PURCHASE AGREEMENT
DATED AS OF APRIL 22, 1999
BY AND BETWEEN
▇▇▇ COMMUNICATIONS, INC.
AND
MEDIA GENERAL, INC.
PURCHASE AGREEMENT
DATED AS OF APRIL 22, 1999
TABLE OF CONTENTS
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Page
SECTION 1: CERTAIN DEFINITIONS................................................1
1.1 Defined Terms......................................................1
1.2 Terms Defined Elsewhere in this Agreement.........................11
1.3 Rules of Construction.............................................11
SECTION 2: SALE AND PURCHASE OF PURCHASED SHARES; CASH CONSIDERATION.........12
2.1 Agreement to Sell and Buy Purchased Shares........................12
2.2 Cash Consideration................................................12
2.3 Cash Consideration Adjustments. ..................................12
2.4 Payments at Closing...............................................13
2.5 Post-Closing Payment of Cash Consideration Adjustments............14
SECTION 3: REPRESENTATIONS AND WARRANTIES OF SELLER..........................16
3.1 Organization and Authority........................................16
3.2 Authorization and Binding Obligation..............................16
3.3 Organization and Ownership of the Companies.......................16
3.4 Absence of Conflicting Agreements; Consents.......................17
3.5 Financial Statements..............................................17
3.6 Absence of Undisclosed Liabilities................................18
3.7 Absence of Certain Changes........................................18
3.8 Franchises, Licenses, Material Contracts..........................19
3.9 Title to Real Property and Tangible Personal Property.............19
3.10 Intangibles.......................................................20
3.11 Information Regarding the Systems.................................20
3.12 Taxes.............................................................22
3.13 Employee Plans....................................................23
3.14 Environmental Laws................................................25
3.15 Claims and Litigation.............................................25
3.16 Compliance With Laws..............................................26
3.17 Transactions with Affiliates......................................26
3.18 Certain Fees......................................................26
3.19 Inventory.........................................................26
3.20 Overbuilds; Competition...........................................26
3.21 Disconnections....................................................27
3.22 Year 2000.........................................................27
3.23 Cure..............................................................27
SECTION 4: [INTENTIONALLY OMITTED]...........................................27
SECTION 5: REPRESENTATIONS AND WARRANTIES OF BUYER...........................27
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5.1 Organization and Authority.......................................27
5.2 Authorization and Binding Obligation.............................28
5.3 Absence of Conflicting Agreements; Consents......................28
5.4 Claims and Litigation............................................28
5.5 Investment Purpose; Investment Company...........................29
5.6 Certain Fees.....................................................29
5.8 Availability of Funds............................................29
5.9 Cure.............................................................30
SECTION 6: SPECIAL COVENANTS AND AGREEMENTS.................................30
6.1 Operation of Business Prior to Closing...........................30
6.2 Confidentiality; Press Release...................................33
6.3 Cooperation; Commercially Reasonable Efforts.....................34
6.4 Consents.........................................................34
6.5 HSR Act Filing...................................................36
6.6 Buyer's Qualifications and Financing and Actions by Parties......37
6.7 Satisfaction of Intercompany Payables and Receivables............37
6.8 Retention of and Access to the Companies' Records................37
6.9 Employee Matters.................................................38
6.10 Tax Matters......................................................41
6.11 Media General Name and Affiliated Services.......................43
6.12 No Recourse; Release of Claims...................................44
6.13 Exculpation and Indemnification..................................44
6.14 Rate Regulatory Matters..........................................45
6.15 Disclosure Schedules.............................................45
6.16 News Channel.....................................................45
SECTION 7: CONDITIONS TO OBLIGATIONS TO CLOSE...............................47
7.1 Conditions to Obligations of Buyer...............................47
7.2 Conditions to Obligations of Seller..............................48
SECTION 8: CLOSING AND CLOSING DELIVERIES...................................49
8.1 Closing..........................................................49
8.2 Deliveries by Seller.............................................50
8.3 Deliveries by Buyer..............................................51
SECTION 9: TERMINATION......................................................51
9.1 Agreement between Seller and Buyer...............................51
9.2 Termination by Seller............................................52
9.3 Termination by Buyer.............................................52
9.4 Effect of Termination............................................53
9.5 Attorneys' Fees..................................................53
SECTION 10: SURVIVAL.........................................................53
10.1 Survival.........................................................53
SECTION 11: MISCELLANEOUS....................................................54
11.1 Fees and Expenses................................................54
11.2 Notices..........................................................54
11.3 Benefit and Binding Effect.......................................55
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11.4 Governing Law.............................................................55
11.5 Waiver of Jury Trial......................................................55
11.6 Submission to Jurisdiction; Venue.........................................55
11.7 Severability..............................................................55
11.8 Entire Agreement..........................................................56
11.9 Amendments; Waiver of Compliance; Consents................................56
11.10 Counterparts..............................................................56
11.11 Cooperation With Respect to Tax-Efficient Legislation or Like-Kind Exchange
56
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TABLE OF SCHEDULES
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SCHEDULE DESCRIPTION
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Schedule 1.2(a) Buyer-Knowledge
Schedule 1.2(b) Seller-Knowledge
Schedule 1.3(a) Licenses
Schedule 1.3(b) Material FCC Consents
Schedule 3.1 Organization and Authority
Schedule 3.3 Organization and Ownership of the Companies
Schedule 3.4 Absence of Conflicting Agreements; Consents
Schedule 3.5 Financial Statements
Schedule 3.6 Absence of Undisclosed Liabilities
Schedule 3.7 Absence of Certain Changes
Schedule 3.8 Franchises, Licenses, Material Contracts
Schedule 3.9 Title to Real Property and Tangible Personal Property
Schedule 3.10 Intangibles
Schedule 3.11 Information Regarding the System
Schedule 3.12 Taxes
Schedule 3.13 Employee Plans
Schedule 3.14 Environmental Laws
Schedule 3.15 Claims and Litigation
Schedule 3.16 Compliance with Laws
Schedule 3.17 Transactions with Affiliates
Schedule 3.20 Overbuilds; Competition
Schedule 3.21 Disconnections
Schedule 5.4 Claims and Litigation
Schedule 6.1 Operation of Business Prior to Closing
Schedule 6.4(e) Guarantees and Sureties
Schedule 6.4(g) Institutional Network Projects
Schedule 6.11 Affiliated Services
TABLE OF EXHIBITS
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EXHIBIT DESCRIPTION
Exhibit A Excluded Assets
Exhibit B Form of Opinion of General Counsel of Seller
Exhibit C Form of Opinion of Counsel to Buyer and Parent
Exhibit 2.4(a) Form of Preliminary Closing Statement
Exhibit 2.5(a) Form of Final Closing Statement
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PURCHASE AGREEMENT
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This PURCHASE AGREEMENT (this "Agreement") is dated as of April 22,
1999 by and between ▇▇▇ COMMUNICATIONS, INC., a Delaware corporation ("Buyer"),
and MEDIA GENERAL, INC., a Virginia corporation ("Seller").
R E C I T A L S:
A. Seller holds all the issued and outstanding capital stock (the
"Fairfax Shares") of Media General Cable of Fairfax County, Inc. ("Fairfax").
B. Seller holds all the issued and outstanding capital stock (the
"Fredericksburg Shares") of Media General Cable of Fredericksburg, Inc.
("Fredericksburg").
C. Seller holds all the issued and outstanding capital stock (the "MGT
Shares") of Media General Telecommunications, Inc. ("MGT").
D. Seller holds all of the issued and outstanding capital stock (the
"Mega Shares") of Mega Advertising, Inc. ("Mega").
E. Buyer desires to acquire from Seller all of the Fairfax Shares,
Fredericksburg Shares, MGT Shares and Mega Shares.
F. The parties hereto desire to set forth the terms in accordance with
which Buyer shall acquire all the Purchased Shares from Seller for the
consideration and on the terms and conditions set forth in this Agreement.
A G R E E M E N T S:
In consideration of the above recitals and of the mutual agreements and
covenants contained in this Agreement, the parties to this Agreement, intending
to be bound legally, agree as follows:
SECTION 1: CERTAIN DEFINITIONS
1.1 Defined Terms. The following terms, as used in this Agreement, have
the meanings set forth in this Section:
"Adjustment Time" means 11:59 p.m., Virginia time, on the Closing Date.
"Affiliate" means, with respect to any Person, any other Person that
directly or indirectly through one or more intermediaries controls, is
controlled by, or is under common control with the specified Person.
"Assets" means all of the tangible and intangible assets that are
owned, leased or held by the Companies, including, without limitation, those
assets that are used in connection with the conduct of the business or
operations of the Systems, other than the Excluded Assets, and less any such
Assets that are sold, transferred or otherwise conveyed by the Companies to
third Persons prior to the Closing in accordance with the provisions of this
Agreement, provided that with respect to any assets that are leased by the
Companies or otherwise not owned by the
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Companies, "Assets" includes only the interest, title and rights in such assets
held by the Companies.
"Basic Subscriber" means, with respect to the Systems, as of any date
of determination, (a) any Subscriber to the Systems at the regular basic monthly
subscription rate for at least broadcast basic cable service (either alone or in
combination with any other service) for the Systems and including subscribers
who receive regularly offered discounts, and who has rendered payment for one
month's service at the Systems' regular basic monthly subscription rate for such
service without discount (excluding regularly offered discounts), and who does
not have more than $25.00 (excluding late charges and fees and amounts subject
to a bona fide dispute) that is two months or more past due from and including
the last day of the period to which any outstanding ▇▇▇▇ relates and (b) to the
extent not included within the foregoing clause (a), any Subscriber to the
Systems for high speed data services who has rendered payment for one month's
service at the Systems' regular rates therefor without discount (excluding
regularly offered discounts), and who does not have more than $25.00 (excluding
late charges and fees and amounts subject to bond fide dispute) that is two
months or more past due from and including the last day of the period to which
any outstanding ▇▇▇▇ relates.
"Bulk Subscriber" means, with respect to the Systems, as of any date of
determination, any Subscriber, other than a Basic Subscriber, to at least
broadcast basic cable service (either alone or in combination with any other
service) for the Systems which is billed to such Subscriber on (a) a bulk basis
to bulk commercial accounts, such as hotels, motels, hospitals, apartment houses
and similar multiple dwelling units or (b) other commercial accounts and, in
each case, who has rendered payment for one month's service at such customer's
regular basic monthly subscription rate for such service and who does not have
more than $25.00 (excluding late charges and fees and amounts subject to a bona
fide dispute) that is two months or more past due from the last day of the
period to which any outstanding ▇▇▇▇ relates.
"Business Day" means each Monday, Tuesday, Wednesday, Thursday and
Friday that is not a day on which national banking institutions in Atlanta,
Georgia or New York, New York are authorized or obligated by law or executive
order to be closed.
"Buyer's Disclosure Schedules" means the Disclosure Schedules referred
to in Section 5 of this Agreement and attached to this Agreement.
"Cable Act" means Title VI of the Communications Act of 1934, as
amended, 47 U.S.C. Section 521 et seq., and all other provisions of the Cable
Communications Policy Act of 1984, the Cable Television Consumer Protection and
Competition Act of 1992, and the provisions of the Telecommunications Act of
1996 amending Title VI of the Communications Act of 1934, in each case as
amended and in effect from time to time.
"Cable Companies" means Fairfax and Fredericksburg.
"Capital Budgets" means the capital budgets of the Cable Companies,
copies of which have been provided to Buyer by Seller.
"Closing" means the purchase and sale of the Purchased Shares pursuant
to this Agreement in accordance with the provisions of Section 8.
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"Closing Date" means the date on which the Closing occurs.
"Code" means the Internal Revenue Code of 1986, as amended, and the
Treasury Regulations promulgated thereunder, as amended and in effect from time
to time.
"Companies" means Fairfax, Fredericksburg, MGT and Mega.
"Company" means Fairfax, Fredericksburg, MGT or Mega, as the case may
be.
"Compensation Arrangement" means any plan or compensation arrangement
other than an Employee Plan, whether written or unwritten, which provides to
employees, former employees, officers or directors of any of the Companies any
compensation or other benefits, whether deferred or not, in excess of base
salary or wages, including, but not limited to, any bonus or incentive plan,
stock rights plan, deferred compensation arrangement, life insurance, stock
purchase plan, severance pay plan and any other employee fringe benefit plan.
"Consents" means the consents, permits, approvals and authorizations of
Governmental Authorities and other Persons necessary to transfer the Purchased
Shares to Buyer and to consummate the other transactions contemplated by this
Agreement.
"Contracts" means all leases, easements, rights-of-way, rights of
entry, programming agreements, pole attachment and conduit agreements, customer
agreements and other agreements (other than Franchises), written or oral
(including any amendments and other modifications thereto), to which any of the
Companies is a party or which are binding upon any of the Companies and (A)
which are in effect on the date hereof, or (B) which are entered into by any of
the Companies between the date hereof and the Closing Date in accordance with
the provisions of this Agreement.
"Copyright Act" means the Copyright Act of 1976, as amended and in
effect from time to time.
"Employee Plan" means any pension, retirement, profit-sharing, deferred
compensation, vacation, severance, bonus, incentive, medical, vision, dental,
disability, life insurance or any other employee benefit plan as defined in
Section 3(3) of ERISA which covers employees, former employees, officers or
directors of the Companies and to which Fairfax or Fredericksburg or any ERISA
Affiliate thereof contributes or is required to contribute or which any of the
Companies or any ERISA Affiliate thereof sponsors or maintains.
"Encumbrances" means any pledge, claim, mortgage, lien, charge,
encumbrance or security interest of any kind or nature whatsoever.
"Enforceability Exceptions" means the exceptions or limitations to the
enforceability of contracts under bankruptcy, insolvency, or similar laws
affecting creditors' rights generally or by judicial discretion in the
enforcement of equitable remedies and by public policies generally.
"Environmental Claim" means any written claim or notice of any
proceeding before a Governmental Authority arising under or pertaining to any
Environmental Law or Hazardous Substance.
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"Environmental Law" means any Legal Requirement pertaining to land use,
air, soil, surface water, groundwater (including the protection, cleanup,
removal, remediation or damage thereof), the handling, storage, treatment or
disposal of waste, including hazardous waste, and the handling, storage,
manufacture, treatment or transportation of hazardous materials, or to the
protection of public health and safety, occupational health and safety or worker
health and safety or any other environmental matter, including the following
laws as amended and as in effect at the relevant time (including, but not
limited to, the following statutes, any regulations promulgated pursuant to any
of them, any permits, licenses or authorizations issued thereunder, any state or
regional analogues thereto and any permits or regulations issued thereunder):
(A) Clean Air Act (42 U.S.C. ss. 7401, et seq.); (B) Clean Water Act (33 U.S.C.
ss. 1251, et seq.); (C) Resource Conservation and Recovery Act (42 U.S.C. ss.
6901, et seq.); (D) Comprehensive Environmental Response, Compensation and
Liability Act (42 U.S.C. ss. 9601, et seq.); (E) Safe Drinking Water Act (42
U.S.C. 300f, et seq.); (F) the Hazardous Materials Transportation Act; (G) the
Federal Insecticide, Fungicide and Rodenticide Act and (H) Toxic Substances
Control Act (15 U.S.C. ss. 2601, et seq.).
"Equity Interests" means any and all shares, interests, or other
equivalent interests (however designated) in the equity of any Person, including
capital stock, partnership interests and membership interests, and including any
rights, options or warrants with respect thereto.
"Equivalent Subscribers" means, with respect to the Systems, as of any
date of determination, the sum of: (A) the number of Basic Subscribers served by
the Systems as of such date; and (B) the number of Basic Subscribers represented
by the Bulk Subscribers served by the Systems as of such date, which number
shall be calculated for "Full Programming Service" (as such term is used on the
Systems' rate cards) provided by the Systems by dividing (1) the monthly
▇▇▇▇▇▇▇▇ attributable to the Systems' Bulk Subscribers for Full Programming
Service provided by the Systems for the calendar month immediately preceding the
date on which such calculation is made, by (2) the full, non-discounted retail
monthly rate charged by the Systems for Full Programming Service as set forth on
the Systems' rate cards (excluding pass-through charges for sales taxes,
line-itemized franchise fees, fees charged by the FCC and other similar
line-itemized charges). For purposes of the foregoing, monthly ▇▇▇▇▇▇▇▇ shall
exclude ▇▇▇▇▇▇▇▇ for A LA CARTE or optional service tiers and for premium
services, pass-through charges for sales taxes, line-itemized franchise fees,
fees charged by the FCC and other similar line-itemized charges, and
nonrecurring charges or credits which include those relating to installation,
connection, relocation and disconnection fees and miscellaneous rental charges
for equipment such as remote control devices and converters.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, and the rules and regulations thereunder, as amended and in effect from
time to time.
"ERISA Affiliate" means a trade or business affiliated within the
meaning of Sections 414(b), (c) or (m) of the Code.
"Excluded Assets" means the assets listed on Exhibit A.
"Fairfax System" means the cable communications system owned and
operated by Fairfax.
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"FCC" means the Federal Communications Commission, or any successor
agency thereof.
"FCC Licenses" means any licenses issued or granted to the Companies by
the FCC, including all amendments thereto and renewals or modifications thereof.
"FCC Regulations" means the rules, regulations and published policies
and decisions of the FCC as they are applicable to the Systems and promulgated
by the FCC with respect to the Cable Act, as in effect from time to time.
"Franchise" means any cable television franchise and related
agreements, ordinances, permits, instruments or other authorizations issued or
granted to the Companies by any Governmental Authority, including all amendments
thereto and renewals or modifications thereof, authorizing the construction,
maintenance and operation of a cable communications system, other than the FCC
Licenses.
"Franchise Area" means any geographic area in which Fairfax or
Fredericksburg is authorized to provide cable television service pursuant to a
Franchise or otherwise provides cable television service for which area a
Franchise is being negotiated or is not required pursuant to applicable Legal
Requirements.
"Franchising Authorities" means all Governmental Authorities that have
issued or granted any Franchises relating to the operation of the Systems.
"Fredericksburg System" means the cable communications system owned and
operated by Fredericksburg.
"GAAP" means generally accepted accounting principles as in effect in
the United States from time to time.
"Governmental Authority" means any federal, state, or local
governmental authority or instrumentality, including any court, tribunal or
administrative or regulatory agency, department, bureau, commission or board.
"Hazardous Substance" means any pollutant, contaminant, hazardous or
toxic substance, material, constituent or waste or any pollutant or any release
thereof that is labeled or regulated as such by any Governmental Authority
pursuant to an Environmental Law, including petroleum or petroleum compounds,
radioactive materials, asbestos or any asbestos-containing material, or
polychlorinated biphenyls.
"HSR Act" means the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act of
1976, and the regulations promulgated by the Federal Trade Commission with
respect thereto, as amended and in effect from time to time.
"Indebtedness" of any Person means, without duplication, (a) all
indebtedness for borrowed money; (b) all obligations issued, undertaken or
assumed as the deferred purchase price of property or services (other than trade
payables and accrued liabilities entered into in the ordinary course of business
on ordinary terms); (c) all non-contingent reimbursement or payment obligations
with respect to surety instruments; (d) all obligations evidenced by notes,
bonds, debentures or similar instruments, including obligations so evidenced
incurred in connection
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with the acquisition of property, assets or businesses; (e) all indebtedness
created or arising under any conditional sale or other title retention
agreement, or incurred as financing, in either case with respect to property
acquired by the Person (even though the rights and remedies of the seller or
bank under such agreement in the event of default are limited to repossession or
sale of such property); (f) all capitalized lease obligations; (g) all net
obligations with respect to swap contracts; (h) all indebtedness referred to in
clauses (a) through (g) above secured by (or for which the holder of such
Indebtedness has an existing right, contingent or otherwise, to be secured by)
any lien upon or in property (including accounts and contract rights) owned by
such Person, even though such Person has not assumed or become liable for the
payment of such Indebtedness; and (i) all guaranty obligations in respect of
indebtedness or obligations of others of the kinds referred to in clauses (a)
through (g) above; provided, however, that "Indebtedness" shall not include any
obligations such as letters of credit, surety bonds or performance bonds or
similar obligations entered into in the ordinary course of business.
"Intangibles" means all copyrights, trademarks, trade names, service
marks, service names, patents, permits, proprietary information, technical
information and data, machinery and equipment warranties, and other similar
intangible property rights and interests (which shall in no event include
Franchises, Licenses or Contracts) issued to or owned by the Companies.
"Intercompany Payables" means any payables of the Companies to Seller
or any Affiliate of Seller, including, without limitation, any amounts owed by
the Companies to Seller or any Affiliate of Seller in respect of management or
accounting fees.
"Intercompany Receivables" means any receivables of the Companies from
Seller or any Affiliate of Seller.
"Intermediary" means an escrow agent or other Person serving as a
"qualified intermediary" under the United States Treasury Regulations
promulgated pursuant to Section 1031 of the Code.
"Knowledge" means the actual knowledge of the persons listed in
Schedule 1.2(a) with respect to Buyer and the actual knowledge of the persons
listed in Schedule 1.2(b) with respect to Seller and the Companies.
"Legal Restrictions" means restrictions arising under the securities
laws, the Cable Act, FCC Regulations, the Franchises, or the Licenses.
"Legal Requirements" means applicable common law and any applicable
statute, permit, ordinance, code or other law, rule, regulation, order,
technical or other standard, requirement or procedure enacted, adopted,
promulgated or applied by any Governmental Authority (including, without
limitation, the FCC), including any applicable order, decree or judgment which
may have been handed down, adopted or imposed by any Governmental Authority, all
as in effect from time to time.
"Licenses" means all domestic satellite, business radio and other FCC
Licenses, and all other licenses, authorizations and permits issued by any
Governmental Authority that are held by the Companies in the business and
operations of the Systems, including all amendments thereto and renewals or
modifications thereof, but excluding the Franchises, which material licenses,
authorizations and permits are listed in Schedule 1.3(a).
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"Loss" means any claims, losses, liabilities, damages, penalties, costs
and expenses (excluding any and all consequential, incidental and special
damages).
"Material Adverse Effect" means a material adverse effect on the
business, results of operations, assets, liabilities or financial condition of
the Companies, taken as a whole or the Systems, taken as a whole, but without
giving effect to any effect resulting from (i) changes in conditions (including
economic conditions, Rate Regulatory Matters and other federal, state, or local
governmental actions, proposed or enacted legislation or proposed or enacted
regulations) that are applicable to the economy or the cable television industry
in general on a national, regional or state basis or (ii) any changes in
competition affecting the business of the Companies or (iii) actions taken by
Buyer or any Affiliate of Buyer.
"Material Contract" means any Contract that requires payments in the
aggregate of more than $150,000 per year and has a remaining stated term of
longer than twenty-four (24) months from the date of this Agreement, but
"Material Contract" specifically excludes all subscription agreements with
customers (including, without limitation, multiple dwelling unit agreements and
Contracts with Bulk Subscribers), pole attachment agreements and conduit
agreements.
"Material FCC Consent" means any Consent of the FCC that is necessary
for the transfer of control to Buyer in connection with the consummation of the
transactions contemplated by this Agreement with respect to the Licenses
identified in Schedule 1.3(b).
"Non-Ordinary Course Capital Expenditures" means any cash expenditures
or commitments for capital expenditures other than Ordinary Course Capital
Expenditures.
"Ordinary Course Capital Expenditures" means cash expenditures or
commitments for: (i) replacement or refurbishment of underground or aerial
distribution plant of either System; (ii) purchase or replacement of analog
converters for use either on a Subscriber's premises or in inventory for either
System; (iii) extensions, construction or relocation of the Systems'
distribution plant in order to accommodate and support the Systems' current
Subscribers and the growth of Subscribers from the date hereof until the
Closing; and (iv) capital expenditures required or necessary to maintain the
Systems in reasonably good working order.
"Organizational Documents" means, with respect to any Person (other
than an individual), the articles or certificate of incorporation, bylaws,
certificate of limited partnership, partnership agreement, certificate of
formation, limited liability company operating agreement, and all other
organizational documents of any Person other than an individual.
"Permitted Encumbrances" means each of the following: (A) liens for
current taxes and other governmental charges that are not yet due and payable;
(B) liens for taxes, assessments, governmental charges or levies, or claims, in
each case the non-payment of which is being diligently contested in good faith
or liens arising out of judgments or awards against the Companies with respect
to which at the time there shall be a prosecution for appeal or there shall be a
proceeding to review or the time limit has not yet run for such an appeal or
review with respect to such judgment or award; provided that with respect to the
foregoing liens in this clause (B), adequate reserves shall have been set aside
on the Companies' books, and no foreclosure, distraint, sale or similar
proceedings shall have been commenced with respect thereto that remain unstayed
for a period of 60 days after their commencement; (C) liens of carriers,
warehousemen, mechanics, laborers, and materialmen and other similar statutory
liens
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incurred in the ordinary course of business for sums not yet due or being
diligently contested in good faith, and for which adequate reserves have been
set aside on the Companies' books; (D) liens incurred in the ordinary course of
business in connection with worker's compensation and unemployment insurance or
similar laws; (E) statutory landlords' liens; (F) with respect to the Real
Property, leases, easements, rights to access, rights-of-way, mineral rights or
other similar reservations and restrictions, defects of title, which are either
of record or set forth in Seller's Disclosure Schedules or in the deeds or
leases to such Real Property or which either individually or in the aggregate,
do not have any Material Adverse Effect; (G) Encumbrances in any of the Assets
or the Companies' revenues arising under any Franchise; and (H) any other claims
or encumbrances that are described in Schedule 3.9 and that relate to
liabilities and obligations that are to be discharged in full at the Closing or
that will be removed prior to or at Closing. It is understood and agreed that if
any item that otherwise constitutes a Current Liability (as defined in Section
2.3(b)(3) below) also constitutes a Permitted Encumbrance, such item will be
included as a Current Liability.
"Person" means an individual, corporation, association, partnership,
joint venture, trust, estate, limited liability company, limited liability
partnership, Governmental Authority, or other entity or organization.
"Purchased Shares" means the Fairfax Shares, the Fredericksburg Shares,
the MGT Shares and the Mega Shares.
"Purchased Subscriber" means any Subscriber acquired pursuant to a
Subscriber Purchase.
"Rate Regulatory Matter" shall mean, with respect to any cable
communications system, any matter or any effect on such system or the business
or operations thereof, arising out of or related to the Cable Act, any FCC
Regulations heretofore adopted thereunder, or any other present or future Legal
Requirement dealing with, limiting or affecting the rates which can be charged
by cable communications systems to their customers (whether for programming,
equipment, installation, service or otherwise).
"Real Property" means all of the fee and leasehold estates and, to the
extent of the interest, title, and rights of the Companies in the following:
land, buildings and other improvements thereon, easements, licenses, rights to
access, rights-of-way, and other real property interests that are owned or held
by any of the Companies and used or held for use in the business or operations
of the Systems, plus such additions thereto and less such deletions therefrom
arising between the date hereof and the Closing Date in accordance with this
Agreement.
"Released Parties" means, collectively, Seller and its Affiliates and
their respective officers, directors, shareholders, members, partners, employees
and agents.
"SEC" means the U.S. Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations of the SEC promulgated thereunder, as in effect from time
to time.
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"Seller's Disclosure Schedules" means the Disclosure Schedules referred
to in Sections 3 and 6 of this Agreement and attached to this Agreement.
"Subscriber" means any Person to whom the Cable Companies provide cable
television programming or other service through the Systems into a single
household, a multiple dwelling unit, a hotel or motel unit, a commercial
business or any other real property improvement; provided, however, that, for
purposes of determining the number of Closing Equivalent Subscribers,
"Subscriber" shall not include any Purchased Subscriber.
"Subscriber Purchase" means any acquisition by the Companies of
Subscribers through the purchase or other acquisition (including, without
limitation, by asset or stock acquisition, merger, combination, lease, joint
venture or other similar transaction) of any business, including, without
limitation, the acquisition of the Bent Tree SMATV system.
"Subsidiary" means, with respect to any Person, any other Person of
which the outstanding voting Equity Interests sufficient to elect at least a
majority of its board of directors or other governing body (or, if there are no
such voting interests, of which 50% or more of the Equity Interests) are owned
(beneficially or otherwise) directly or indirectly by such first Person or any
Subsidiary thereof.
"System" means the Fairfax System or the Fredericksburg System, as the
case may be.
"Systems" means the Fairfax System and the Fredericksburg System.
"Tangible Personal Property" means all of the equipment, tools,
vehicles, furniture, leasehold improvements, office equipment, plant,
converters, spare parts, and other tangible personal property which are owned or
leased by the Companies and used or held for use in the conduct of the business
or operations of the Systems, plus such additions thereto and less such
deletions therefrom arising between the date hereof and the Closing Date in
accordance with this Agreement and other than the Excluded Assets.
"Tax" means any and all taxes, fees, levies, duties, tariffs, imposts
and other charges of any kind imposed by any government or taxing authority,
including, without limitation: federal, state, local, or foreign income, gross
receipts, windfall profits, severance, property, motor vehicle, ad valorem,
production, sales, use, license, excise, franchise, capital, transfer,
recordation, employment, withholding, or other tax or governmental assessment,
together with any interest, additions, or penalties with respect thereto and any
interest in respect of such additions or penalties.
"Tax Efficient Effect" means an effect which, in the reasonable
judgment of Seller, would result in Seller and its Affiliates, in the aggregate,
becoming liable for an amount of Taxes as a result of the consummation of the
transactions contemplated by this Agreement which is less than the amount of
Taxes for which Seller and its Affiliates, in the aggregate, would become liable
if the transactions contemplated by this Agreement were consummated as of the
date hereof.
"Tax Return" means any tax return, declaration of estimated tax, tax
report or other tax statement, or any other similar filing, including any
schedule or attachment thereto, and
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including any amendment thereof, required to be submitted to any Governmental
Authority with respect to any Tax.
"Transaction Documents" means this Agreement and the other documents,
agreements, certificates and other instruments to be executed, delivered and
performed by the parties in connection with the transactions contemplated by
this Agreement.
"Transfer Taxes" means all transfer taxes, recordation taxes, sales
taxes and document stamps required in connection with the transactions
contemplated by this Agreement.
"Transferable Franchise Area" means any Franchise Area with respect to
which (A) any Consent necessary under a Franchise in connection with the
consummation of the transactions contemplated by this Agreement shall have been
obtained or shall have been deemed obtained by operation of law in accordance
with the provisions of the Cable Act or FCC Regulations, or (B) no Consent is
necessary under a Franchise in connection with the consummation of the
transactions contemplated by this Agreement.
"Upset Date" means the one year anniversary date of this Agreement,
subject to extension as provided in Sections 8.1(a)(3).
1.2 Terms Defined Elsewhere in this Agreement. For purposes of this
Agreement, and in addition to (i) the definitions set forth in the first
paragraph hereof and in Section 1.1, and (ii) certain defined terms that are
used solely within the section in which they are defined, the following terms
have the meanings set forth in the sections indicated:
Term Section
---- -------
Antitrust Division Section 6.5
Capital Expenditure Adjustment Section 2.3(d)
Cash Consideration Section 2.2(b)
Closing Cash Payment Section 2.4(b)
Closing Equivalent Subscribers Section 2.3(a)
Confidentiality Agreement Section 6.2(a), 6.2(a)
Current Assets Section 2.3(b)(2)
Current Liabilities Section 2.3(b)(3)
Fee Properties Section 3.9
Final Closing Statement Section 2.5(a)
Financial Statements Section 3.5(a)
FTC Section 6.5
Investment Person Section 3.3(a)
Institutional Network Projects Section 6.4(g)
Limited Service Section 6.16
Post-Closing Referee Section 2.5(a)
Preliminary Closing Statement Section 2.4(a)
WARN Act Section 6.9(e)
Working Capital Section 2.3(b)(1)
Y2K Plan Section 3.22
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1.3 Rules of Construction. Words used in this Agreement, regardless of
the gender and number specifically used, shall be deemed and construed to
include any other gender and any other number as the context requires. As used
in this Agreement, the word "including" is not limiting, and the word "or" is
not exclusive. Except as specifically otherwise provided in this Agreement in a
particular instance, a reference to a Section is a reference to a Section of
this Agreement, a reference to an Exhibit is a reference to an Exhibit to this
Agreement, and the terms "hereof," "herein," and other like terms refer to this
Agreement as a whole, including the Disclosure Schedules and the Exhibits to
this Agreement, and not solely to any particular part of this Agreement. The
descriptive headings in this Agreement are inserted for convenience of reference
only and are not intended to be part of or to affect the meaning or
interpretation of this Agreement.
SECTION 2: SALE AND PURCHASE OF PURCHASED SHARES; CASH CONSIDERATION
2.1 Agreement to Sell and Buy Purchased Shares. Subject to the terms
and conditions set forth in this Agreement, Seller hereby agrees to sell,
transfer, convey and deliver to Buyer at the Closing, and Buyer hereby agrees to
purchase at the Closing, the Purchased Shares free and clear of all
Encumbrances, subject to the Legal Restrictions.
2.2 Cash Consideration. Buyer shall pay and deliver to Seller at the
Closing, as consideration for the sale of the Purchased Shares, a cash payment
equal to One Billion Four Hundred Million Dollars ($1,400,000,000), subject to
adjustment in accordance with Sections 2.3, 2.4 and 2.5 (the "Cash
Consideration").
2.3 Cash Consideration Adjustments.
-------------------------------
(a) Closing Equivalent Subscribers. The Cash Consideration shall be
decreased by the number, if any, by which the number of Closing Equivalent
Subscribers is less than 261,201 multiplied by $5,360. The Cash Consideration
shall be increased by an amount equal to the value of the consideration paid by
the Companies for all Purchased Subscribers acquired between the date hereof and
the Closing Date. For purposes of this Agreement, "Closing Equivalent
Subscribers" means the total number of Equivalent Subscribers for the Systems as
of the Closing Date.
(b) Working Capital Adjustment. The Cash Consideration shall be
decreased by the amount by which Working Capital is less than negative Ten
Million Two Hundred Thirty-Five Thousand Eight Hundred Four Dollars
($(10,235,804)) or increased by the amount by which Working Capital is greater
than negative Ten Million Two Hundred Thirty-Five Thousand Eight Hundred Four
Dollars ($(10,235,804)).
(1) Subject to the other provisions of this Section 2.3(b),
"Working Capital" means Current Assets as of the Adjustment Time minus Current
Liabilities as of the Adjustment Time.
(2) Subject to the other provisions of this Section 2.3(b),
"Current Assets" means the total current assets of the Companies as defined for
purposes of GAAP, computed for the Companies as of the Adjustment Time on a
consolidated basis and without duplication in accordance with GAAP, consistently
applied; provided, however, that notwithstanding GAAP or anything to the
contrary in this Agreement, Current Assets shall not
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include any amounts in respect of the Excluded Assets, federal and state income
taxes receivable (including the current portion of deferred income taxes) and
Intercompany Receivables from any Affiliate of the Companies.
(3) Subject to the other provisions of this Section 2.3(b),
"Current Liabilities" means the total current liabilities of the Companies as
defined for purposes of GAAP, computed for the Companies as of the Adjustment
Time on a consolidated basis and without duplication in accordance with GAAP,
consistently applied; provided, however, that notwithstanding GAAP or anything
to the contrary in this Agreement, Current Liabilities shall not include, and no
adjustment to the Cash Consideration shall be made in respect of: (A) any
prepayment penalty or premium, breakage costs, change of control penalty or
premium or other payment arising out of or resulting from the consummation of
the transactions contemplated by this Agreement (other than any payments or
obligations that are in the form of compensation or deferred compensation),
including the termination of any Contract, or any other obligation to which the
Companies are a party or by which they may be bound; provided, that such
prepayment penalties or premiums, breakage costs, change of control penalties or
premiums or other payments in this clause (A) do not, in the aggregate, exceed
$2,500,000, and, to the extent such payments exceed $2,500,000, the excess over
$2,500,000 shall be included in Current Liabilities; (B) federal and state
income taxes payable (including the current portion of deferred income taxes);
(C) any Intercompany Payables; (D) any liabilities related to any Employee Plan
or Compensation Arrangement for which Seller has retained the obligation to
discharge in full all amounts therefrom under Section 6.9(h); or (E) any
Transfer Taxes.
(c) Debt Adjustment. The Cash Consideration shall be decreased by
the principal amount and accrued and unpaid interest and any other outstanding
obligations of any indebtedness for borrowed money of the Companies, if any, as
of the Adjustment Time, excluding, however, any Intercompany Payables and any
amounts included in the calculation of Working Capital.
(d) Capital Expenditures Adjustment. The Cash Consideration shall
be increased by the amount of any and all Non-Ordinary Course Capital
Expenditures made by or on behalf of the Companies in accordance with Section
6.1(b)(7) between the date hereof and the Closing Date, provided any such
Non-Ordinary Course Capital Expenditure shall have been made by the Companies
pursuant to and in accordance with a written request from Buyer (the "Capital
Expenditure Adjustment").
2.4 Payments at Closing.
--------------------
(a) No later than five (5) Business Days prior to the date
scheduled for the Closing, Seller shall prepare and deliver to Buyer a written
report, substantially in the form of Exhibit 2.4(a) hereto (the "Preliminary
Closing Statement"), setting forth Seller's estimates of Working Capital,
Closing Equivalent Subscribers, the Capital Expenditure Adjustment and the debt
adjustment calculated pursuant to Section 2.3(c), and the Cash Consideration, as
adjusted pursuant to Section 2.3. The Preliminary Closing Statement shall be
prepared by Seller in good faith and shall be certified by Seller to be its good
faith estimate of Working Capital, Closing Equivalent Subscribers, the Capital
Expenditure Adjustment and the debt adjustment calculated pursuant to Section
2.3(c) as of the date thereof, and the Cash Consideration, as so adjusted,
pursuant to Section 2.3. Seller shall make available to Buyer such information
as Buyer shall reasonably request relating to the matters set forth in the
Preliminary Closing Statement. The
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parties shall negotiate in good faith to resolve any dispute and to reach an
agreement on the amount of the Cash Consideration, as adjusted pursuant to
Section 2.3, for purposes of the Closing (which amount shall be subject to final
determination as provided in Section 2.5). Notwithstanding the foregoing, to the
extent that the parties do not reach an agreement on the amount of the Cash
Consideration, as adjusted pursuant to Section 2.3, by the Closing, the Closing
Cash Payment shall be calculated from the Preliminary Closing Statement.
(b) At Closing, Buyer shall pay to Seller the amount of the Cash
Consideration adjusted pursuant to Sections 2.3(a), (b), (c) and (d), as
determined pursuant to this Section 2.4 (such amount, the "Closing Cash
Payment").
2.5 Post-Closing Payment of Cash Consideration Adjustments.
-------------------------------------------------------
(a) Final Closing Statement. Within ninety (90) days after the
Closing Date, Buyer shall prepare and deliver to Seller a written report,
substantially in the form of Exhibit 2.5(a) hereto (the "Final Closing
Statement"), setting forth Buyer's final estimates of Working Capital, Closing
Equivalent Subscribers, the Capital Expenditure Adjustment and the debt
adjustment, determined in accordance with Section 2.3 and the Cash
Consideration, as adjusted pursuant to Section 2.3, all prepared on the same
basis as the Preliminary Closing Statement. The Final Closing Statement shall be
prepared by Buyer in good faith and shall be certified by Buyer to be, as of the
date prepared, its good faith estimate of Working Capital, Closing Equivalent
Subscribers, the Capital Expenditure Adjustment, the debt adjustment calculated
pursuant to Section 2.3(c) and Cash Consideration, as so adjusted, as
applicable. Buyer shall allow Seller and its agents access, upon reasonable
prior notice, at all reasonable times after the Closing Date to copies of the
books, records and accounts of the Companies and promptly make available to
Seller such information as Seller reasonably requests to allow Seller to examine
the accuracy of the Final Closing Statement.
Within thirty (30) days after the date that the Final Closing Statement
is delivered by Buyer to Seller, Seller shall complete its examination thereof
and may deliver to Buyer a written report setting forth any proposed adjustments
to any amounts set forth in the Final Closing Statement; provided, however, that
if Buyer does not comply with its obligations pursuant to the preceding
sentence, such thirty (30) day period shall run from the day after the date on
which Buyer complies with such obligations; provided, further, however, that if
Buyer does not comply with its obligations pursuant to the preceding sentence
within thirty (30) days after Seller has made any such request for access, there
shall be no adjustment in favor of Buyer pursuant to this Section 2.5. To the
extent that Buyer does not provide to Seller the Final Closing Statement within
ninety (90) days after the Closing Date in accordance with this Section 2.5,
Buyer shall have no right to raise further adjustments in its favor. After
submission of the Final Closing Statement, Buyer shall have no right to raise
further adjustments in its favor and after submission of Seller's report of any
proposed adjustments, Seller shall have no right to raise further adjustments in
its favor.
If Seller notifies Buyer of its acceptance of the amounts set forth in
the Final Closing Statement, or if Seller fails to deliver its report of any
proposed adjustments within the period specified in the second preceding
sentence, the amounts set forth in the Final Closing Statement shall be
conclusive, final and binding on the parties as of the last day of such period.
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Buyer and Seller shall use good faith efforts to resolve any dispute
involving the amounts set forth in the Final Closing Statement. If Seller and
Buyer fail to agree on any amount set forth in the Final Closing Statement
within fifteen (15) days after Buyer receives Seller's report pursuant to this
Section 2.5, (a) then the parties shall retain a "Big Five" national independent
accounting firm reasonably acceptable to Buyer and Seller (the "Post-Closing
Referee") to make the final determination, under the terms of this Agreement, of
any amounts under dispute. The Post-Closing Referee shall endeavor to resolve
the dispute as promptly as practicable and the Post-Closing Referee's resolution
of the dispute shall be final and binding on the parties, and a judgment may be
entered thereon in any court of competent jurisdiction; provided that in no
event shall such resolution result in (i) amounts less than the amounts therefor
(in the case of liabilities) or more than the amounts therefor (in the case of
assets) set forth in Seller's written report pursuant to this Section 2.5(a) or
(ii) amounts greater than the amounts therefor (in the case of liabilities) or
less than the amounts therefor (in the case of assets) set forth in the Final
Closing Statement. The costs and expenses of the Post-Closing Referee and its
services rendered pursuant to this Section 2.5 shall be borne one-half by Buyer
and one-half by Seller.
(b) Payment of Cash Consideration Adjustments.
------------------------------------------
(1) After the amount of the Cash Consideration is finally
determined pursuant to Section 2.5(a), payments shall be made as follows:
(A) If the amount of the Cash Consideration as finally
determined pursuant to Section 2.5(a) exceeds the Closing Cash Payment, then
within three (3) Business Days after the date the amount of Cash Consideration
is finally determined pursuant to Section 2.5(a), Buyer will pay to Seller in
cash the amount of such excess by wire transfer of immediately available funds
to the account or accounts designated by Seller to Buyer in writing at least one
(1) Business Day prior to the date of payment thereof.
(B) If the amount of the Closing Cash Payment exceeds the
amount of the Cash Consideration as finally determined pursuant to Section
2.5(a), then within three (3) Business Days after the date the amount of Cash
Consideration is finally determined pursuant to Section 2.5(a), Seller will pay
to Buyer in cash the amount of such excess by wire transfer of immediately
available funds to the account or accounts designated by Buyer to Seller in
writing at least one (1) Business Day prior to the date of payment thereof.
(2) Any amount which becomes payable pursuant to this Section
2.5 will constitute an adjustment to the Cash Consideration for all purposes.
SECTION 3: REPRESENTATIONS AND WARRANTIES OF SELLER
Subject to any provisions of this Agreement limiting, qualifying or
excluding any of the representations or warranties made herein, and to the
disclosures set forth in the Seller's Disclosure Schedules, Seller hereby
represents and warrants to Buyer, as set forth in this Section 3.
3.1 Organization and Authority. Seller and the Companies are
corporations duly incorporated, validly existing and in good standing under the
laws of the Commonwealth of Virginia. Except as disclosed in Schedule 3.1,
Seller and the Companies have the requisite corporate power and authority to
own, lease and operate their respective properties, to carry on their respective
businesses in the places where such properties are now owned, leased or
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operated and in the manner in which such businesses are now conducted, and to
execute, deliver and perform this Agreement and the other Transaction Documents
to which they are parties according to their respective terms.
3.2 Authorization and Binding Obligation. The execution, delivery and
performance by each of Seller and the Companies of this Agreement and the other
Transaction Documents to which it is a party have been duly authorized by all
necessary corporate action on its part. This Agreement and the other Transaction
Documents to which each of Seller and the Companies is a party have been duly
executed and delivered by it (or, in the case of Transaction Documents to be
executed and delivered at Closing, when executed and delivered will be duly
executed and delivered) and constitute (or, in the case of Transaction Documents
to be executed and delivered at Closing, when executed and delivered will
constitute) its legal, valid, and binding obligation enforceable against it in
accordance with their terms, except as the enforceability of this Agreement and
such other Transaction Documents may be limited by Enforceability Exceptions.
3.3 Organization and Ownership of the Companies.
--------------------------------------------
(a) Each of the Companies is duly qualified, validly existing and
in good standing as a foreign corporation in each jurisdiction listed on
Schedule 3.3, which are all the jurisdictions in which such qualification is
required. Except as disclosed in Schedule 3.3, none of the Companies owns
directly or indirectly, of record or beneficially, any outstanding securities or
other interest in any Person (each such Person described in Schedule 3.3, an
"Investment Person") or has the right or obligation to acquire, any Equity
Interests, outstanding securities or other interest in any Person.
(b) Schedule 3.3 sets forth each of the Companies' authorized,
issued and outstanding Equity Interests and the record and beneficial owner of
each issued and outstanding Equity Interest of each of them. All of such issued
and outstanding Equity Interests of the Companies have been validly issued, are
fully paid and non-assessable and have not been issued in violation of any
federal or state securities laws. Except as set forth in Schedule 3.3, the owner
of the Equity Interests of each of the Companies owns such Equity Interest free
and clear of all Encumbrances, but subject to the Legal Restrictions. Except as
disclosed in Schedule 3.3, there are no outstanding securities, options,
warrants, calls, rights, commitments, agreements, arrangements or undertakings
of any kind to which any of the Companies is a party or by which any of the
Companies is bound obligating any of the Companies to issue, deliver or sell, or
cause to be issued, delivered or sold, any additional Equity Interests of any of
the Companies or obligating any of the Companies to issue, grant, extend or
enter into any such security, option, warrant, call, right, commitment,
agreement, arrangement or undertaking. Seller has delivered or made available to
Buyer complete and correct copies of the Organizational Documents of each of the
Companies as in effect on the date hereof.
(c) Seller holds all legal and beneficial right to the Purchased
Shares, free and clear of all Encumbrances, but subject to the Legal
Restrictions. All of the Purchased Shares have been validly issued and are fully
paid and nonassessable, and no class of capital stock of any of the Companies is
entitled to preemptive rights. None of the Companies holds any shares of any
class of its capital stock in its treasury.
3.4 Absence of Conflicting Agreements; Consents. Except for the
expiration or termination of any applicable waiting period under the HSR Act or
as set forth on Schedule 3.4
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or Schedule 3.8 or as would not impair the ability of Seller to perform its
obligations under the Transaction Documents, the execution, delivery and
performance by Seller of this Agreement and by Seller of the other Transaction
Documents to which it is a party (with or without the giving of notice, the
lapse of time, or both): (a) do not require the Consent of, notice to, or filing
with any Governmental Authority or any other Person under any of the Companies'
Franchises, FCC Licenses or Material Contracts or under any material agreement
or instrument to which Seller is a party or is bound; (b) will not conflict with
any provision of Seller's or the Companies' Organizational Documents as
currently in effect; (c) assuming receipt of all Consents listed in Schedule 3.4
or Schedule 3.8, will not conflict with, in any material way, result in a
material breach of, or constitute a material default under any Legal Requirement
to which any of Seller or the Companies is bound; (d) assuming receipt of all
Consents listed in Schedule 3.4 or Schedule 3.8, will not conflict with,
constitute grounds for termination of, result in a breach of, constitute a
default under, or accelerate or permit the acceleration of any performance
required by the terms of any of the Companies' Franchises, FCC Licenses, or
Material Contracts or under any material agreement or instrument to which Seller
is a party or is bound; and (e) assuming receipt of all Consents, will not
result in the creation of any Encumbrance, other than the Legal Restrictions,
but subject to Permitted Encumbrances, upon the Assets or the Purchased Shares.
Notwithstanding the foregoing, Seller makes no representation or warranty
regarding any of the foregoing that may result from the specific legal or
regulatory status of any of Buyer or any of its Affiliates or as a result of any
other facts that specifically relate to the business or activities in which any
of Buyer or any of its Affiliates is or proposes to be engaged, other than the
cable television business.
3.5 Financial Statements.
---------------------
(a) Seller has made available to Buyer true and complete copies of
(i) Fairfax's audited balance sheet and income statement (including the notes
thereto) for the year ended December 27, 1998 and unaudited balance sheet and
income statement for the month ended March 28, 1999; (ii) Fredericksburg's
unaudited balance sheet and income statement for the year ended December 27,
1998 and unaudited balance sheet and income statement for the month ended March
28, 1999; and (iii) Mega's unaudited balance sheet and income statement for the
year ended December 27, 1998 and the month ended March 28, 1999, in each case,
that are described in Schedule 3.5 (collectively, the "Financial Statements"),
and such Financial Statements are by that reference incorporated into and deemed
a part of the Seller's Disclosure Schedules.
(b) Except as disclosed in Schedule 3.5, the Financial Statements:
(1) have been prepared from the appropriate Company's books and records; (2)
have been prepared in accordance with GAAP, consistently applied since its
inception (except as indicated in the notes thereto and, in the case of
unaudited financial statements, except for the absence of statements of cash
flows and the omission of information ordinarily contained in footnotes to
audited financial statements and, in the case of any Financial Statements not as
of the end of a fiscal year, subject to customary year-end adjustments); and (3)
present fairly in all material respects the Companies' financial condition as at
December 27, 1998 and as at March 28, 1999, as applicable, and the results of
operations for the period then ended.
3.6 Absence of Undisclosed Liabilities.
-----------------------------------
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(a) Except as set forth in Schedule 3.6, none of the Companies has
any indebtedness, liability or obligation of a type required by GAAP to be
reflected on a balance sheet that is not reflected or reserved against in its
balance sheet included in the Financial Statements, other than indebtedness,
liabilities and obligations that were incurred in the ordinary course of
business after December 27, 1998, or that would not, in the aggregate,
reasonably be material in accordance with GAAP.
(b) As of the date hereof, except as provided in or arising
pursuant to the loan agreements, notes, bonds, indentures and other agreements
and instruments listed in Schedule 3.6, or under any capitalized leases listed
in Schedule 3.8, the Companies have no Indebtedness.
3.7 Absence of Certain Changes. Since December 27, 1998, except as
disclosed in Schedule 3.7 and except for matters occurring after the date hereof
that are permitted by the provisions of this Agreement or consented to by Buyer,
none of the Companies has:
(a) made any sale, assignment, lease or other transfer of assets
other than in the ordinary course of business;
(b) issued any note, bond or other debt security or created,
incurred, assumed or guaranteed any Indebtedness; or
(c) made or promised any material increase in the salary or other
compensation payable or to become payable to any of its executive officers or
other employees, other than in the ordinary course of business or as
contemplated under any employment or bonus arrangement currently in effect.
3.8 Franchises, Licenses, Material Contracts. Schedule 3.8 contains a
list of each of the Companies' Franchises (including the Franchising Authority
which granted each Franchise and the stated expiration date of each Franchise),
the System to which the Franchise applies, FCC Licenses and Material Contracts
in effect on the date hereof, which list is true, correct and complete. Schedule
3.8 contains a list of each pending application for a Franchise and a list of
any System or portion thereof owned or operated by the Companies that does not
require a Franchise authorizing the installation, construction, development,
ownership or operation of the same, which list is true, correct and complete.
Fairfax and Fredericksburg possess all Franchises and FCC Licenses necessary to
operate their respective businesses as currently conducted. Without material
exception, the Companies possess all other Licenses necessary to operate their
businesses as currently conducted. Seller has made available to Buyer true and
complete copies of all of the Companies' Franchises, FCC Licenses and Material
Contracts as in effect on the date hereof. The Franchises, FCC Licenses and
Material Contracts are in full force and effect (subject to expiration at the
end of their current term and to the last sentence of this Section 3.8) and are
valid, binding and enforceable upon Company that is a party thereto and, to
Seller's Knowledge, the other parties thereto in accordance with their terms,
except to the extent such enforceability may be affected by Enforceability
Exceptions. Except as disclosed in Schedule 3.8, each of the Companies is in
compliance with the terms of its Franchises, FCC Licenses and Material
Contracts, except for such noncompliance which in the aggregate is not material
to the Companies, taken as a whole, or would not prevent the operation of the
business of the Companies as currently conducted, and, as of the date of this
Agreement, none of the Companies has received any written notice within the last
year from a Franchising Authority, a consultant representing a Franchising
Authority, any state cable regulatory authority or the FCC
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to the effect that any of the Companies is not currently in compliance with the
terms of the Franchise granted by such Franchising Authority or with any FCC
License. Except as set forth in Schedule 3.8, a valid request for renewal has
been timely filed under Section 626(a) of the Cable Act with the proper
Franchising Authority with respect to each of the Companies' Franchises that has
expired prior to, or will expire within thirty months after, the date of this
Agreement. Buyer acknowledges and agrees that certain of the Franchises, FCC
Licenses and Material Contracts may have already expired or may expire by their
own terms prior to the Closing, that the Companies shall not be deemed to have
breached their respective representation and warranty in the second and fifth
sentences of this Section 3.8 by virtue of such expiration, that neither Seller
nor the Companies shall have any obligation to renew or extend any such
Franchises, FCC Licenses and Material Contracts as a condition to Buyer's
obligations under this Agreement.
3.9 Title to Real Property and Tangible Personal Property. Schedule 3.9
lists the street address for all Real Property owned in fee by any of the
Companies as of the date of this Agreement (excluding easements, rights-of-way,
and similar authorizations) (the "Fee Properties"). A true and correct copy of
(i) each deed pursuant to which any of the Companies acquired any Fee Property,
any survey and title insurance policies issued to such Company, (ii) any leases
under which any Company is the lessor affecting such Fee Property or (iii) any
other easements, rights of way, covenants, conditions and restrictions, document
or agreement affecting title to such Fee Property (and, in the case of this
clause (iii), in the possession of such Company) have been delivered or made
available to Buyer (or, in the case of deeds, will be made available or
delivered to Buyer prior to Closing). Schedule 3.9 lists the street address for
the Real Property leased by any of the Companies, as lessee, as of the date of
this Agreement and sets forth the parties to the applicable lease and any
amendments, supplements or modifications thereto. Except as disclosed in
Schedule 3.9: (a) the Company that owns a fee estate in a Real Property parcel
has good and marketable title thereto; (b) the Company that owns any material
item of Tangible Personal Property has good and valid title thereto; (c) the
Company that leases Real Property has a valid leasehold interest therein
(subject to expiration of such lease in accordance with its terms), except to
the extent that the failure to have any such valid leasehold interests would not
impair the operation of the Systems in any material respect; and (d) the Company
that leases any material item of Tangible Personal Property has a valid
leasehold interest therein (subject to expiration of such lease in accordance
with its terms), in each case of (a), (b), (c) and (d) above, free and clear of
all Encumbrances, other than Permitted Encumbrances and subject to the Legal
Restrictions. Notwithstanding the express language of this Section 3.9 or as may
otherwise be provided in this Agreement, no representation or warranty is being
made as to title to the internal wiring, house drops and unrecorded
dwelling-unit easements, rights of entry or rights-of-way held or used by the
Companies.
3.10 Intangibles. Schedule 3.10 contains a true and correct description
and list of the Intangibles (exclusive of those required to be listed in
Schedule 3.8) that are owned or leased by any of the Companies and that are
necessary for the conduct of the business or operations of the Systems as
currently conducted. Except as to potential copyright liability arising from the
performance, exhibition or carriage of any music on the Systems or as disclosed
in Schedule 3.10, none of the Companies is infringing upon any trademarks, trade
names, copyrights or similar intellectual property rights of others.
3.11 Information Regarding the Systems.
----------------------------------
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(a) Subscribers. Schedule 3.11 sets forth the approximate number of
Equivalent Subscribers as of the date indicated therein (including the
approximate number of Equivalent Subscribers served in each System) and sets
forth a true, complete and correct statement of all Subscribers' rates, tariffs
and other charges for cable television and other services provided by any of the
Cable Companies, and a list of all free, discount or other promotional service
obligations (other than those obligations which are regularly offered or arise
in the ordinary course of the business and operations of the Cable Companies) of
any of the Cable Companies, with respect to the Systems as of the date of this
Agreement.
(b) Certain System Information. Schedule 3.11 sets forth the
approximate number of plant miles (aerial and underground) for each System, the
approximate bandwidth capability of each System, the channel lineup for each
System as of the date hereof, which information is true and correct in all
material respects, in each case as of the applicable dates specified therein and
subject to any qualifications set forth therein. Each of the respective channel
lineups set forth in Schedule 3.11 is capable of being viewed in its entirety by
each Subscriber in the applicable System (subject to ordinary course service
interruptions).
(c) Franchise and FCC Matters. Except as set forth in Schedule
3.11, all reports or other documents, payments or submissions required to be
filed by any of the Companies with any of the Franchising Authorities or the FCC
have been duly filed and were correct in all material respects when filed.
Except as set forth in Schedule 3.11, the Companies are permitted under all
applicable Franchises and FCC Regulations to distribute the television broadcast
signals distributed by the Systems and to utilize all carrier frequencies
generated by the operations of the Systems, and are licensed to operate in all
material respects all the facilities of the Systems required by Legal
Requirements to be licensed.
(d) Request for Signal Carriage. Except for nonduplication and
blackout notices received in the ordinary course of business, none of the
Companies has received any FCC order requiring any System to carry a television
broadcast signal or to terminate carriage of a television broadcast signal with
which it has not complied, and, except as disclosed in Schedule 3.11, have
complied in all material respects with all written and bona fide requests or
demands received from television broadcast stations to carry or to terminate
carriage of a television broadcast signal on a System.
(e) Rate Regulatory Matters. Schedule 3.11 sets forth a list of all
Governmental Authorities that are certified to regulate rates of the Systems
pursuant to the Cable Act and FCC Regulations as of the date of this Agreement.
Except as set forth in Schedule 3.11, no pending rate complaints have been filed
with the FCC against the Systems according to the FCC's log dated January 1,
1999, which reflects rate complaints filed through December 31, 1998. Except as
disclosed in Schedule 3.11, as of the date of this Agreement, none of the
Companies has received any written notice and, to Seller's Knowledge, any notice
(other than written notice) from any Governmental Authority that it has any
unresolved obligation or liability to refund to subscribers of the Systems any
portion of the revenue received by the Companies from subscribers of the Systems
(excluding revenue with respect to deposits for converters, encoders, decoders
and related equipment and other prepaid items). Buyer acknowledges that, except
as expressly warranted in this Section 3.11(e), Seller and the Companies are not
making any representation or warranty regarding any Rate Regulatory Matter and
Buyer shall not be entitled to make any claim against Seller or the Companies
arising out of or relating to any Rate Regulatory Matter.
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(f) Insurance. The Systems and Assets are insured against claims,
loss or damage in amounts generally customary in the cable television industry
and consistent with the Companies' past practices. All such policies are with
financially sound insurers and are each outstanding and in full force and effect
on the date hereof. As of the date hereof, within the past two (2) years, no
insurance carrier has denied any material claim for insurance made by any
Company in respect of any of the Systems and Assets or refused to renew any
policy issued in respect of any of the Systems and Assets.
(g) Right of First Refusal. Except as disclosed in Schedule 3.11,
no Person (including any Governmental Authority) has any right to acquire any
interest in any of the Systems (including, without limitation, any right of
refusal or similar right), other than rights of condemnation or eminent domain
afforded by law or upon the expiration or termination of or revocation or
default under any Franchise.
3.12 Taxes.
------
(a) Seller has filed or has caused to be filed in a timely manner
all required Tax Returns of the Companies with the appropriate Governmental
Authorities in all jurisdictions in which such Tax Returns are required to be
filed by the Companies (except Tax Returns for which the filing date has not
expired or has been extended and such extension period has not expired), and all
Taxes shown on such Tax Returns (other than sales, use and property Taxes in an
aggregate amount not to exceed $150,000) have been properly accrued or paid to
the extent such Taxes have become due and payable. Schedule 3.12 lists all
jurisdictions where material Tax Returns are required to be filed with respect
to the Companies. Except as set forth in Schedule 3.12, the Financial Statements
reflect an adequate reserve in accordance with GAAP (without regard to any
amounts reserved for deferred taxes) for all material unpaid Taxes payable by
the Companies for all Tax periods and portions thereof through the date of such
Financial Statements. Except as disclosed in Schedule 3.12, Seller has not, and
none of the Companies have, executed any waiver or extension of any statute of
limitations on the assessment or collection of any Tax or with respect to any
liability arising therefrom. Except as disclosed in Schedule 3.12, none of the
federal, state or local income Tax Returns filed by or on behalf of the
Companies are currently being audited by any taxing authority, and there are no
other examinations, requests for information or other administrative or judicial
proceedings pending with respect to Taxes of the Companies. Except as disclosed
in Schedule 3.12, (i) neither the Internal Revenue Service nor any other taxing
authority has asserted any deficiency or claim for additional Taxes (other than
sales, use and property Taxes in an aggregate amount not to exceed $150,000)
against, or any adjustment of Taxes (other than sales, use and property Taxes in
an aggregate amount not to exceed $150,000) relating to, any of the Companies,
and (ii) there are no proposed reassessments of any property owned by any of the
Companies that would affect the Taxes of any of the Companies. None of the
Companies has any liability for the Taxes of any person (other than the members
of the consolidated group of corporations of which Seller is the parent)
pursuant to Section 1.1502-6 of the Treasury Regulations promulgated under the
Code or comparable provisions of any taxing authority in respect of a
consolidated, combined or unitary Tax Return. There are no material Tax liens on
any assets of the Companies, other than liens for current Taxes not yet due and
payable and liens for Taxes that are being contested in good faith by
appropriate proceedings.
(b) Since their inception, (i) each of the Companies has been a
member of an affiliated group filing a consolidated federal income tax return
pursuant to Code section 1501 of
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which Seller is the common parent, and (ii) each of the Companies has been a
member of an affiliated group filing a consolidated or combined Virginia income
tax return of which Seller is the common parent.
(c) No consent under Section 341(f) of the Code has been filed
with respect to any of the Companies.
(d) Except as disclosed in Schedule 3.12, none of the Companies
has been at any time a member of any partnership, joint venture or other
arrangement or contract which is treated as a partnership for federal, state,
local or foreign tax purposes or the holder of a beneficial interest in any
trust for any period for which the statute of limitations for any Tax has not
expired.
(e) As of the Closing, there will be no tax sharing agreements or
similar arrangements with respect to or involving any of the Companies.
3.13 Employee Plans.
---------------
(a) List of Benefit Plans. All of the Employee Plans and
Compensation Arrangements are listed in Schedule 3.13, and complete and accurate
copies of (including any amendments to) any such written Employee Plans or
Compensation Arrangements have been furnished to Buyer. Any unwritten Employee
Plans or Compensation Arrangements also are listed in Schedule 3.13. Except as
disclosed in Schedule 3.13, none of the Companies are the plan sponsor of any of
the Employee Plans or Compensation Arrangements.
(b) Compliance. Each Employee Plan has been administered in
material compliance with its own terms and in material compliance with the
provisions of ERISA, the Code, the Age Discrimination in Employment Act and any
other applicable Legal Requirements.
(c) Multiemployer Plans. Neither the Companies nor any of their
ERISA Affiliates is contributing to, is required to contribute to, or has
contributed within the last six years to, any multiemployer plan, as defined in
ERISA Section 3(37) with respect to any employees of the Companies, and neither
the Companies nor any of their ERISA Affiliates has incurred within the last six
years, or reasonably expects to incur, any "withdrawal liability," as defined
under Section 4201 et seq. of ERISA with respect to any employees of the
Companies.
(d) Retiree Coverage. Except as described in Schedule 3.13,
neither the Seller, the Companies or any ERISA Affiliate or either sponsors,
maintains or contributes to any Employee Plan or Compensation Arrangement that
provides medical or death benefit coverage to former employees of the Companies,
except to the extent required by Section 4980B of the Code.
(e) Qualification Standards. Except as described in Schedule 3.13,
with respect to each Employee Plan: (i) each Employee Plan that is intended to
be tax-qualified, and each amendment thereto, is the subject of a favorable
determination letter, and no plan amendment that is not the subject of a
favorable determination letter would affect the validity of an Employee Plan's
letter; (ii) no condition or event exists or is reasonably expected to occur
that could subject, directly or indirectly, any of the Companies to any material
liability, contingent or otherwise, or the imposition of any lien on the assets
of any of the Companies under the Code or
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Title IV of ERISA, whether to the Pension Benefit Guaranty Corporation, the
Internal Revenue Service, or any other entity; (iii) no Employee Plan ever has
incurred an "accumulated funding deficiency," as such term is defined in Section
302(a)(2) of ERISA and Section 412(a) of the Code, whether or not waived, and
otherwise always has fully met the funding standards required under Title I of
ERISA and Section 412 of the Code; (iv) no "reportable event," as that term is
defined in Section 4043(c)(1) through (8) of ERISA and, to the knowledge of the
Seller and the Companies, Section 4043(c)(9) of ERISA, ever has occurred with
respect to any Employee Plan other than one for which the thirty (30) day notice
has been waived by regulation and no reportable event has occurred or is
reasonably expected to occur with respect to an Employee Plan which would
require prior notice; (v) there are no unfunded liabilities with respect to any
tax-qualified Employee Plan, i.e., the actuarial present value of all "benefit
liabilities" (determined within the meaning of Section 401(a)(2) of the Code)
under such Employee Plan, whether or not vested, does not exceed the current
value of the assets of such Employee Plan; (vi) no nonexempt prohibited
transaction, within the definition of Section 4975 of the Code or Title 1, Part
4 of ERISA, has occurred that would subject any of the Companies to any material
liability; and (vii) all contributions, premiums or payments accrued, in whole
or in part, under each Employee Plan or with respect thereto as of the Closing
will be paid by the Companies, on or prior to Closing or, if later, within the
time period permitted by ERISA and the Code.
(f) Deduction Issues. Except as specifically disclosed on Schedule
3.13, neither the execution and delivery of this Agreement nor the consummation
of the transactions contemplated hereby will (i) result in any payment
(including, without limitation, stay bonuses, severance, or unemployment
compensation) becoming due to any director or employee of any of the Companies;
(ii) result in the payment of any compensation or other payments to any
employees or former employees of the Companies that will not be deductible under
the terms of Section 280G of the Code (iii) result in the acceleration of
vesting under any Employee Plan or Compensation Arrangements; or (iv) materially
increase any benefits otherwise payable under any Employee Plan or Compensation
Arrangement; except that the Companies may pay stay bonuses to the employees of
the Companies in connection with the transactions contemplated by this Agreement
so long as the same shall not be liabilities or obligations for which the
Companies or Buyer would be responsibility after the Closing.
(g) Employee Stock Options. There are no currently outstanding
stock options or other rights extended to employees, directors or independent
contractors of any of the Companies, or any their Affiliates that, in their
current form and without regard to the transactions contemplated by this
Agreement, would grant to such persons the ability to purchase or otherwise
receive stock in any of the Companies at any time.
(h) COBRA. With respect to the Companies, Schedule 3.13 contains a
complete and accurate list of all covered employees and qualified beneficiaries,
as such terms are defined under Section 4980B of the Code, as of the date hereof
(including covered employees and qualified beneficiaries who are in the election
period for continuation coverage but who have not yet elected continuation
coverage), the date of the applicable qualifying event and the expected duration
of such coverage. The Seller and the Companies agree to provide to Buyer at
Closing an updated list of such covered employees and qualified beneficiaries
with respect to the Companies, effective as of the Closing. The information
required to be disclosed by this Section 3.13(h) shall either be included in
Schedule 3.13 as of the date this Agreement is executed or shall be provided to
Buyer no later than 30 days after the date this Agreement is executed.
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(i) Labor Contracts. As of the date of this Agreement, there are no
collective bargaining agreements, and no contracts or agreements with labor
unions, relating to, involving or affecting the employees of the Companies to
which any of the Companies is a party or by which it is bound, and none of the
Companies has any obligation to bargain with any labor organization with respect
to any such persons. As of the date of this Agreement, there are no unfair labor
practice charges pending against any of the Companies and to the knowledge of
Seller and the Companies there are neither any demands for recognition or any
other requests or demands from a labor organization for representative status
with respect to any persons employed by any of the Companies nor is any such
activity threatened. As of the date of this Agreement, no employees of the
Companies are presently members of any collective bargaining unit with respect
to their employment with the Companies.
(j) Employee, Officers and Directors. Schedule 3.13 lists the names
and positions of each of the officers, directors and employees of each of the
Companies, and the hourly wage or salary information for such employees (other
than for officers and directors of the Companies who are compensated solely by
Seller) has been previously delivered to Buyer and is accurate in all material
respects as of the date hereof. The information required to be disclosed by this
Section 3.13(j) shall either be included in Schedule 3.13 as of the date this
Agreement is executed or shall be provided to Buyer no later than 30 days after
the
date this Agreement is executed.
3.14 Environmental Laws. Except as disclosed in Schedule 3.14: (a) the
Companies' operations with respect to the Systems comply in all material
respects with all applicable Environmental Laws as in effect on the Closing
Date; and (b) the Companies have not used the Real Property for the manufacture,
transportation, treatment, storage or disposal of Hazardous Substances except
for gasoline and diesel fuel and such use of Hazardous Substances (in cleaning
fluids, solvents and other similar substances) customary in the construction,
maintenance and operation of a cable communications system and in amounts or
under circumstances that would not reasonably be expected to give rise to
material liability for remediation. Except as disclosed in Schedule 3.14, as of
the date of this Agreement, no Environmental Claim has been filed or issued
against the Companies that is pending and unresolved. To Seller's Knowledge, the
Companies' operations with respect to the Systems have complied with all
applicable Environmental Laws, except such non-compliance that would not
reasonably be expected to have a Material Adverse Effect.
3.15 Claims and Litigation. Except as disclosed in Schedule 3.15, as of
the date of this Agreement, there is no claim, legal action, arbitration or
other legal, administrative or tax proceeding, order, decree, judgment or
complaint or, to Seller's Knowledge, investigation, dispute or controversy
reasonably likely to result in litigation against or relating to the Companies,
the Assets or the business or operations of the Systems (other than FCC and
other proceedings generally affecting the cable television industry and not
specific to the Companies and other than rate complaints or certifications filed
by customers or Franchising Authorities) other than routine collection matters
or ordinary course matters expected to be covered by insurance policies
maintained by the Companies, subject to applicable deductibles.
3.16 Compliance With Laws. Except as disclosed in Schedule 3.16 and
except for any such noncompliance as has been remedied, each of the Companies,
the Systems and the Assets are in compliance in all material respects with all
Legal Requirements (including the Code,
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ERISA, the National Labor Relations Act, the Cable Act, FCC Regulations, and the
Copyright Act). Seller has made available to Buyer complete and correct copies
of all FCC forms relating to rate regulation filed by the Companies with any
Governmental Authority with respect to the Systems relating to rate regulation
generally and any other Rate Regulatory Matter or specific rates charged to
subscribers of the Systems, and any other documentation prepared by the
Companies supporting an exemption from the rate regulation provisions of the
Cable Act claimed by any Company with respect to the Systems. Notwithstanding
the foregoing or any other provision of this Agreement to the contrary, and
without limiting the provisions of Section 6.14, it does not make any
representation or warranty with respect to compliance with any Legal
Requirements dealing with, limiting or affecting the rates which can be charged
by its Systems to their Subscribers (whether for programming, equipment,
installation, service or otherwise) or any other Rate Regulatory Matter.
3.17 Transactions with Affiliates. Except to the extent disclosed in
the Financial Statements and the notes thereto or in Schedule 3.17, it is not a
party to any business arrangement or business relationship with any of its
Affiliates, and none of its Affiliates owns any property or right, tangible or
intangible, that is used in its business (other than in its capacity as a direct
or indirect holder of its equity or debt).
3.18 Certain Fees. No finder, broker, agent, financial advisor or other
intermediary has acted on its behalf in connection with this Agreement, any
Transaction Document or the transactions contemplated hereby or thereby, or is
entitled to any payment in connection herewith or therewith which, in either
case, would result in any obligation or liability to Buyer, except that Seller
has retained certain brokers and advisors and will pay all fees and expenses of
such brokers and advisors in connection with the transactions contemplated
hereby.
3.19 Inventory. Each Cable Company has inventory, spare parts and
materials relating to the Systems of the type and nature and maintained at a
level consistent with past practice (the "Inventory"), and such Inventory will
be sufficient to operate their respective businesses in the ordinary course for
at least thirty (30) days after the Closing.
3.20 Overbuilds; Competition. Except as set forth in Schedule 3.20, as
of the date of this Agreement, (i) no construction programs have been undertaken
by any Governmental Authority or other active cable television, multichannel
multipoint distribution system (as defined by the rules and regulations of FCC),
or multipoint distribution system provider in any of the Franchise Areas and, to
Seller's Knowledge, without investigation but upon inquiry of its regional
managers and as should reasonably be known to a reasonable cable television
operator, no such construction programs are proposed or threatened to be
undertaken; (ii) no franchise or other applications or requests of any Person to
provide cable television service in the Franchise Areas have been filed more
than two (2) weeks prior to the date hereof or, to Seller's Knowledge (subject
to the same limitation referred to in clause (i) above), have been filed less
than two (2) weeks prior to the date hereof or are pending, threatened, or
proposed; (iii) there is no other cable television or other video services
provider within any of the Franchise Areas which is providing or, to Seller's
Knowledge (subject to the same limitation referred to in clause (i) above), has
applied for a franchise to provide cable television services or other video
services to any of the Franchise Areas in competition with any of the Cable
Companies; and (iv) none of the Companies has received any written notice that
any other provider of cable television services or other existing or prospective
video service provider intends to provide such cable television or other video
service in competition with any Company. Except as set forth in Schedule 3.20,
no
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Company is, nor is any Affiliate of any Company, a party to any agreement
restricting the ability of any third party to operate cable television systems
or any other video programming distribution business within any of the Franchise
Areas.
3.21 Disconnections. Schedule 3.21 sets forth (i) the number of
Subscribers which each of the Cable Companies have disconnected from service
during each of the six (6) months prior to the date hereof and (ii) a general
description of the Cable Companies' policies relating to the connection and
disconnection of Subscribers from service.
3.22 Year 2000. Each Company has (i) initiated a review and assessment
of all areas within its business that would reasonably be expected to be
adversely affected by the "Year 2000 Problem" (that is, the risk that computer
applications used by such Company may be unable to recognize and perform
properly date-sensitive functions involving certain dates prior to and any date
after December 31, 1999), (ii) developed a plan for addressing the Year 2000
Problem (the "Y2K Plan") on a timely basis, and (iii) to date, implemented the
Y2K Plan.
3.23 Cure. For all purposes under this Agreement, the existence or
occurrence of any events or circumstances which constitute or cause a breach of
a representation or warranty of the Companies (as modified by the Seller's
Disclosure Schedules) on the date such representation or warranty is made shall
be deemed not to constitute a breach of such representation or warranty if such
event or circumstance is cured on or prior to the Closing Date or the earlier
termination of this Agreement.
SECTION 4: [INTENTIONALLY OMITTED]
SECTION 5: REPRESENTATIONS AND WARRANTIES OF BUYER
Subject to any provisions of this Agreement limiting, qualifying or
excluding any of the representations or warranties made herein, and to the
disclosures set forth in Buyer's Disclosure Schedules, Buyer represents and
warrants to Seller as set forth in this Section 5.
5.1 Organization and Authority. Buyer is a corporation duly
incorporated, validly existing and in good standing under the laws of the State
of Delaware. Buyer has the requisite corporate power and authority to own, lease
and operate its properties, to carry on its business in the places where such
properties are now owned, leased or operated and in the manner in which such
business is now conducted and to execute, deliver and perform this Agreement and
the other Transaction Documents to which Buyer is a party according to their
respective terms. Buyer is duly qualified and in good standing as a foreign
corporation in each jurisdiction in which such qualification is required, except
where such failure to be so qualified in such other jurisdictions would not have
a material adverse effect on Buyer's ability to perform its obligations under
this Agreement and the other Transaction Documents.
5.2 Authorization and Binding Obligation. The execution, delivery and
performance by Buyer of this Agreement and the other Transaction Documents to
which it is a party have been duly authorized by all necessary corporate action
on the part of Buyer. This Agreement and the other Transaction Documents to
which Buyer is a party have been duly executed and delivered by Buyer (or, in
the case of Transaction Documents to be executed and delivered at Closing, when
executed and delivered will be duly executed and delivered) and constitute (or,
in the case of Transaction Documents to be executed and delivered at Closing,
when executed and delivered will constitute) the legal, valid, and binding
obligation of Buyer, enforceable against
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Buyer in accordance with their terms, except as the enforceability of this
Agreement and such other Transaction Documents may be limited by Enforceability
Exceptions.
5.3 Absence of Conflicting Agreements; Consents. Assuming receipt of
all Consents under the Franchises, Licenses and Contracts at or prior to the
Closing and except for the expiration or termination of any applicable waiting
period under the HSR Act and the filing by Buyer with the SEC of any reports
required to be filed in connection with the consummation of the transactions
contemplated hereby, the execution, delivery and performance by Buyer of this
Agreement and the other Transaction Documents to which Buyer is a party (with or
without the giving of notice, the lapse of time, or both): (a) do not require
any Consent of, notice to, or filing with any Governmental Authority or any
other Person that will not have been obtained by Closing; (b) will not conflict
with any provision of the Organizational Documents of Buyer, as currently in
effect; (c) will not conflict with, in any material way, result in a material
breach of, or constitute a material default under any Legal Requirement to which
Buyer is bound; and (d) will not conflict with, constitute grounds for
termination of, result in a breach of, constitute a default under, or accelerate
or permit the acceleration of any performance required by the terms of any
material agreement or instrument to which Buyer is a party. Notwithstanding the
foregoing, Buyer does not make any representation or warranty regarding any of
the foregoing that may result from the specific legal or regulatory status of
Seller or the Companies or as a result of any other facts that specifically
relate to the business or activities in which Seller or the Companies is or
proposes to be engaged, other than the cable television business.
5.4 Claims and Litigation. Except as disclosed in Schedule 5.4, as of
the date of this Agreement, there is no pending or written threat of a claim,
legal action, arbitration, governmental investigation or other legal,
administrative or tax proceeding pending, nor any order, decree or judgment in
progress or pending, or to Buyer's Knowledge, threatened other than in writing,
against or relating to Buyer or the assets or business of Buyer or its
Subsidiaries (other than FCC and other proceedings generally affecting the cable
television industry and not specific to Buyer or its Subsidiaries and other than
rate complaints or certifications filed by customers or franchising
authorities), that would have a material adverse effect on Buyer's ability to
perform its obligations under this Agreement.
5.5 Investment Purpose; Investment Company. Buyer is acquiring the
Purchased Shares for investment for its own account and not with a view to the
sale or distribution of any part thereof within the meaning of the Securities
Act. Buyer (either alone or together with its advisors) has sufficient knowledge
and experience in financial and business matters so as to be capable of
evaluating the merits and risks of its investment in the Purchased Shares and is
capable of bearing the economic risks of such investment. Buyer is an informed
and sophisticated purchaser, and has engaged expert advisors, experienced in the
evaluation and purchase of companies such as the Companies as contemplated
hereunder. Buyer has undertaken such investigation and has been provided with
and has evaluated such documents and information as it has deemed necessary to
enable it to make an informed and intelligent decision with respect to the
execution, delivery and performance of this Agreement. Buyer acknowledges that
Seller and the Companies have given Buyer complete and open access to the key
employees, documents and facilities of the Companies. Buyer will undertake,
prior to Closing, such further investigation and request such additional
documents and information as it deems necessary. Buyer is not an "investment
company" as defined in the Investment Company Act of 1940, as amended.
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5.6 Certain Fees. No finder, broker, agent, financial advisor or other
intermediary has acted on behalf of Buyer in connection with this Agreement or
the transactions contemplated by this Agreement, or is entitled to any payment
in connection herewith or therewith which, in either case, would result in any
obligation or liability to Seller or the Companies.
5.7 Buyer Qualifications. Buyer is legally and financially qualified to
be the transferee of control of the Companies as the holder of their respective
Franchises and FCC Licenses, as applicable, and, in the case of the Cable
Companies, the owner and operator of the Systems. Buyer has no Knowledge of any
fact that would, under existing law and the existing rules, regulations,
policies and procedures of any Franchising Authority or the FCC, (a) disqualify
Buyer as a transferee of control of the Companies, as the holder of the
Franchises and FCC Licenses, as applicable, or, in the case of the Cable
Companies, as the owner and operators of the Systems or (b) be reasonably likely
to cause any Franchising Authority or the FCC to fail to approve in a timely
fashion any of the applications for Consent relating to the Franchises or the
FCC Licenses. No waiver of any Legal Requirement, including without limitation,
any rule or policy of any Franchising Authority or the FCC, is necessary to be
obtained for the grant of the applications for the transfer of control of the
Franchises or FCC Licenses to Buyer, nor will processing pursuant to any
exception to a rule of general applicability be requested or required in
connection with the consummation of the transactions contemplated hereby.
5.8 Availability of Funds. Buyer has, and will have, as of the Closing
Date, available sufficient cash, available lines of credit or other immediately
available funds to enable it to consummate the transactions contemplated hereby.
5.9 Cure. For all purposes under this Agreement, the existence or
occurrence of any events or circumstances which constitute or cause a breach of
a representation or warranty of Buyer (as modified by Buyer's Disclosure
Schedules) on the date such representation or warranty is made shall be deemed
not to constitute a breach of such representation or warranty if such event or
circumstance is cured on or prior to the Closing Date or the earlier termination
of this Agreement.
SECTION 6: SPECIAL COVENANTS AND AGREEMENTS
6.1 Operation of Business Prior to Closing. Except as required by
applicable Legal Requirements or as contemplated by this Agreement or Schedule
6.1, and subject to Seller's obligation to comply with the terms and conditions
hereof and the operation of the Companies' businesses in the ordinary course,
and except as consented to by Buyer, between the date hereof and the Closing
Date, Seller will cause the Cable Companies to operate the Systems, and MGT and
Mega to conduct their respective operations, in the ordinary course of business
(subject to, and except as modified by, compliance with the following negative
and affirmative covenants) and cause the Companies to abide by the following
negative and affirmative covenants:
(a) Negative Covenants. The Companies shall not do any of the
following between the date hereof and the Closing Date:
(1) Franchises. Fail to timely file a valid request for renewal
in accordance with Section 626(a) of the Cable Act, or fail to use commercially
reasonable efforts to renew on substantially the same or on other commercially
reasonable terms any Franchise that will expire after the date hereof and prior
to the date which is thirty (30) months after the Closing
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Date in accordance with its terms (it being understood that the Companies shall
not be required to take any steps necessary to obtain renewals of any Franchise
earlier than such steps are required to be taken by applicable FCC Regulations,
and obtaining renewals of any Franchise shall not be a condition precedent to
Buyer's obligations hereunder).
(2) Contracts. Enter into any new Contracts that will be
binding on the Companies following the Closing or, except in the ordinary course
of business, modify or amend in any material respect, any Contract that shall
survive the Closing, in all cases, except: (A) agreements for the provision of
services to customers on customary terms and conditions consistent with past
practices; (B) the renewal or extension of any existing Contract on its existing
terms, in all material respects, in the ordinary course of business; (C) with
respect to utility pole attachment agreements, Contracts with terms as
customarily required by the utility whose poles are utilized; (D) Contracts in
connection with capital expenditures made in accordance with Section 6.1(b)(7);
(E) any other contracts or commitments entered into in the ordinary course of
business (which for purposes hereof shall include, without limitation, all
matters included in, or reasonably contemplated by, the Capital Budgets); (F)
Contracts for or in connection with underground facilities construction and
Contracts for or in connection with installation in Subscribers' homes of cable,
converters and the like; (G) subject to Buyer's consent, Contracts for the
acquisition (however effected) of assets, Equity Interests or otherwise,
relating to subscribers to cable services within the Franchise Areas; or (H) any
other contracts or commitments entered into the ordinary course of business that
are terminable on not more than sixty days prior notice without the payment of
any penalty or that do not involve post-Closing obligations in excess of One
Hundred Thousand Dollars ($100,000) per annum in any one case or in excess of
Five Hundred Thousand Dollars ($500,000) in the aggregate per annum.
(3) Disposition of Assets. Sell, assign, lease, swap or
otherwise transfer or dispose of any of the Assets, except for Assets consumed
or disposed of in the ordinary course of business.
(4) Encumbrances. Create, assume or permit to exist any
Encumbrance upon the Assets, except for Permitted Encumbrances or other
Encumbrances disclosed in Schedule 3.9 and subject to the Legal Restrictions.
(5) Indebtedness. Permit the Companies to incur any additional
indebtedness for borrowed money, except to the extent (if not repaid at or prior
to the Closing) included in the computation of Current Liabilities; provided
that any such incurrence shall be in the ordinary course of business, the
Companies shall give Buyer prior notice of such borrowing and such incurrence
shall not include payment of a penalty or premium by the Companies in the case
of the prepayment thereof.
(6) Compensation. Increase annually recurring compensation by
more than 5%, on average, for the Companies' employees, except for customary
merit or time-in-grade increases for qualifying employees or otherwise in
accordance with the Companies' employee policies.
(7) Waivers. Waive any material right relating to the Systems
or the Assets.
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(8) Marketing Plan. Implement any new marketing plans not
contemplated in the Companies' budgets, except as set forth in Schedule 6.1 or
as consented to by Buyer, such consent not to be unreasonably withheld or engage
in any marketing, subscriber installation or collection practices that are
inconsistent in any material respect with the practices of the Cable Companies
for the periods covered by the Financial Statements.
(9) Issuance of Equity Interests. Issue any additional Equity
Interests of any Company or any option or other instrument exchangeable for or
convertible into any such Equity Interest.
(b) Affirmative Covenants. Seller shall, and shall cause the
Companies to, do the following between the date hereof and the Closing Date:
(1) Access to Information. Subject to Buyer's obligations
hereunder and under the Confidentiality Agreement with respect to
confidentiality, allow Buyer and its authorized representatives reasonable
access during normal business hours to the Assets and the physical plant,
offices, properties and records of the Companies for the purpose of inspection,
and furnish or cause to be furnished to Buyer or its authorized representatives
all information with respect to the Assets or the Companies that Buyer may
reasonably request. Any investigation or request for information shall be
conducted in such a manner as not to interfere with the business or operations
of the Companies and the Systems.
(2) Insurance. Maintain the existing insurance policies on the
Systems and the Assets (or comparable replacement policies).
(3) Books and Records. Maintain the Companies' books and
records substantially in accordance with past practices.
(4) Financial and Operational Information. Furnish to Buyer (i)
within forty-five days after the end of each month between the date hereof and
the Closing Date, (A) month-end billing, month-end subscriber and month-end
capital expenditure reports for each of the Systems; and (B) unaudited
consolidated balance sheet and statement of operations such month (the "Interim
Financial Statements"). The Interim Financial Statements (Y) shall be prepared,
and upon delivery of each Interim Financial Statement to Buyer, Seller shall be
deemed to represent and warrant to Buyer that such Interim Financial Statement
has been prepared, in accordance with the books and records of the Companies and
in accordance with GAAP on a consistent basis throughout the periods covered
thereby, except for the absence of footnotes and statements of cash flows and
adjustments described on Schedules 3.5 and 3.6; and (Z) shall fairly present in
all material respects, and upon delivery of each Interim Financial Statement to
Buyer, Seller shall be deemed to represent and warrant to Buyer that such
Interim Financial Statement fairly presents in all material respects, the
financial condition and operating results as of the dates and for the periods
indicated therein, subject only to normal year-end adjustments.
(5) Compliance with Laws. Comply in all material respects with
all Legal Requirements applicable to the Companies and the operation of the
Systems.
(6) Keep Organization Intact. Except with respect to any
voluntary departure of any of the Companies' employees between the date hereof
and Closing, use
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commercially reasonable efforts to preserve intact the Companies' business and
organization relating to the Systems and preserve for Buyer the goodwill of the
Companies' suppliers, customers and others having business relations with them.
(7) Ordinary Course Capital Expenditures. The Companies shall
make Ordinary Course Capital Expenditures reasonably required on the basis of
past practices or the Companies' operations.
(8) Non-Ordinary Course Capital Expenditures. The Companies
shall use their commercially reasonable efforts to make at the times and in the
manner specified by Buyer in its written request (so long as such time and
manner is reasonable) Non-Ordinary Course Capital Expenditures reasonably
requested by Buyer pursuant to and in accordance with any written request of
Buyer; provided it is understood and agreed that notwithstanding anything to the
contrary contained in this Agreement, the Companies shall have no obligation to
make any Non-Ordinary Course Capital Expenditures unless requested by Buyer in
accordance herewith.
(9) Y2K Plan. Continue to implement the Y2K Plan substantially
in accordance with the terms thereof.
(10) Rate Increase. Implement the Subscriber rate increase
described in Schedule 6.1.
(c) Certain Permitted Actions. Notwithstanding anything in this
Agreement (including Sections 6.1(a) and (b) above) to the contrary, Buyer
consents and agrees as follows:
(1) Contractual Commitments. Buyer acknowledges that the
Companies may comply with all of their contractual commitments under their
existing Contracts and under any Contracts entered into after the date of this
Agreement in compliance with Section 6.1(a)(2) or with Buyer's consent (in each
case, as such Contracts may be in effect from time to time in accordance with
Section 6.1(a)(2) or with Buyer's consent). The Companies may take such actions
as are contemplated by the other Sections of this Agreement and otherwise comply
with their obligations under the other Sections of this Agreement.
(2) Excluded Assets. The Companies may, prior to Closing,
terminate, transfer or assign to Seller, its designee or any other Person, each
of the Excluded Assets on such terms as shall be determined by Seller, in its
sole discretion. Buyer and Seller hereby acknowledge and agree that none of
Seller's representations and warranties made herein shall be deemed to be made
as to any matters that arise out of or relate to any Excluded Assets, and the
failure to disclose matters on Seller's Disclosure Schedules as to matters that
arise out of or relate to any Excluded Asset shall not be and shall not result
in a breach, default or misrepresentation under any representation, warranty,
covenant or agreement set forth in this Agreement or any other Transaction
Documents.
6.2 Confidentiality; Press Release.
-------------------------------
(a) Buyer and Seller are parties to a Confidentiality Agreement
dated April 14, 1999 (the "Confidentiality Agreement"). Notwithstanding the
execution, delivery and performance of this Agreement, or the termination of
this Agreement prior to Closing, the
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Confidentiality Agreement shall remain in full force and effect in accordance
with its terms, but shall expire concurrently with the Closing hereunder.
(b) No party will issue any press release or make any other public
announcements concerning this Agreement or the transactions contemplated hereby
except with the prior approval (not to be unreasonably withheld) of the other
party or as required by law, except that if any such disclosure is required by
law, no party will make such disclosure without first providing to the other
party an advance copy of any such disclosure and a reasonable opportunity to
review and comment.
6.3 Cooperation; Commercially Reasonable Efforts. Without limiting any
of the obligations of the parties hereunder, the parties shall cooperate with
each other and their respective counsel, accountants, agents and other
representatives in all commercially reasonable respects in connection with any
actions required to be taken as part of their respective obligations under this
Agreement, and otherwise use their commercially reasonable efforts to consummate
the transactions contemplated hereby and to fulfill their obligations hereunder
as expeditiously as practicable. Subject to the terms of a confidentiality
agreement in form and substance reasonably acceptable to Buyer and Seller and to
be executed and delivered by Buyer and Seller, Buyer shall provide to Seller
such information relating to Buyer and its Subsidiaries and their businesses and
operations as Seller shall reasonably request.
6.4 Consents.
---------
(a) Following the execution hereof, until the Closing Date,
Seller shall use its commercially reasonable efforts, and shall cause the
Companies to use their commercially reasonable efforts, and Buyer shall use its
commercially reasonable efforts to obtain as expeditiously as possible all
Consents required to be obtained by the Companies, including Consents under the
Franchises, FCC Licenses and Contracts of the Companies. Seller shall, and shall
cause the Companies to, and Buyer shall, prepare and file, or cause to be
prepared and filed, within fifteen (15) days after the date hereof (subject to
extension for a period of up to an additional ten (10) days, if reasonably
necessary for a party to complete its application), all applications (including
FCC Forms 394 or other appropriate forms) required to be filed with the FCC and
any Franchising Authority that are necessary for the transfer of control to
Buyer in connection with the consummation of the transactions contemplated by
this Agreement of the Franchises and the FCC Licenses identified in Schedule
3.8, which applications shall include a request that Seller and its Affiliates
be unconditionally released of any guarantee or surety of any of the Companies'
obligations or performance thereunder in connection therewith. The parties shall
also make appropriate requests, as soon as practicable after the date hereof,
for any Consents required under any Contract, which requests shall include a
request that Seller and its Affiliates be unconditionally released of any
guarantee or surety of any of the Companies' obligations or performance
thereunder in connection therewith. If any Contract requires Buyer to assume
such Contract or the obligations of any of the Companies thereunder in
connection with the consummation of the transactions contemplated by this
Agreement, Buyer shall, effective as of Closing, assume any such Contracts and
obligations pursuant to an instrument reasonably acceptable to all parties
thereto. If, notwithstanding their commercially reasonable efforts, Seller and
the Companies are unable to obtain any of the Consents, none of the Companies
nor Seller shall be liable to Buyer for any breach of covenant, and, for the
avoidance of doubt, after the Closing, Seller shall not have any obligation with
respect to obtaining any Consents or any liability for the failure of such
Consents to be obtained. Except as expressly set
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forth in Section 6.4(b) below, nothing herein shall require the expenditure or
payment of any funds (other than in respect of normal and usual attorneys fees,
filing fees or other normal costs of doing business) or the giving of any other
consideration by Buyer, Seller or, prior to consummation of the Closing, any
Company, or any adjustment to the Cash Consideration to be paid to Seller.
(b) Seller agrees that if in connection with the process of
obtaining any Consent, a Governmental Authority or other Person purports to
require any significant adverse condition, change or additional or materially
different adverse terms to a Franchise, License or Contract to which such
Consent relates that would be applicable to Buyer or the Companies as a
requirement for granting its Consent, Buyer's approval is required before Seller
accepts any such conditions, changes or additional or different terms (it being
agreed by Buyer for purposes of this Agreement, without otherwise limiting
whether any other conditions, changes or additional or different terms are
acceptable, that (i) any conditions, changes or additional or different terms,
expenditures in respect of which are included in, or reasonably contemplated by,
the Capital Budgets shall be deemed to be acceptable for purposes hereof and
(ii) any requirement that Buyer or any Affiliate controlled by Buyer provide a
guarantee or other surety for the performance of Buyer's obligations under any
such Franchise, License or Contract to substantially the same extent that Seller
or its Affiliates are required to provide any such guarantee or surety for any
of the Companies as of the date hereof shall be deemed to be commercially
reasonable for purposes hereof).
(c) Buyer shall promptly furnish to any Governmental Authority or
other Person from whom a Consent is requested such accurate and complete
information regarding Buyer and its Subsidiaries, including financial
information concerning Buyer and other information relating to the cable and
other media operations of Buyer, as a Governmental Authority or other Person may
reasonably require in connection with obtaining any Consent, and Buyer shall
promptly furnish to Seller a copy of any such information provided to a
Governmental Authority or other Person, and any other information concerning
Buyer as Seller may reasonably request in connection with obtaining any Consent.
(d) Notwithstanding anything in this Agreement to the contrary,
Buyer acknowledges and agrees that Seller and the Companies will control and
manage the process of obtaining Consents and neither Buyer nor any of its
employees, agents, representatives or any other Person acting on behalf of Buyer
will contact any Governmental Authority or other Person from whom a Consent is
sought for the purpose of seeking any amendment, modification or changes to any
Franchise, License or Contract, for the purpose of waiving or extending the time
period in which such Governmental Authority or other Person is required to act
on the request for Consent, or for any other purpose that would have the result
of hindering or delaying the receipt of any Consent; provided that it is
understood and agreed that nothing herein shall prevent Buyer (or its employees,
agents, representatives or any other Person acting on behalf of Buyer) from
responding to requests initiated by Governmental Authorities or other Persons
from whom a Consent is sought so long as such response does not relate to any of
the foregoing prohibited matters and Buyer shall use commercially reasonable
efforts to apprise the Companies of all such requests.
(e) Buyer agrees that if any Consent related to a Franchise, FCC
License or Contract that includes a guarantee or surety by Seller or any of its
Affiliates of any of the Companies' obligations or performance thereunder does
not include an unconditional release
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thereof, Buyer shall indemnify and hold harmless Seller and its Affiliates from
and against any and all claims, losses, liabilities, damages, penalties, costs
and expenses, including, without limitation, reasonable attorneys' fees, arising
out of any such guarantee or surety; provided, however, that Buyer's
indemnification and hold harmless obligation under this Section 6.4(e) shall
only relate to guarantees and sureties disclosed on Schedule 6.4(e).
(f) At least five (5) Business Days prior to the date scheduled for
Closing, Seller shall deliver to Buyer a notice that the condition set forth in
the second sentence of Section 7.1(c) has been satisfied.
(g) From and after Closing, Buyer agrees that it shall (i) cause
the Companies to complete the institutional network projects described in
Schedule 6.4(g) hereto (the "Institutional Network Projects") and (ii) to the
extent that Seller or any Affiliate of Seller provides a guarantee or other
surety for the obligations or liabilities of the Companies arising under the
Institutional Network Projects, Buyer shall provide a guarantee or other surety
to substantially the same extent that Seller or any of its Affiliates is
required to provide any such guarantee or surety for any of the Companies in
connection with such Institutional Network Projects as of the date hereof. To
the extent that any guarantee or surety by Seller or any of its Affiliates under
any Contract or Franchise related to the Institutional Network Projects is not
released unconditionally at Closing, Buyer shall indemnify and hold harmless
Seller and its Affiliates from and against any and all claims, losses,
liabilities, damages, penalties, costs and expenses, including, without
limitation, reasonable attorneys' fees, arising out of any such guarantee or
surety; provided, however, that Buyer's indemnification and hold harmless
obligation under this Section 6.4(g) shall only relate to guarantees and
sureties disclosed on Schedule 6.4(e).
6.5 HSR Act Filing. As soon as practicable after the execution of this
Agreement, but in any event no later than fifteen (15) days after such execution
(subject to extension for a period of up to an additional ten (10) days, if
reasonably necessary for a party to complete its notification and report) if not
filed by the expiration of such fifteen (15) day period, the parties will each
complete and file, or cause to be completed and filed, any notification and
report required to be filed under the HSR Act; and each such filing shall
request early termination of the waiting period imposed by the HSR Act. The
parties shall use commercially reasonable 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 commercially 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.
Notwithstanding anything to the contrary in this Agreement, neither Buyer nor
Seller shall be required to agree to any prohibition, limitation or other
requirements that would (i) prohibit or limit in any materially adverse respect
the ownership or operation by a party or any of its Affiliates of any portion of
its business or assets or any of its Affiliates, or compel such party or any of
its Affiliates to dispose of or hold separate any portion of the business or
assets of such party or any of its Affiliates or (ii) prohibit such party or any
of its Affiliates from effectively controlling in any material respect the
business or operations of such party or any of its Affiliates.
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6.6 Buyer's Qualifications and Financing and Actions by Parties.
(a) Buyer covenants that it is, and, to the extent within its
control, shall remain, legally, financially and otherwise qualified to be the
transferee of control of the Companies as the holder of the Franchises and the
Licenses and the owner and operator of the Assets and the Systems. Neither Buyer
nor any of its Affiliates will take any action that does, or could reasonably be
expected to, disqualify Buyer to be the transferee of control of the Companies
as the holder of the Franchises and the Licenses and the owner and operator of
the Assets and Systems. Should Buyer become aware of any fact or circumstance
that could reasonably be expected to disqualify Buyer as the transferee of
control of the Companies, Buyer will promptly notify the Companies in writing
thereof and will remove, to the extent within its control, any such
disqualifying fact or circumstance.
(b) At all times between the date hereof and the Closing Date,
Buyer will take all necessary or advisable actions to ensure, and Buyer will
ensure, that Buyer is able to deliver the Cash Consideration at Closing. From
the date hereof until Closing, Buyer will promptly notify Seller of any event
that occurs or circumstance that arises that could prevent Buyer from being able
to deliver the Cash Consideration at Closing and shall take all actions
necessary to cure or remove such event or circumstances before Closing.
(c) No party hereto, nor any of their respective Affiliates, will
take any action that is inconsistent with its obligations under this Agreement
or which does, or would reasonably be expected to, hinder or delay the
consummation of the transaction contemplated by this Agreement.
6.7 Satisfaction of Intercompany Payables and Receivables. At or prior
to Closing, Seller shall take all such actions as it determines are reasonably
necessary such that the Companies shall have no obligations with respect to the
Intercompany Payables or guarantees or sureties made by any Company in favor of
Seller and Seller's Affiliates (other than the Companies), nor any rights with
respect to the Intercompany Receivables.
6.8 Retention of and Access to the Companies' Records. Except as
provided in Section 6.10(c)(1) and subject to the terms of a confidentiality
agreement in form and substance reasonably acceptable to Buyer and Seller and to
be executed and delivered by Buyer and Seller, Seller shall, for a period of
five years from the Closing Date, have access (provided a representative of
Buyer is present) to, and the right to copy, at its expense, during usual
business hours upon reasonable prior notice to Buyer, all of the books and
records relating to the Companies, the Assets and the Systems that were
transferred to Buyer pursuant to this Agreement. Buyer shall retain and preserve
all such books and records for such five year period. Subsequent to such five
year period, Buyer shall only destroy such books and records if there is no
ongoing litigation, governmental audit or other proceeding, and subsequent to
thirty days' notice to Seller of its right to remove and retain such books and
records or to copy such books and records prior to their destruction.
6.9 Employee Matters.
-----------------
(a) Effective as of the Closing, Buyer shall offer employment
to, or shall cause the Companies to continue the employment of, all persons who
were employees of the Companies immediately prior to Closing. Prior to Closing,
Seller will consider any reasonable request by Buyer to implement an employee
retention plan for employees of the Companies. All
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employees of the Companies shall be employed on such terms and conditions as are
substantially similar in the aggregate to the terms and conditions of employment
of similarly situated employees of Buyer and its ERISA Affiliates. Effective as
of the Closing, Buyer shall grant to each employee of any of the Companies past
service credit for such employee's service with (i) the Companies, (ii) any
Affiliate of Seller, and (iii) any predecessor employer, to the extent that
service with the predecessor is credited under any Employee Plan or Compensation
Arrangement as of the Closing Date; Buyer shall grant such past service credit
for all purposes, other than for purposes of benefit accrual under any defined
benefit retirement plan, under every "employee benefit plan" as defined in
Section 3(3) of ERISA and every other compensation arrangement sponsored by,
maintained by or contributed to by Buyer or any of its ERISA Affiliates for
similarly situated employees.
(b) On and after the Closing Date, Buyer shall offer group health
plan coverage to all of the employees of the Companies (and to the spouse and
dependents of such employees) on terms and conditions generally applicable to
all of Buyer's similarly situated employees. For purposes of providing such
coverage, Buyer shall waive all preexisting condition waiting periods for all
such employees covered by the group health care plan of the Companies as of the
Closing and shall provide such health care coverage effective as of the Closing
without the application of any eligibility period for coverage. In addition,
Buyer shall credit all payments toward deductible, out-of-pocket and co-payment
obligation limits under the Companies' health care plans for the plan year which
includes the Closing Date as if such payments had been made for similar purposes
under Buyer's health care plans during the plan year which includes the Closing
Date, with respect to employees of the Companies (and the spouse and any
dependents of such employees) who become employed by Buyer or remain employed by
any of the Companies after the Closing.
(c) On and after the Closing Date, Buyer shall assume full
responsibility and liability for offering and providing "continuation coverage"
to any "covered employee" who is or was an employee of any of the Companies and
any "qualified beneficiary" related to such employee or former employee who is
covered by an Employee Plan which is a "group health plan," who has experienced
a "qualifying event" or is receiving "continuation coverage" on or prior to the
Closing. "Continuation coverage," "covered employee," "qualified beneficiary,"
"qualifying event" and "group health plan" all shall have the meanings given
such terms under Section 4980B of the Code and Section 601 et seq. of ERISA.
(d) From and after the Closing, Buyer shall, and shall cause the
Companies to, make severance payments in accordance with the terms of this
subsection and Seller's and the Companies' existing practices with respect to
severance (two weeks of total compensation for each year of employment, pro
rated, with a maximum of 39 weeks paid), to all persons who (i) were employees
of the Companies immediately prior to the Closing, (ii) continued employment
with the Companies or otherwise accepted offers of employment made by Buyer and
(iii) have their employment terminated (other than for cause) by Buyer or the
Companies, as applicable, prior to the first (1st) anniversary of the Closing
Date. For purposes of determining the amount of severance payments to be made
pursuant to the preceding sentence, Buyer and the Companies shall give
terminated employees past service credit for such employees' service with (x)
the Companies, (y) any Affiliate of Seller, and (z) any predecessor employer, to
the extent service with the predecessor is credited by Seller and the Companies
as of the Closing Date under their severance policies.
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(e) Buyer shall be solely responsible for any and all liabilities,
penalties, fines or other sanctions that may be assessed or otherwise due under
the Worker Adjustment and Retraining and Notifications Act and similar laws and
regulations (collectively, the "WARN Act") arising out of the transactions
contemplated herein, or otherwise at anytime after the Closing Date. At Closing,
the Seller shall furnish to Buyer a list of all employees that have been
terminated by the Companies throughout the ninety (90) day period ending on the
Closing Date.
(f) Buyer shall provide long term disability benefits to the
employees of the Companies who are receiving such benefits under the Employee
Plans as of the Closing Date under terms substantially similar to the terms of
the Long Term Disability Benefit provisions of the MG Advantage Flexible
Benefits Plan. Buyer shall provide long term disability benefits under the terms
of Buyer's long term disability program to employees of the Companies who are
not receiving long term disability benefits under the Employee Plans as of the
Closing Date but who subsequently become eligible for long term disability
benefits, regardless of whether the event or condition entitling such employee
to long term disability benefits occurred on, prior to or after the Closing
Date.
(g) The Seller shall furnish to Buyer as soon as practicable prior
to the Closing a list, calculated as of the Closing Date, estimating the amounts
of compensation deferred by each employee of the Companies under the Thrift Plan
Plus of Media General, Inc. during the calendar year in which the Closing
occurs.
(h) Seller shall be responsible for and shall cause to be
discharged and satisfied in full all amounts owed to any of the employees of the
Companies as of the Closing Date under any Employee Plan or Compensation
Arrangement, other than liabilities for or under (i) any Employee Plan or
Compensation Arrangement administered as a payroll practice, including vacation
pay, sick leave pay, short term disability pay, occasional disability pay, and
holiday pay, (ii) the Employee Assistance Program currently in operation at
Fairfax, (iii) with respect to employees of the Companies, the Executive
Automobile Program, (iv) with respect to the employees of the Companies who are
receiving long term disability benefits, the Long Term Disability Benefit
provisions of the MG Advantage Flexible Benefits Plan, and (v) any commission or
similar incentive compensation arrangements.
(i) Except as otherwise provided in this Section 6.9, Seller shall
be responsible for and shall cause to be discharged and satisfied in full all
liabilities under any Employee Plans that are employee welfare benefit plans
(within the meaning of ERISA) for all claims incurred through the Closing Date,
whether or not such claims are submitted for payment or reimbursement on or
before the Closing Date.
(j) As of the Closing Date, the Seller shall cause all the
employees of the Companies to cease participation in any of the Employee Plans
or Compensation Arrangements maintained by or on behalf of the Seller.
(k) The Seller shall be responsible for and shall cause to be
discharged and satisfied in full any and all "withdrawal liability," as defined
under Section 4201 et seq. of ERISA, that the Seller of any of its ERISA
Affiliates has incurred or may incur in the future.
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(l) This Section 6.9 shall operate exclusively for the benefit of
the parties to this Agreement and not for the benefit of any other Person,
including, without limitation, any current, former or retired employee of the
Companies or spouse or dependents of such Persons.
6.10 Tax Matters.
------------
(a) Section 338(h)(10) Election.
----------------------------
(1) Seller and Buyer shall make timely and irrevocable
elections under Section 338(h)(10) of the Code and, if permissible, similar
elections under any applicable state or local income tax laws with respect to
the Companies (the "Section 338(h)(10) Elections"); provided, however, that if
federal legislation which would have a Tax Efficient Effect is not enacted prior
to December 31, 1999, and if Buyer gives notice to Seller in writing at least 30
days prior to Closing that it does not desire to make the Section 338(h)(10)
Elections, then Seller and Buyer shall not make the Section 338(h)(10)
Elections. Seller and Buyer shall report the transactions contemplated by this
Agreement consistent with such Section 338(h)(10) Elections and shall take no
position contrary thereto. Seller shall pay to the applicable taxing authority
any Tax attributable to the Section 338(h)(10) Elections, provided that Buyer
shall reimburse Seller for any liability for Taxes arising solely out of the
purchase of the Shares by Buyer in conjunction with the Section 338(h)(10)
Elections to the extent such liability exceeds the liability for Taxes that
would have arisen solely out of the purchase of Shares by Buyer in the absence
of the Section 338(h)(10) Elections; provided, however, that Buyer's obligation
to reimburse Seller pursuant to this Section 6.10(a)(1) shall not, based upon
actions taken by Seller or its Affiliates after the date hereof, exceed the
amount that Buyer would be required to pay to Seller if the Closing had occurred
on the date of this Agreement, taking into account Seller's basis in the
Purchased Shares and the Companies' basis in the Assets as of the date of this
Agreement. For purposes of computing the amount to be reimbursed by Buyer
pursuant to the preceding sentence, Taxes shall be computed at the highest
applicable marginal rate, and it shall be assumed that neither Seller nor its
Affiliates had any items of income, gain, loss, or deduction or credit other
than that resulting from (i) the operations of the Companies and (ii) the
transactions contemplated by this Agreement. Seller shall give notice to Buyer
of its calculation of the reimbursement to be made by Buyer pursuant to this
Section 6.10(a)(1), which notice shall include work papers supporting such
calculation and shall include wire transfer instructions for such payment.
Seller shall promptly make available to Buyer such information as Buyer
reasonably requests to allow Buyer to examine the accuracy of the reimbursement
calculation. Buyer shall pay the reimbursement amount shown on such notice by
wire transfer of immediately available funds to Seller within 10 days of receipt
by Buyer of such notice; provided, however, that if Buyer disputes the
calculation set forth in such notice, Buyer shall pay the undisputed amount, and
the parties shall resolve such dispute with respect to any remaining amounts, in
accordance with the procedures set forth in Section 2.5(a). Any amount paid
pursuant to this Section 6.10(a)(1) shall be considered to be an adjustment to
the Cash Consideration.
(2) After Closing, Seller and Buyer agree to use commercially
reasonable efforts to agree to an allocation of the modified Aggregate Deemed
Sale Price (as defined under applicable Treasury Regulations) among the assets
of the Companies within sixty (60) days after the Closing Date; provided,
however, that if Seller and Buyer shall not have agreed on such allocation by
the sixtieth (60th) day following the Closing Date, such allocation shall be
made in accordance with the appraisal of a recognized appraisal firm chosen and
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retained by mutual agreement of Buyer and Seller, the fees and expenses of which
shall be paid one-half by Seller and one-half by Buyer. Seller and Buyer shall
reflect such allocation in all applicable Tax Returns filed by any of them.
Neither Seller nor Buyer shall take a position before any Taxing Authority or
otherwise (including in any Tax Return) inconsistent with such allocation.
(b) Filing of Tax Returns. Seller shall be responsible for the
preparation and filing of all Tax Returns of the Companies for all taxable
periods that end on or before the Closing Date, including Tax Returns of the
Companies for periods that end on or before the Closing Date but are due after
the Closing Date, and Seller shall be responsible for the contents of such Tax
Returns and the payment of all Taxes due with respect thereto. Seller shall have
the sole authority to deal with any matters relating to Tax Returns of the
Companies for periods ending on or prior to the Closing Date. Buyer shall be
responsible for the preparation and filing of all Tax Returns of the Companies
for all taxable periods that end after the Closing Date (including taxable
periods beginning before and ending after the Closing Date), and Buyer shall be
responsible for the contents of such Tax Returns and the payment of all Taxes
due with respect thereto. Buyer shall have the sole authority to deal with any
matters relating to Tax Returns of the Companies for periods ending after the
Closing Date.
(c) Cooperation on Tax Matters.
---------------------------
(1) Seller and Buyer shall cooperate fully, as and to the
extent reasonably requested by the other party, in connection with the filing of
Tax Returns pursuant to this Section 6.10 and any audit, litigation, or other
proceeding with respect to Taxes. Such cooperation shall include the retention
and (upon the other party's request) the provision of records and information
which are reasonably relevant to any such Tax Return, audit, litigation or other
proceeding and making employees available on a mutually convenient basis to
provide additional information and explanation of any material provided
hereunder. Seller and Buyer agree (A) to retain all books and records with
respect to Tax matters pertinent to the Companies relating to any taxable period
beginning before the Closing Date until the expiration of the statute of
limitations (and, to the extent notified by Seller or Buyer, any extensions
thereof) of the respective taxable periods, and to abide by all record retention
agreements entered into with any taxing authority, and (B) to give the other
party reasonable written notice prior to transferring, destroying or discarding
any such books and records and, if the other party so requests, Seller or Buyer,
as the case may be, shall allow the other party to take possession of such books
and records to the extent they would otherwise be destroyed or discarded.
(2) Seller and Buyer further agree, upon request, to use
commercially reasonable efforts to obtain any certificate or other document from
any Governmental Authority or any other Person as may be necessary to mitigate,
reduce or eliminate any Tax that could be imposed (including Taxes with respect
to the transactions contemplated hereby).
(3) Each of Buyer and Seller shall promptly deliver to the
other any notice from any Tax authority received by it relating to Taxes for
which the other is or may be liable pursuant to this Agreement.
(d) Refunds. Except to the extent taken into account in Working
Capital, Buyer shall promptly pay or cause to be paid to Seller all refunds of
Taxes and interest thereon received by Buyer, any Affiliate of Buyer, or any
Company attributable to Taxes paid by Seller
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or any Company with respect to any taxable period ending on or before the
Closing Date. Seller shall promptly pay or cause to be paid to Buyer all refunds
of Taxes and interest thereon received by Buyer or any Affiliate of Buyer
attributable to Taxes paid by Buyer with respect to any taxable period ending
after the Closing Date.
6.11 Media General Name and Affiliated Services.
-------------------------------------------
(a) The parties agree that Seller and its Affiliates (other than
the Companies) shall retain the right to use the names "Media General," and any
and all derivations thereof, and, after Closing, Buyer shall, and shall cause
the Companies to, remove or delete the name "Media General" and all derivations
thereof from the Assets as soon as reasonably practicable, but in any event, by
the sixtieth (60th) day following Closing. Until such removal or deletion in
accordance with the preceding sentence, in order to facilitate the transition of
ownership of the Systems pursuant to the transactions contemplated by this
Agreement, the name "Media General" and all derivations thereof may remain on
the tangible assets included in the Assets. Notwithstanding the foregoing, Buyer
shall not be required to remove or discontinue using the "Media General" name as
same may appear on inventory and assets, identification tags or on converters,
modems or similar items in customers' homes or properties making such removal or
discontinuation impracticable for Buyer. On the Closing Date, immediately
following the Closing, Buyer shall cause the Companies to change their
respective corporate names to names which do not include the name "Media
General" or any derivations thereof by filing appropriate amendments to their
respective Organizational Documents with the appropriate Governmental
Authorities. From and after the sixtieth (60th) day following the Closing,
Seller and its Affiliates (other than the Companies) shall retain the sole and
exclusive right to use the names "Media General," and any and all derivations
thereof, subject to the use thereof permitted by the third sentence of this
Section 6.11(a). Notwithstanding the foregoing, after Closing, Buyer shall not,
and shall cause the Companies not to, (i) use any stationery containing the name
"Media General" or any derivation thereof or (ii) make any public announcement
or communication using the name "Media General" or any derivation thereof.
(b) The parties acknowledge and agree that (i) all the services
currently provided for the Companies by Seller and its other Affiliates, and by
the Companies to Seller or any of its other Affiliates are described in Schedule
6.11 and that, effective as of the Closing, all agreements and arrangements
therefor between any of the Companies and Seller or any of its Affiliates shall
be terminated and (ii) after Closing, Seller and its Affiliates shall no longer
provide such services for the Companies, and the Companies shall no longer
provide such services for Seller or its Affiliates.
6.12 No Recourse; Release of Claims. Anything in this Agreement or
applicable law to the contrary notwithstanding, other than claims against Seller
or the Companies as and to the extent expressly provided for in Sections 9.4 and
10 of this Agreement, Buyer will not have any claim or recourse against any of
the Released Parties as a result of the breach of any representation, warranty,
covenant or agreement of Seller or the Companies contained herein or otherwise
arising out of or in connection with the transactions contemplated by this
Agreement or the Transaction Documents or the business or operations of the
Companies prior to the Closing, including, without limitation, any implied
representations or warranties (including, without limitation, any warranties of
fitness for a particular purpose). Effective as of the Closing, Buyer and each
of its Subsidiaries hereby release and forever discharge each of the Released
Parties from all actions, causes of action, suits, debts and claims arising out
of facts or
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circumstances prior to the Closing, whether at law or in equity or otherwise,
which Buyer ever had or now or hereafter may have for, upon or by reason of any
matter, cause or thing whatsoever related to the Companies, whether, contingent,
accrued or otherwise arising out of facts or circumstances prior to the Closing;
provided that the foregoing shall not limit Buyer's rights provided in Section
10, subject to the limitations provided for therein.
6.13 Exculpation and Indemnification. After the Closing, Buyer and the
Companies will be bound by and will assume the same obligations to satisfy (and
Buyer and will cause the Companies to continue to satisfy) the rights of
exculpation, indemnification and advancement of expenses to which the present
and former, directors, officers, employees and agents of the Companies and any
of their respective Affiliates are entitled with respect to any matter existing
or occurring prior to the Closing and/or with respect to this Agreement and the
Transaction Documents, under the Companies' Organizational Documents, by
contract or agreement or by resolution of the Board of Directors of the
Companies, in accordance with the terms and conditions of any such exculpation
and indemnification provisions as in effect on the date of this Agreement (other
than for any directors and officers of the Companies and their Affiliates, who
were not employees of the Companies, but, at the appropriate time for
determining their entitlement to exculpation, indemnification and advancement of
expenses, are employees of Seller or its Affiliates). Without limiting the
foregoing, Buyer agrees to maintain in place for a period of not less than six
years from the Closing, for the benefit of the parties mentioned in the
foregoing sentence, directors' and officers' insurance, on substantially the
same terms and to the same extent as presently in effect for the Companies.
6.14 Rate Regulatory Matters. The parties acknowledge and agree that
notwithstanding anything in this Agreement or any other Transaction Document to
the contrary (including any representation or warranty made by Seller in
Sections 3.11(e), 3.15 or 3.16), any matter relating to, in connection with or
resulting or arising from any Rate Regulatory Matter, or any actions taken prior
to or after the date hereof by Seller or the Companies to comply with or in a
good faith attempt to comply with any Rate Regulatory Matter (including any rate
reduction, refund, penalty or similar action having the effect of reducing the
rates previously or subsequently paid by subscribers, whether instituted or
implemented by or imposed on the Companies and changes to rate practices
instituted or implemented by or imposed on the Companies), shall not: (a) cause
or constitute, directly or indirectly, a breach by Seller of any of its
representations, warranties, covenants or agreements contained in this Agreement
or any other Transaction Document (and such representations, warranties,
covenants, and agreements shall hereby be deemed to be modified appropriately to
reflect and permit the impact and existence of such Rate Regulatory Matters and
to permit any action by the Companies to comply with or attempt in good faith to
comply with such Rate Regulatory Matters); (b) otherwise cause or constitute,
directly or indirectly, a default or breach by Seller under this Agreement or
any other Transaction Document; (c) result in the failure of any condition
precedent to the obligations of Buyer under this Agreement or any other
Transaction Document; (d) otherwise excuse Buyer's performance of its
obligations under this Agreement or any other Transaction Document; or (e) give
rise to any claim for (i) any adjustment to the Cash Consideration or other
compensation or (ii) indemnification.
6.15 Disclosure Schedules. The parties acknowledge and agree that (i)
the Seller's Disclosure Schedules and Buyer's Disclosure Schedules may include
certain items and information solely for informational purposes for the
convenience of the parties hereto and (ii) the disclosure of any matter in the
Seller's Disclosure Schedules or Buyer's Disclosure
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Schedules shall not be deemed to constitute an acknowledgment by Seller or the
Companies, in the case of the Seller's Disclosure Schedules, or Buyer, in the
case of Buyer's Disclosure Schedules, that the matter is material or is required
to be disclosed under this Agreement. If any particular Schedule forming part of
the Seller's Disclosure Schedules or Buyer's Disclosure Schedules discloses an
item or information in such a way as to make its relevance to the disclosure
required by another Schedule forming part of the Seller's Disclosure Schedules
or Buyer's Disclosure Schedules, as the case may be, readily apparent, the
matter shall be deemed to have been disclosed in such other Schedule,
notwithstanding the omission of an appropriate cross-reference to such other
Schedule.
6.16 News Channel. From and after Closing, Buyer shall provide to
Seller (or any Affiliate of Seller designated by Seller), for a term which shall
be mutually agreed by Buyer and Seller, without charge to Seller, one
fully-dedicated cable channel (including, without limitation, the vertical
blanking interval), carried on the System's Limited Service (as such term is
used on the channel line-ups of the Systems included in Schedule 3.11) ("Limited
Service") tier, on each System, on which Seller or its Affiliates shall be
entitled to transmit a predominately local news service (the "Service"), and
Buyer shall transmit the Service, in its entirety, without alteration or delay,
to all System Subscribers as part of Limited Service at no separate or
additional charge to System Subscribers. The cable channel on which the Service
is transmitted shall not be changed without Seller's prior written consent.
Buyer and Seller shall cooperate and use commercially reasonable efforts to
facilitate the transmission and distribution of the Service on such dedicated
cable-channel, and Buyer agrees to take (and cause its Affiliates to take) all
other actions reasonably requested by Seller and necessary to implement the
transmission and distribution of the Service, consistent with this Section 6.16.
Without limiting the foregoing, if the FCC issues a non-appealable final order
requiring Buyer or any successor or permitted assign of Buyer to add an
additional broadcast channel to a System's Limited Service tier line-up on the
cable channel reserved exclusively for the Service pursuant to this Section
6.16, then the current operator of such System shall place the Service on
another Limited Service tier channel; provided, however, that if all of such
System's Limited Service channels are filled by local broadcast channels carried
pursuant to the FCC's mandatory broadcast signal carriage rules, the current
operator of such System shall place the Service on a cable channel that is the
next lowest cable channel which is not filled by local broadcast channels
carried pursuant to the FCC's mandatory broadcast signal carriage rules on the
next lowest tier of service. The provisions of this Section 6.16 shall be
binding on Buyer and its Affiliates and their respective successors and
permitted assigns, and Buyer shall cause all such successors and permitted
assigns, including, without limitation, all subsequent purchasers of the
Systems, to assume and perform all of Buyer's and its Affiliates' obligations
hereunder. Seller will be responsible for providing all of the content of the
Service to Buyer and for obtaining all necessary licenses, including, without
limitation, copyright and trademark licenses, necessary for Buyer to transmit
the content of the Service to all System Subscribers. Seller will indemnify and
hold Buyer harmless from and against any and all losses, liabilities, claims,
costs, damages and expenses arising out of the content of the Service
(including, without limitation, any promotional or advertising spots inserted in
the Service by Seller), including, without limitation, any losses, liabilities,
claims, costs, damages and expenses based on any suit, lien, encumbrance,
charge, administrative proceeding, government investigation or litigation
relating to the Service, any program contained therein or any component thereof,
or based upon alleged or proven libel, slander, defamation, invasion of privacy
or publicity, or violation of copyright, literary or music synchronization
rights, obscenity, indecency or any other forms of speech or otherwise arising
out of the content
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of the Service as provided by Seller. Subsequent to reasonable notice from Buyer
and a reasonable opportunity to cure by Seller, Buyer may terminate carriage of
Seller's Service if, in Buyer's good faith determination (based upon reasonable
evidence and circumstances), the content exhibited or to be exhibited on the
Service has or would be reasonably likely to jeopardize any of the Franchises or
Buyer's retention of any of the Franchises.
6.17 Environmental Investigations. As soon as practicable after the
date of this Agreement (but in no event more than 60 days after the date of this
Agreement), Buyer may obtain at Buyer's expense a Phase I environmental audit of
the Real Property (which shall include a limited asbestos survey), or on such
parcels of the Real Property as Buyer may determine. Buyer shall engage Eneco
Tech, Inc. or, at Buyer's option, another nationally known environmental
auditing company to perform the aforesaid audit. Seller and the Companies will
comply with any reasonable request for information made by Buyer or its agents
in connection with any such investigation and shall afford Buyer and its agents
access to all operations of the Companies, including, without limitation, all
areas of the Real Property, at reasonable times and in a reasonable manner in
connection with any such investigations. If the results of those investigations
would cause a reasonable purchaser to perform further investigations or testing
with respect to any of the Real Property, Buyer shall cause to be performed
Phase II environmental audits with respect to such Real Property, which shall be
completed no more than 120 days after the date of this Agreement. Buyer agrees
to promptly deliver to Seller copies of all audits and other reports obtained by
Buyer with respect to such investigations and, at Seller's expense, all other
information related thereto which is reasonably requested by Seller. Further,
Buyer agrees to restore any test borings and other physical damage to any of the
assets and properties of any of the Companies caused by such investigations
which in no event shall be deemed to obligate Buyer to remediate any
environmental problems).
6.18 No Shop. None of Seller, the Companies or their Affiliates shall,
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 (i) solicit or initiate the
submission of proposals or offers from any Person for, (ii) participate in any
discussions pertaining to, or (iii) furnish any information to any Person other
than Buyer relating to, any direct or indirect acquisition or purchase of all or
any substantial portion of the Assets or the Systems (through the sale of the
Companies' stock, merger, combination, asset sale, lease or otherwise).
6.19 Franchise Consents Not Obtained. If, as of the Closing, any of the
Franchise Consents have not been obtained, but the conditions set forth in
Section 7.1(c) and 7.2(c) of this Agreement have been satisfied or waived, then
the parties shall negotiate in good faith an agreement to provide for the
operation by Seller or its Affiliates after the Closing until such Franchise
Consents are obtained, for the benefit of Buyer, of that portion of the Systems
serving the Franchise Areas in respect of which such Franchise Consents have not
been obtained, including, without limitation, the establishment of a trust to
hold the Franchises for which Consents have not been obtained or such other
appropriate structure, on such terms as Buyer and Seller shall reasonably agree;
provided, however, that Buyer and Seller acknowledge and agree that Seller shall
have no obligation pursuant to this Section 6.19 to the extent that any such
agreement, operation or structure would have an adverse effect on Seller or any
portion of its business or operations or would result in Seller incurring any
liability, obligation or expense which is not reimbursed by Buyer or the
Systems.
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SECTION 7: CONDITIONS TO OBLIGATIONS TO CLOSE
7.1 Conditions to Obligations of Buyer. All obligations of Buyer at the
Closing hereunder are subject to the fulfillment (or waiver at the option of
Buyer) prior to or at the Closing of each of the following conditions:
(a) Representations and Warranties of the Companies and Seller. The
representations and warranties of Seller set forth in Section 3 which are
expressly stated to be made as of the date of this Agreement or another
specified date shall be true and correct in all respects (disregarding all
qualifications and exceptions contained therein related to materiality or
Material Adverse Effect) as of such date and all other representations and
warranties of Seller set forth in Section 3 shall be true and correct in all
respects (disregarding all qualifications and exceptions contained therein
related to materiality or Material Adverse Effect) at and as of the time of the
Closing as though made at and as of that time; provided that for purposes of the
foregoing, the representations and warranties shall be deemed true and correct
in all respects to the extent that the aggregate effect of the inaccuracies in
such representations and warranties as of the applicable times does not
constitute a Material Adverse Effect.
(b) Covenants. Seller shall have performed and complied with all
covenants and agreements required by this Agreement to be performed or complied
with by it prior to or at the Closing, except to the extent that the aggregate
effect of the failure to so perform or comply does not constitute a Material
Adverse Effect.
(c) FCC Consents and Franchises. The Material FCC Consents shall
have been obtained. The aggregate number of Equivalent Subscribers as of any
applicable date, in those Franchise Areas that are Transferable Franchise Areas
shall be at least ninety percent (90%) of the aggregate number of Equivalent
Subscribers in all Franchise Areas as of such applicable date.
(d) ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇. The requisite waiting period under the HSR
Act shall have expired or been terminated, without the FTC or the Antitrust
Division, as applicable, taking any action which has not been terminated or
resolved, subject to the last sentence of Section 6.5.
(e) Judgment. There shall not be in effect on the date on which the
Closing is to occur any judgment, decree, order or other prohibition of a court
of competent jurisdiction having the force of law that would prevent the
Closing, provided that Buyer shall have used commercially reasonable efforts to
prevent the entry of any such judgment, decree, order or other prohibition and
to appeal as expeditiously as possible any such judgment, decree, order or other
prohibition that may be entered.
(f) Deliveries. The Companies and Seller shall have made or stand
willing to make all the deliveries to Buyer described in Section 8.2.
(g) Intercompany Payables. The Companies shall have no obligations
with respect to the Intercompany Payables or guarantees or sureties made by the
Companies in favor of, or for the benefit of, Seller or Seller's Affiliates
(other than the Companies); provided, however, that this condition shall be
deemed satisfied if Seller provides an indemnity reasonably satisfactory to
Buyer in respect of any such guaranties or sureties that are not released.
7.2 Conditions to Obligations of Seller.
-------------------------------------
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All obligations of Seller at the Closing hereunder are subject to the
fulfillment (or waiver at the option of Seller) prior to or at the Closing of
each of the following conditions:
(a) Representations and Warranties. The representations and
warranties of Buyer set forth in Section 5 which are expressly stated to be made
as of the date of this Agreement or another specified date shall be true and
correct in all material respects as of such date (disregarding all
qualifications and exceptions contained therein related to materiality), and all
other representations and warranties shall be true and correct in all material
respects (disregarding all qualifications and exceptions contained therein
related to materiality) at and as of the Closing as though made at and as of
that time.
(b) Covenants. Buyer shall have performed and complied with in all
material respects all covenants and agreements required by this Agreement to be
performed or complied with by it prior to or at the Closing.
(c) FCC Consents and Franchises. The Material FCC Consents shall
have been obtained. The aggregate number of Equivalent Subscribers as of any
applicable date, in those Franchise Areas that are Transferable Franchise Areas
shall be at least ninety percent (90%) of the aggregate number of Equivalent
Subscribers in all Franchise Areas as of such applicable date.
(d) ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇. The requisite waiting period under the HSR
Act shall have expired or been terminated, without the FTC or the Antitrust
Division, as applicable, taking any action which has not been terminated or
resolved, subject to the last sentence of Section 6.5.
(e) Judgment. There shall not be in effect on the date on which the
Closing is to occur any judgment, decree, order or other prohibition of a court
of competent jurisdiction having the force of law that would prevent the
Closing, provided that the Companies and Seller shall have used commercially
reasonable efforts to prevent the entry of any such judgment, decree, order or
other prohibition and to appeal as expeditiously as possible any such judgment,
decree, order or other prohibition that may be entered.
(f) Deliveries. Buyer shall have made or stand willing to make all
the deliveries to Seller described in Section 8.3.
SECTION 8: CLOSING AND CLOSING DELIVERIES
------------------------------
8.1 Closing.
--------
(a) Closing Date.
-------------
(1) Subject to satisfaction or, to the extent permitted by law,
waiver, of the closing conditions described in Section 7, and subject to
Sections 8.1(a)(2), 8.1(a)(3) and 8.1(a)(4), the Closing shall take place on the
date specified by Seller by notice to Buyer, which specified date shall be no
earlier than two (2) Business Days and not later than five (5) Business Days
after satisfaction or waiver of the conditions set forth in Sections 7.1(c) and
(d) and Section 7.2(c) and (d), or on such earlier or later date as Seller and
Buyer shall mutually agree; provided, however, subject to Section 8.1(a)(3), the
Closing shall not take place beyond the Upset Date.
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(2) If on the date on which the Closing would otherwise be
required to take place pursuant to Section 8.1(a)(1) (A) there shall be in
effect any judgment, decree, order or other prohibition of a court of competent
jurisdiction having the force of law that would prevent or make unlawful the
Closing, or (B) any other circumstance beyond the reasonable control of the
Companies, Seller or Buyer (which shall in no event include any matters relating
to financing of the transactions contemplated hereby) shall exist that would
prevent the Closing or the satisfaction of any of the conditions precedent to
any party set forth in Section 7, then either Seller or Buyer may, at its
option, postpone the date on which the Closing is required to take place until
such date, to be set by the party that elects to postpone the date for Closing
pursuant to this subsection (2) on at least ten (10) Business Days' written
notice to the other party, as soon as practicable after such judgment, decree,
order or other prohibition ceases to be in effect, or such other circumstance
ceases to exist; provided, however, that any postponement of the date on which
the Closing is required to take place to a date beyond the Upset Date shall
require the consent of both Seller and Buyer.
(3) Notwithstanding anything in this Agreement to the contrary,
if on the date scheduled for Closing, the Closing has not occurred because any
notice period required by Section 8.1(a)(1) or (2) has not lapsed, the Upset
Date shall be extended until one (1) Business Day after the lapse of such
period.
(4) Notwithstanding anything to the contrary contained herein,
if, in the reasonable judgment of Seller, the enactment of legislation which
would have a Tax Efficient Effect is reasonably likely to occur prior to
December 31, 1999, Seller may, at its option, postpone the date on which the
Closing is required to take place until a date chosen by Seller on not less than
two (2) Business Days', nor more than five (5) Business Days' notice to Buyer,
but not later than the Upset Date.
(b) Closing Place. The Closing shall be held at the offices of
Seller's counsel, or any other place or time as the Companies and Buyer shall
mutually agree.
8.2 Deliveries by Seller. Seller shall deliver or cause to be delivered
to Buyer the following:
(a) Purchased Shares. Certificates representing the Purchased
Shares, together with stock powers or an assignment agreement providing for the
assignment of the Purchased Shares by Seller to Buyer, in a form reasonably
satisfactory to Buyer.
(b) Officer's Certificate of Seller. A certificate executed by
Seller, dated as of the Closing Date, certifying that the closing conditions
specified in Sections 7.1(a) and (b) have been satisfied as to Seller, except as
disclosed in such certificate.
(c) Secretaries' Certificate. Certificates executed by each of
Seller and each of the Companies, dated as of the Closing Date, (1) certifying
that the resolutions, as attached to said certificate, were duly adopted by the
Board of Directors of Seller or the Companies, as the case may be, authorizing
and approving the execution by such party of this Agreement and the other
Transaction Documents to which such party is a party and the consummation of the
transactions contemplated hereby and thereby and that such resolutions remain in
full force and effect; and (2) providing, as attachments thereto, a Certificate
of Good Standing certified by an
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appropriate state official of the State of its incorporation certified by such
state official as of a date not more than five (5) Business Days before the
Closing Date.
(d) Consents. Copies of Consents which have been obtained by Seller
or the Companies prior to the Closing.
(e) Opinion of Counsel. An opinion of the General Counsel of
Seller, dated as of the Closing Date, substantially in the form of Exhibit B
hereto.
8.3 Deliveries by Buyer. Prior to or at the Closing, Buyer shall
deliver to Seller the following:
(a) Purchase Consideration. As provided in Section 2.4, the Closing
Cash Payment to Seller, by wire transfer of immediately available funds to one
or more accounts designated by Seller by written notice to Buyer not fewer than
two days prior to the Closing.
(b) Officer's Certificate. A certificate executed by Buyer, dated
as of the Closing Date, certifying that the closing conditions specified in
Sections 7.2(a) and (b) have been satisfied, except as disclosed in said
certificate.
(c) Secretary's Certificate. A certificate executed by Buyer, dated
as of the Closing Date, (1) certifying that the resolutions, as attached to said
certificate, were duly adopted by the Board of Directors or Executive Committee
of Buyer, authorizing and approving the execution by Buyer of this Agreement and
the other Transaction Documents to which it is a party and the consummation of
the transactions contemplated hereby and thereby and that such resolutions
remain in full force and effect; and (2) providing, as attachments thereto,
Certificates of Good Standing for Buyer certified by an appropriate state
official of the States of Delaware and Virginia, certified by such state
official as of a date not more than five (5) Business Days before the Closing
Date.
(d) Opinion of Counsel. An opinion of counsel to Buyer, dated as of
the Closing Date, substantially in the form of Exhibit C hereto.
SECTION 9: TERMINATION
9.1 Agreement between Seller and Buyer. This Agreement may be
terminated at any time prior to the Closing and the purchase and sale of the
Purchased Shares abandoned, by written agreement between Seller and Buyer.
9.2 Termination by Seller. This Agreement may be terminated at any time
prior to the Closing by Seller and the purchase and sale of the Purchased Shares
abandoned, upon written notice to Buyer, upon the occurrence of any of the
following:
(a) Conditions. If on any date determined for the Closing in
accordance with Section 8.1 if each condition set forth in Section 7.1 has been
satisfied (or will be satisfied by the delivery of documents at the Closing) or
waived in writing by Buyer on such date and either (i) a condition set forth in
Section 7.2 has not been satisfied (or will not be satisfied by the delivery of
documents at the Closing) or waived in writing by Seller on such date or (ii)
Buyer has nonetheless refused to consummate the Closing. Notwithstanding the
foregoing, Seller may not rely on the failure of any condition set forth in
Section 7.2 to be satisfied if such failure was
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caused by Seller's failure to act, or to cause the Companies to act, in good
faith or a breach of or failure to perform, or to cause the Companies to
perform, any of its representations, warranties, covenants or other obligations
in accordance with the terms of this Agreement.
(b) Upset Date. If the Closing shall not have occurred on or prior
to the Upset Date as extended as provided in Section 8.1(a)(3), unless the
failure of the Closing to occur was caused by Seller's failure to act, or to
cause the Companies to act, in good faith or a breach of or failure to perform,
or to cause the Companies to perform, any of its representations, warranties,
covenants or other obligations in accordance with the terms of this Agreement.
9.3 Termination by Buyer. This Agreement may be terminated at any time
prior to the Closing by Buyer and the purchase and sale of the Purchased Shares
abandoned, upon written notice to Seller, upon the occurrence of any of the
following:
(a) Conditions. If on any date determined for the Closing in
accordance with Section 8.1 if each condition set forth in Section 7.2 has been
satisfied (or will be satisfied by the delivery of documents at the Closing) or
waived in writing by Seller on such date and either (i) a condition set forth in
Section 7.1 has not been satisfied (or will not be satisfied by the delivery of
documents at the Closing) or waived in writing by Buyer on such date or (ii)
Seller has nonetheless refused to consummate the Closing. Notwithstanding the
foregoing, Buyer may not rely on the failure of any condition set forth in
Section 7.1 to be satisfied if such failure was caused by Buyer's failure to act
in good faith or a breach of or failure to perform any of its representations,
warranties, covenants or other obligations in accordance with the terms of this
Agreement.
(b) Upset Date. If the Closing shall not have occurred on or prior
to the Upset Date as extended as provided in Section 8.1(a)(3), unless the
failure of the Closing to occur was caused by Buyer's failure to act in good
faith or a breach of or failure to perform any of its representations,
warranties, covenants or other obligations in accordance with the terms of this
Agreement.
9.4 Effect of Termination. If this Agreement is terminated as provided
in this Section 9, then, subject to the parties' right to specific performance
provided below, this Agreement will forthwith become null and void and there
will be no liability on the part of any party to any other party or any other
Person in respect thereof, provided that:
(a) Surviving Obligations. The obligations of the parties described
in Sections 6.2, 9.4, 9.5 and 11.1 (and all other provisions of this Agreement
relating to expenses) will survive any such termination.
(b) Withdrawal of Applications. All filings, applications and other
submissions relating to the consummation of the transaction contemplated hereby
shall, to the extent practicable, be withdrawn from the Governmental Authority
or other Person to whom made.
(c) Willful Breach by Buyer. No such termination will relieve Buyer
from liability for a willful breach by Buyer of this Agreement (which shall in
all events include, without limitation, a failure to pay the Cash
Consideration), and in such event Seller and the
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Companies shall have all rights and remedies available at law or equity,
including the remedy of specific performance.
(d) Willful Breach by Seller. No such termination will relieve
Seller from liability for a willful breach of this Agreement, and in such event
Buyer shall have all rights and remedies available at law or equity, including
the remedy of specific performance.
9.5 Attorneys' Fees. Notwithstanding any provision in this Agreement
that may limit or qualify a party's remedies, in the event of a default by any
party that results in a lawsuit or other proceeding for any remedy available
under this Agreement, the prevailing party shall be entitled to reimbursement
from the defaulting party of its reasonable legal fees and expenses (whether
incurred at trial or on appeal).
9.6 Specific Performance. The parties recognize that in the event a
party hereto should refuse to perform under the provisions of this Agreement,
monetary damages alone will not be adequate. The nonbreaching party, therefore,
shall be entitled, in addition to any other remedies which may be available,
including money damages, to obtain specific performance of the terms of this
Agreement. In the event of any action to enforce this Agreement, the breaching
party hereby waives the defense that there is an adequate remedy at law.
SECTION 10: SURVIVAL
10.1 Survival. None of the representations and warranties of Seller set
forth herein shall survive the Closing. None of the covenants and agreements of
Seller set forth herein shall survive the Closing, other than the agreements of
Seller contained in Sections 2.5(b)(1)(B), 6.9, 6.10, 6.16, 6.19 (to the extent
implemented), 11.1, 11.2, 11.3, 11.4, 11.5, 11.6, 11.7, 11.8, 11.9, 11.10 and
11.11, which shall survive the Closing until performed and discharged in full.
None of the representations and warranties of Buyer set forth herein shall
survive the Closing. The covenants and agreements of Buyer set forth herein to
be discharged in full prior to the Closing shall not survive the Closing. All
covenants and agreements of Buyer set forth herein to be performed in whole or
in part after the Closing shall survive the Closing until performed and
discharged in full.
SECTION 11: MISCELLANEOUS
-------------
11.1 Fees and Expenses. Except as otherwise provided in this Agreement,
each party shall pay its own expenses incurred in connection with the
authorization, preparation, execution, and performance of this Agreement,
including all fees and expenses of counsel, brokers, financial advisors,
accountants, agents, and representatives. Notwithstanding the foregoing, Buyer
shall pay all Transfer Taxes and HSR Act filing fees in connection with the
transactions contemplated by this Agreement.
11.2 Notices. All notices, demands, and requests required or permitted
to be given under the provisions of this Agreement shall be in writing, may be
sent by telecopy (with automatic machine confirmation), delivered by personal
delivery, or sent by commercial delivery service or certified mail, return
receipt requested, shall be deemed to have been given on the date of actual
receipt, which may be conclusively evidenced by the date set forth in the
records of any commercial delivery service or on the return receipt, and shall
be addressed to the recipient at the address specified below, or with respect to
any party, to any other address that such party may from time to time designate
in a writing delivered in accordance with this Section 11.2:
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If to Buyer: ▇▇▇ Communications, Inc.
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇, ▇.▇.
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇. ▇▇▇▇ ▇. ▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
with copies (which General Counsel
shall not ▇▇▇ Communications, Inc.
constitute ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇, ▇.▇.
notice) to: ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
If to the Companies or Media General, Inc.
Seller: ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
(prior to the Closing) ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
or Seller (after the Attention: ▇▇. ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Closing): Telephone: ▇▇▇-▇▇▇-▇▇▇▇
Telecopier: ▇▇▇-▇▇▇-▇▇▇▇
with copies (which shall not Media General, Inc.
constitute notice) to: ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
Telephone: ▇▇▇-▇▇▇-▇▇▇▇
Telecopier: ▇▇▇-▇▇▇-▇▇▇▇
11.3 Benefit and Binding Effect. This Agreement shall be binding upon
and inure to the benefit of the parties hereto (and, in the case of Sections
6.12 and 6.13, the parties specified therein) and their respective successors
and permitted assigns; provided that (a) neither this Agreement nor any of the
rights, interests or obligations hereunder may be assigned by Seller without the
prior written consent of Buyer (which consent shall not be unreasonably withheld
or delayed), and (b) neither this Agreement nor any of the rights, interests or
obligations hereunder may be assigned by Buyer without the prior written consent
of Seller (which consent shall not be unreasonably withheld or delayed). Consent
shall be deemed to be reasonably withheld if the consenting party reasonably
determines that the assignment would be reasonably likely to hinder or delay the
Closing or adversely affect the payment of the Cash Consideration at the Closing
or the discharge of any other obligations of Buyer. This Agreement is not
intended to confer upon any Person other than the parties hereto (and, in the
case of Sections 6.12 and 6.13, the parties specified therein) any rights or
remedies hereunder.
11.4 Governing Law. This Agreement shall be governed, construed, and
enforced in accordance with the laws of the Commonwealth of Virginia (without
regard to the choice of law provisions thereof).
11.5 Waiver of Jury Trial. Each of the parties hereto hereby
irrevocably waives all right to trial by jury in any action, proceeding or
counterclaim (whether based on contract, tort or
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otherwise) arising out of or relating to this Agreement or the actions of any
party in the negotiation, performance or enforcement hereof.
11.6 Submission to Jurisdiction; Venue. Each of the parties hereto
agrees to submit to the jurisdiction of any court of the Commonwealth of
Virginia or the United States District Court for the Eastern District of the
Commonwealth of Virginia in any action or proceeding arising out of or relating
to this agreement or any of the matters contemplated hereby. Each party hereto
irrevocably and unconditionally waives, to the fullest extent it may legally and
effectively do so, any objection it may now or hereafter have to the laying of
venue of any action or proceeding arising out of or relating to this agreement
in any such Virginia state or federal court. Each of the parties hereto hereby
irrevocably waives, to the fullest extent permitted by applicable law, the
defense of an inconvenient forum to the maintenance of such action or proceeding
in any such court.
11.7 Severability. Any provision of this Agreement that is prohibited
or unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall (to the full extent permitted by
applicable law) not invalidate or render unenforceable such provision in any
other jurisdiction. Notwithstanding the foregoing, in the event of any such
determination the effect of which is to affect materially and adversely any
party, the parties shall negotiate in good faith to modify this Agreement so as
to effect the original intent of the parties as closely as possible to the
fullest extent permitted by applicable law in an acceptable manner to the end
that the transactions contemplated hereby are fulfilled and consummated to the
maximum extent possible.
11.8 Entire Agreement. This Agreement, the Disclosure Schedules and the
Exhibits hereto, the other Transaction Documents to be delivered by the parties
pursuant to this Agreement and the Confidentiality Agreement collectively
represent the entire understanding and agreement among Buyer and Seller with
respect to the subject matter hereof and thereof and supersede all prior
agreements, understandings and negotiations between the parties. Buyer
acknowledges and agrees that neither Seller nor the Companies shall be liable
for or bound in any manner by, and Buyer has not relied upon, any express or
implied, oral or written information (including any information circulated by
▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & Co), warranty, guaranty, promise, statement, inducement,
presentation or opinion (whether of, by or on behalf of Seller, the Companies,
any broker or finder, or any officer, employee, agent or representative of any
of the foregoing, or any other person) pertaining to the transactions
contemplated hereby, Seller, the Companies, the Systems, the Purchased Shares,
the Assets, or any part of any of the foregoing (including, without limitation,
the physical condition of the Systems or any of the Assets, or the uses which
can be made of the same or the value thereof), except as is expressly set forth
in this Agreement and the Disclosure Schedules and Exhibits hereto.
11.9 Amendments; Waiver of Compliance; Consents. This Agreement may be
amended and any provision of this Agreement may be waived; provided that any
such amendment or waiver will be binding upon Seller only if such amendment or
waiver is set forth in a writing executed by Seller, and will be binding upon
Buyer only if such amendment or waiver is set forth in a writing executed by
Buyer.
11.10 Counterparts. This Agreement may be signed in counterparts with
the same effect as if the signature on each counterpart were upon the same
instrument.
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11.11 Cooperation With Respect to Tax-Efficient Legislation or
Like-Kind Exchange.
(a) Notwithstanding any provision in this Agreement to the
contrary, Buyer agrees that if federal legislation which would have a Tax
Efficient Effect is enacted prior to December 31, 1999, then, if requested by
Seller, Buyer shall cooperate with Seller and shall use commercially reasonable
efforts, including changes with respect to Buyer and attendant necessary
refilings with Governmental Authorities or other Persons, to enable Seller to
obtain the benefits of such legislation; provided, however, that Buyer shall not
be required hereunder to take any actions that in the reasonable judgment of
Buyer would adversely affect the Section 338(h)(10) Election or that would
otherwise result in material additional costs to Buyer.
(b) Seller may assign some or all of its rights (but not its
obligations) under this Agreement to an escrow agent or other Person reasonably
satisfactory to Buyer serving as a Intermediary under United States Treasury
Regulations promulgated under Section 1031 of the Code; provided that (i) such
assignment shall not deprive Buyer of rights or benefits, or relieve Seller of
any obligations or liabilities, under this Agreement, (ii) Buyer shall not be
obligated to expend funds or incur obligations or liabilities in connection
therewith and (iii) Seller shall indemnify and hold harmless Buyer from and
against any and all loss, liability, cost and expense arising or resulting from
any such transaction. Seller intends for such exchange to constitute a like-kind
exchange pursuant to Section 1031 of the Code. However, nothing in this
Agreement shall be construed as a representation or warranty of any party to any
other party as to the tax characteristics of the transaction.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK; SIGNATURES ON
FOLLOWING PAGES]
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IN WITNESS WHEREOF, this Agreement has been executed by each of Buyer
and Seller as of the date first written above.
BUYER:
------
▇▇▇ COMMUNICATIONS, INC.
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇
-----------------
Name: ▇▇▇▇ ▇. ▇▇▇▇
Title: Senior Vice President
SELLER:
-------
MEDIA GENERAL, INC.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
----------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Secretary
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AMENDMENT
---------
This Amendment (this "Amendment") is entered into as of October 1, 1999
by and between Media General, Inc., a Virginia corporation ("Seller"), and ▇▇▇
Communications, Inc., a Delaware corporation ("Buyer").
RECITALS
--------
A. Buyer and Seller are parties to that certain Purchase Agreement
dated as of April 22, 1999 (the "Purchase Agreement").
B. Buyer and Seller desire to effect certain amendments to the Purchase
Agreement and enter into the other agreements set forth herein.
AGREEMENTS
----------
NOW THEREFORE, in consideration of the premises herein contained, and
for other good and valuable consideration, the receipt of which is hereby
acknowledged, the parties hereto hereby agree as follows:
Section 1. Defined Terms. Capitalized terms used, but not defined,
herein shall have the meanings attributed to such terms in the Purchase
Agreement.
Amendments of the Purchase Agreement. The Purchase Agreement shall
be amended as of the date hereof as follows:
(a) The definition of the term "Adjustment Time" contained in
Section 1.1 of the Purchase Agreement is hereby amended by deleting such
definition in its entirety and substituting therefor the following:
"Adjustment Time" means 12:01 a.m., Virginia time, on the Closing
Date.
(b) Section 6.9(g) of the Purchase Agreement is hereby amended by
deleting such section in its entirety and substituting therefor the following:
Seller shall furnish to Buyer as soon as practicable after the
Closing a list, calculated as of the Closing Date, estimating the
amounts of compensation deferred by each employee of the Companies
under the Thrift Plan Plus of Media General, Inc. during the
calendar year in which the Closing occurs.
(c) The last sentence of Section 6.13 of the Purchase Agreement is
hereby amended by deleting such sentence in its entirety and substituting
therefor the following:
Without limiting the foregoing, Seller shall maintain in place
for a period of not less than six years from the Closing, for
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the benefit of the parties mentioned in the foregoing sentence,
directors' and officers' insurance, on substantially the same terms
and to the same extent as presently in effect with respect to the
Companies. As consideration for maintaining such insurance in
place, Buyer shall pay to Seller $55,123 (the "D&O Premium") and
shall promptly reimburse Seller, upon receipt by the Buyer of
evidence reasonably satisfactory to Buyer, for the following: (a)
any deductible payable by Seller in connection with any claim
against such policy of insurance arising out of, or in connection
with, claims thereunder for the benefit of the parties mentioned in
the first sentence of this Section 6.13 and (b) any increased
premium payable by Seller with respect to its policy of directors'
and officers' insurance from the date hereof through the sixth
(6th) anniversary of the Closing Date as a result of any claims
made against such policy of insurance arising out of, or in
connection with, claims thereunder for the benefit of the parties
mentioned in the first sentence of this Section 6.13.
Section 2. Certain Liabilities. Seller hereby assumes and undertakes to
pay the monetary liabilities of the Companies arising with respect to claims
incurred prior to the Adjustment Time in respect of matters or occurrences which
would have been covered by the Companies' and Seller's general liability,
automobile liability and workmen's compensation insurance as in effect
immediately prior to the Adjustment Time. In connection with the foregoing, the
parties shall cooperate with each other and their respective counsel,
accountants, agents and other representatives in all commercially reasonable
respects in connection with any claims, obligations, duties and liabilities
which are the subject of this Section 3. The parties hereby further agree that
there shall be no adjustment to the Cash Consideration pursuant to Sections 2.3
or 2.5 of the Purchase Agreement or otherwise as a result of the liabilities
subject of this Section 3.
Section 3. Defamation Insurance. Seller hereby agrees to purchase
defamation insurance coverage with respect to the Companies for the period
beginning on the Closing Date and ending on the fifth (5th) anniversary of the
Closing Date with respect to matters and occurrences arising on or prior to the
Adjustment Time, providing coverage which is substantially similar to such
insurance coverage maintained by Seller and the Companies immediately prior to
the Adjustment Time. Buyer hereby agrees to reimburse Seller for premiums
payable in respect thereof in an amount equal to $1,923 annually (the
"Defamation Insurance Premium") promptly upon receipt of an invoice therefor.
Buyer hereby acknowledges and agrees that it shall have no claims against
Seller, and that Seller shall have no liability or obligation to Buyer, as a
result of, or arising out of, this paragraph (d), except for Seller's failure to
purchase such insurance coverage for the period specified herein.
Section 4. Capital Expenditure Adjustment Amount. Notwithstanding
anything to the contrary contained herein or in the Purchase Agreement, Buyer
and Seller hereby agree that the amount of the Capital Expenditure Adjustment
for purposes of the Final Closing Statement shall be Two Million Nine Hundred
Eighty-Four Thousand Four Hundred Thirty-Nine Dollars ($2,984,439), and that the
determination of such amount shall not be subject to dispute by the parties
pursuant to Section 2.5 of the Purchase Agreement or otherwise.
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Section 5. Guarantees. Buyer hereby agrees that it shall indemnify and
hold harmless Seller and its Affiliates from and against any and all claims,
losses, liabilities, damages, penalties, costs and expenses, including, without
limitation, reasonable attorneys' fees, arising out of any guarantee or surety
by Seller or any of its Affiliates of the Companies' obligations or performance
under the contracts and agreements set forth on Schedule 6 hereto.
Section 6. Payments. Notwithstanding anything to the contrary contained
herein or in the Purchase Agreement, (a) each of the D&O Premium, the first
annual Defamation Insurance Premium and the Capital Expenditure Adjustment shall
be (i) included in the Final Closing Statement to be prepared and delivered by
Buyer pursuant to Section 2.5 of the Purchase Agreement and (ii) used to
determine the amount of the Cash Consideration as finally determined pursuant to
Section 2.5(a) of the Purchase Agreement and (b) none of the D&O Premium, the
first annual Defamation Insurance Premium or the Capital Expenditure Adjustment
shall be subject to dispute by the parties pursuant to Section 2.5 of the
Purchase Agreement or otherwise.
Section 7. Survival. The covenants and agreements of the parties set
forth herein shall survive the Closing until performed and discharged in full.
Amendment Date. This Amendment shall become effective as of the
date first above written (the "Amendment Date") upon execution
of this Amendment by Buyer and Seller.
Ratification.The Purchase Agreement, as amended hereby, is hereby
ratified, approved and confirmed in all respects.
Reference to Purchase Agreement. From and after the date hereof,
each reference in the Purchase Agreement to "this Agreement",
"hereof", or "hereunder" or words of like import, and all
references to the Purchase Agreement in any and all agreements,
instruments, documents, notes, certificates and other writings
of every kind and nature shall be deemed to mean the Purchase
Agreement, as amended by this Amendment.
Governing Law. This Amendment shall be governed in all respects by
the laws of the Commonwealth of Virginia (without giving effect
to the provisions thereof relating to conflicts of law).
Execution in Counterparts. This Amendment may be executed in two or
more counterparts, each of which shall be deemed an original
but all of which taken together shall constitute a single
agreement.
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IN WITNESS WHEREOF, Buyer and Seller have caused this Amendment to be signed by
their respective officers thereunder duly authorized all as of the date first
written above.
Buyer:
------
▇▇▇ COMMUNICATIONS, INC.
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇
-----------------
▇▇▇▇ ▇. ▇▇▇▇
Senior Vice President
Seller:
-------
MEDIA GENERAL, INC.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
---------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Secretary