental or relating to or resulting from any of the
foregoing (the items described in clauses (a) and (b) collectively being
referred to for purposes of this Section 11.5 as "Buyer Damages") unless the
amount of Buyer Damages for which Sellers would, but for the provisions of this
Section 11.5, be liable exceeds, on an aggregate basis, $175,000, in which case
Seller will be liable for all such Buyer Damages up to $2,000,000, which will be
due and payable within 15 days after Seller's receipt of a statement therefor.
In regard to Buyer Damages arising under Section 11.2, Sellers' total liability
to Buyer shall not exceed $2,000,000. In regard to Buyer's Damages arising
pursuant to Section 11.2, Seller shall be liable for indemnification arising
thereunder for the period of the applicable statute of limitations.
11.6 Limitations on Indemnification - Buyer. Buyer will not be
liable for indemnification arising solely under (a)(i) through (a)(vi) of
Section 11.3 for (a) any Losses of or to Sellers or any other person entitled to
indemnification from Buyer or (b) any claims, actions, suits, proceedings,
demands, judgments, assessments, fines, interest, penalties, costs and expenses
(including settlement costs and reasonable legal, accounting, experts' and other
fees, costs and expenses) incidental or relating to or resulting from any of the
foregoing the items described in clauses (a) and (b) collectively being referred
to for purposes of this Section 11.6 as "Seller Damages") unless the amount of
Seller Damages for which Buyer would, but for the provisions of this Section
11.6, be liable exceeds, on an aggregate basis, $175,000, in which case Buyer
will be liable for all such Seller Damages up to $2,000,000, which will be due
and payable within 15 days after Buyer's receipt of a statement therefor. In
regard to Seller Damages arising under Section 11.3, Buyer's total liability to
Sellers shall not exceed $2,000,000. In regard to Seller's Damages arising
pursuant to Section 11.3, Buyer shall be liable for indemnification arising
thereunder for the period of the applicable statute of limitations.
SECTION 12. MISCELLANEOUS.
12.1 Parties Obligated and Benefited. Subject to the
limitations set forth below, this Agreement will be binding upon the parties and
their respective assigns
44
and successors in interest and will inure solely to the benefit of the parties
and their respective assigns and successors in interest, and no other Person
will be entitled to any of the benefits conferred by this Agreement. Without the
prior written consent of the other party, neither Buyer nor either Seller may
assign any of its rights or obligations under this Agreement or delegate any of
its duties under this Agreement. Notwithstanding the foregoing, Sellers may
assign all or part of its rights under this Agreement to a qualified
intermediary as that term is defined in Treasury Reg. 1.1031 (k-1(g)(4))
provided that any such assignment shall not materially delay the Closing.
12.2 Notices. Any notice, request, demand, waiver or other
communication required or permitted to be given under this Agreement will be in
writing and will be deemed to have been duly given only if delivered in person
or by first class, prepaid, registered or certified mail, or sent by courier or,
if receipt is confirmed, by telecopier:
45
To Buyer at:
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇-▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
ATTN: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Telecopy: ▇▇▇-▇▇▇-▇▇▇▇
With a copy addressed to the attention of:
Dow, ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇, PLLC
▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇.▇.
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇.▇. ▇▇▇▇▇
ATTN: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇, Esq.
Telecopy: 202-776-2222
To Sellers at:
▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇ ▇▇▇▇▇▇▇▇
Telecopy: ▇▇▇-▇▇▇-▇▇▇▇
With a copy addressed to the attention of ▇▇▇▇ ▇.
▇▇▇▇▇▇, Esq. at fax ▇▇▇-▇▇▇-▇▇▇▇
Any party may change the address to which notices are required to be sent by
giving notice of such change in the manner provided in this Section 12.2. All
notices will be deemed to have been received on the date of delivery, which in
the case of deliveries by telecopier will be the date of the sender's
confirmation, except that any notice of a change of address will be effective
only upon actual receipt.
46
12.3 Attorneys' Fees. In the event of any action or suit based
upon or arising out of any alleged breach by any party of any representation,
warranty, covenant or agreement contained in this Agreement, the prevailing
party will be entitled to recover reasonable attorneys' fees and other costs of
such action or suit from the other party.
12.4 Right to Specific Performance. Each Seller acknowledges
that the unique nature of the Assets to be purchased by Buyer pursuant to this
Agreement renders money damages an inadequate remedy for the breach by either
Seller of its obligations under this Agreement, and Seller agrees that in the
event of such breach, Buyer will upon proper action instituted by it, be
entitled to a decree of specific performance of this Agreement.
12.5 Waiver. This Agreement or any of its provisions may not
be waived except in writing. The failure of any party to enforce any right
arising under this Agreement on one or more occasions will not operate as a
waiver of that or any other right on that or any other occasion.
12.6 Captions. The captions of this Agreement are for
convenience only and do not constitute a part of this Agreement.
12.7 Choice of Law. THIS AGREEMENT AND THE RIGHTS OF THE
PARTIES UNDER IT WILL BE GOVERNED BY AND CONSTRUED IN ALL RESPECTS IN ACCORDANCE
WITH THE LAWS OF THE STATE OF COLORADO, WITHOUT REGARD TO THE CONFLICTS OF LAWS
RULES OF COLORADO.
12.8 Terms. Terms used with initial capital letters will have
the meanings specified, applicable to both singular and plural forms, for all
purposes of this Agreement. The word "include" and derivatives of that word are
used in this Agreement in an illustrative sense rather than limiting sense.
12.9 Rights Cumulative. All rights and remedies of each of the
parties under this Agreement will be cumulative, and the exercise of one or more
rights or remedies will not preclude the exercise of any other right or remedy
available under this Agreement or applicable law.
12.10 Further Actions. Sellers and Buyer will execute and
deliver to the other, from time to time at or after the Closing, for no
additional consideration and at no additional cost
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to the requesting party, such further assignments, certificates, instruments,
records, or other documents, assurances or things as may be reasonably necessary
to give full effect to this Agreement and to allow each party fully to enjoy and
exercise the rights accorded and acquired by it under this Agreement.
12.11 Time. Time is of the essence under this Agreement. If
the last day permitted for the giving of any notice or the performance of any
act required or permitted under this Agreement falls on a day which is not a
Business Day, the time for the giving of such notice or the performance of such
act will be extended to the next succeeding Business Day.
12.12 Late Payments. If either party fails to pay the other
any amounts when due under this Agreement, the amounts due will bear interest
from the due date to the date of payment at the annual rate publicly announced
from time to time by The Bank of New York as its prime rate (the "Prime Rate")
plus 3%, adjusted as and when changes in the Prime Rate are made.
12.13 Counterparts. This Agreement may be executed in
counterparts, each of which will be deemed an original.
12.14 Entire Agreement. This Agreement (including the
Schedules and Exhibits referred to in this Agreement, which are incorporated in
and constitute a part of this Agreement) and the Transaction Documents contain
the entire agreement of the parties and supersedes all prior oral or written
agreements and understandings with respect to the subject matter. This Agreement
may not be amended or modified except by a writing signed by the parties.
12.15 Severability. Any term or provision of this Agreement
which is invalid or unenforceable will be ineffective to the extent of such
invalidity or unenforceability without rendering invalid or unenforceable the
remaining rights of the Person intended to be benefited by such provision or any
other provisions of this Agreement.
12.16 Construction. This Agreement has been negotiated by
Buyer and Seller and their respective legal counsel, and legal or equitable
principles that might require the construction of this Agreement or any
provision of this Agreement against the party drafting this Agreement will not
apply in any construction or interpretation of this Agreement.
12.17 Expenses. Except as otherwise expressly provided in this
Agreement, each party will pay all of its expenses, including attorneys' and
accountants' fees, in connection
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with the negotiation of this Agreement, the performance of its obligations and
the consummation of the transactions contemplated by this Agreement.
12.18 Risk of Loss; Condemnation.
12.18.1 Sellers will bear the risk of any loss or damage
to the Assets resulting from fire, theft or other casualty (except reasonable
wear and tear) at all times prior to the Closing. If any such loss or damage is
sufficiently substantial so as to preclude or prevent resumption of normal
operations of any material portion of a System or the replacement or restoration
of the lost or damaged property within 20 days from the occurrence of the event
resulting in such loss or damage, Sellers will immediately notify Buyer in
writing of that fact and Buyer, at any time within 10 days after receipt of such
notice, may elect by written notice to Sellers either (i) to waive such defect
and proceed toward consummation of the transaction in accordance with terms of
this Agreement or (ii) terminate this Agreement. If Buyer elects to so terminate
this Agreement, Buyer and Seller will stand fully released and discharged of any
and all obligations under this Agreement except as set forth in the second
sentence of Section 10.2 in regard to remedies related to circumstances other
than those described in this Section 12.18. If Buyer elects to consummate the
transactions contemplated by this Agreement notwithstanding such loss or damage
and does so, there will be no adjustment in the consideration payable to Sellers
on account of such loss or damage but all insurance proceeds payable as a result
of the occurrence of the event resulting in such loss or damage (to the extent
not used to replace or restore such lost or damaged property) will be delivered
by Sellers to Buyer, or the rights to such proceeds will be assigned by Sellers
to Buyer if not yet paid over to Sellers, and Sellers will pay to Buyer (or
Buyer may withhold from the Base Purchase Price) an amount equal to the
difference between the amount of such insurance proceeds and the full
replacement cost of the damaged or lost Assets.
12.18.2 If, prior to the Closing, any part of or interest
in the Assets is taken or condemned as a result of the exercise of the power of
eminent domain, or if a Governmental Authority having such power informs Sellers
or Buyer that it intends to condemn all or any part of the Assets (such event
being called, in either case, a "Taking"), then Buyer may terminate this
Agreement. If Buyer does not elect to terminate this Agreement, then (a) Buyer
will have the sole right, in the name of Sellers, if Buyer so elects, to
negotiate for, claim, contest and receive all damages with respect to the
Taking, (b) Sellers will be relieved of its obligation to convey to Buyer the
Assets or interests that are the subject of the Taking, (c) at the Closing
Sellers will assign to Buyer all of Sellers' rights to all damages payable with
respect to such Taking and will pay to Buyer all damages previously paid to
Sellers with respect to the Taking
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and (d) following the Closing, Sellers will give Buyer such further assurances
of such rights and assignment with respect to the taking as Buyer may from time
to time reasonably request.
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The parties have executed this Agreement as of the day and year first above
written.
SELLERS:
WESTMARC DEVELOPMENT JOINT VENTURE,
by WestMarc Development, Inc., its Managing Partner
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
-------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
Title: Vice President
TCI CABLEVISION OF VERMONT, INC.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
-------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
Title: Vice President
BUYER:
FRONTIERVISION OPERATING PARTNERS, L.P., a Delaware
limited partnership, by FrontierVision Partners, L.P.,
its general partner, by FVP GP, L.P., its general
partner, by FrontierVision Inc. its general partner
By: /s/ ▇▇▇▇▇. ▇. ▇▇▇▇▇▇
--------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: President
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