EXHIBIT 10.3.4 TO
FUND 14-A 10-K
ASSET PURCHASE AGREEMENT
DATED: MARCH 12, 1997
BETWEEN
TRIAX MIDWEST ASSOCIATES, L.P.
AND
CABLE TV FUND 14-A, LTD.
TABLE OF CONTENTS
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Page
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.......................................................
RECITALS................................................................... 1
Section 1. Purchase and Sale of Assets............................... 1
1.1. Conveyance of Assets...................................... 1
1.2. Excluded Assets........................................... 3
Section 2. Purchase Price and Method of Payment...................... 4
2.1. Purchase Price............................................ 4
2.2. Deposit................................................... 5
2.3. Method of Payment......................................... 5
2.4. Definitions; Adjustments.................................. 5
2.5. Limited Assumption of Liabilities......................... 10
Section 3. Representations, Warranties, Covenants and Seller
Agreements of............................................. 10
3.1. Organization, Qualification and Authority................. 11
3.2. Due Authorization......................................... 11
3.3. No Conflicts.............................................. 11
3.4. Financial Statements...................................... 12
3.5. Regulatory Licenses and Filings........................... 13
3.6. Franchises and Other Authorities.......................... 14
3.7. Status of the Systems..................................... 15
3.8. Legality of Signals Carried; Compliance with
Applicable Laws........................................... 17
3.9. Real Property and Leases.................................. 19
3.10. Personal Property......................................... 19
3.11. Contracts................................................. 20
3.12. Employee Agreements and Benefits; Labor Matters........... 20
3.13. ERISA..................................................... 21
3.14. Access Agreements......................................... 22
3.15. Bonds, Insurance and Letters of Credit.................... 22
3.16. Litigation................................................ 22
3.17. Intellectual Property..................................... 23
3.18. Payment of Taxes.......................................... 23
3.19. Seller's Accounts and Promotions.......................... 23
3.20. Environmental Compliance.................................. 24
3.21. Continuation of Business.................................. 24
3.22. Approvals and Consents.................................... 24
3.23. Other Financial Interests................................. 25
3.24. Complete Disclosure....................................... 25
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Section 4. Representations, Warranties, Covenants and Agreements of
Buyer........................................................ 25
4.1. Organization and Authority of Buyer.......................... 25
4.2. Due Authorization by Buyer................................... 25
4.3. No Conflicts................................................. 26
4.4. Litigation................................................... 26
4.5. Complete Disclosure.......................................... 26
Section 5. Covenants and Further Agreements............................. 26
5.1. Application for Assignment of Franchises and Licenses........ 26
5.2. Information; Consultation; Confidentiality................... 27
5.3. Period Pending Closing....................................... 28
5.4. Cooperation.................................................. 29
5.5. Expenses..................................................... 29
5.6. Brokerage.................................................... 30
5.7. Reliance Upon and Survival of Representations and
Warranties................................................... 30
5.8. Further Assurances........................................... 30
5.9. Indemnification.............................................. 31
5.10. No Negotiation............................................... 33
5.11. Special Covenants of Seller.................................. 33
5.12. Employees.................................................... 33
Section 6. Conditions Precedent to the Obligation of Buyer
to Close..................................................... 34
6.1. Truth of Representations and Warranties...................... 34
6.3. Consents of Third Parties.................................... 34
6.4. Opinion of Seller's Counsel.................................. 35
6.5. Opinion of FCC and Copyright Counsel......................... 35
6.6. No Adverse Change............................................ 35
6.7. Inventories.................................................. 35
6.8. No Litigation................................................ 35
6.9. HSR Act Compliance........................................... 35
6.10. Deliveries................................................... 35
Section 7. Conditions Precedent to the Obligation of Seller
to Close..................................................... 36
7.1. Truth of Representations and Warranties...................... 36
7.2. Performance of Agreements.................................... 36
7.3. Opinion of Counsel for Buyer................................. 36
7.4. Consents of Third Parties.................................... 36
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TABLE OF CONTENTS
(Cont.)
7.5. No Adverse Change.................................. 36
7.6. No Litigation...................................... 36
7.7. HSR Act Compliance................................. 36
7.8. Deliveries......................................... 36
7.9. Subscriber Adjustment Amount and Revenue Adjustment
Amount............................................. 36
Section 8. The Closing........................................ 37
8.1. Time and Place..................................... 37
8.2. Deliveries by Seller............................... 37
8.3. Deliveries by Buyer................................ 37
8.4. Other Action....................................... 38
Section 9. Allocation of Purchase Price....................... 38
Section 10. Termination........................................ 38
10.1. Termination Events................................. 38
10.2. Effect of Termination.............................. 39
Section 11. Casualty Losses.................................... 40
Section 12. Non-competition.................................... 40
Section 13. Notices............................................ 41
Section 14. Parties in Interest................................ 42
Section 15. Entire Agreement................................... 42
Section 16. Governing Law...................................... 42
Section 17. Counterparts....................................... 42
Section 18. Descriptive Headings............................... 42
Section 19. Definitions........................................ 42
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LIST OF SCHEDULES AND EXHIBITS
Schedules
0.1 Systems of Seller
1.1(a) Machinery, Equipment, etc.
1.1(b) Governmental Authorizations
1.1(c) Franchise Authorizations
1.1(d) Access Agreements, etc.
1.1(f) Leases of Real and Personal Property
1.1(g) Owned Real Property
1.1(i) Other Agreements
1.2(h) Excluded Assets
2.4(a)(i) Standard Basic Rates
2.4(a) Spring Subscribers
3.3 Non Conflicts
3.4(c) Contingent Obligations
3.5(a) Exceptions to Regulatory Compliance
3.5(b) Legal or Governmental Actions and Proceedings
3.6 Compliance; Absence of Defaults
3.7(a) Combined Basic and Tier Rates
3.7(b) Cable Services and Rates
3.7(c) Channel Capacity; Matters Affecting or Relating to Channels
3.7(d) Exceptions to Compliance; Complaints
3.7(j) Information Regarding Certifications or Complaints
3.7(k) Information Regarding Rates and Refunds
3.8(a) Information Regarding Signals Carried
3.8(b) Exceptions Regarding Conduct of Business
3.9(c) Exceptions Regarding Real Property
3.12 Employees, Employment Agreements, etc.
3.13 ERISA
3.15 Insurance, Bonds and Letters of Credit
3.16 Litigation
3.18 Tax Matters
3.19(a) Billing Practices
3.19(b) Subscription and Converter Deposit Agreements
3.19(c) Billing and Collection Terms
3.19(d) Concessions; Promotions
3.19(e) Barter/Trade Out Agreements
3.20 Environmental Disclosure Schedule
3.22 Required Notices and Consents
3.23 Other Financial Interests
6.3 Required Consents
9 Allocation of Purchase Price
19 Definitions
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Exhibits
Exhibit A Form of Assumption Agreement
Exhibit B Form of Indemnity Escrow Agreement
Exhibit C Form of Certificate
Exhibit D Form of Franchise Consent
Exhibit E Form of Third Party Consent
Exhibit F Form of Opinion of Seller's Counsel
Exhibit G Form of Opinion of FCC Counsel
Exhibit H Form of Opinion of Buyer's Counsel
Exhibit I Form of Non-Competition Agreement
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ASSET PURCHASE AGREEMENT Between
TRIAX MIDWEST ASSOCIATES, L.P. and
CABLE TV FUND 14-A, LTD.
THIS ASSET PURCHASE AGREEMENT, effective as of the 12th day of March, 1997
is entered into by TRIAX MIDWEST ASSOCIATES, L.P., a Missouri limited
partnership ("Buyer"), and CABLE TV FUND 14-A, LTD., a Colorado limited
partnership ("Seller").
R E C I T A L S:
- - - - - - - -
Seller is franchised or otherwise authorized by law to operate community
antenna television systems and to distribute, and does operate and distribute,
audio and video signals by coaxial and/or fiber optic cable in and around the
communities and other geographic areas set forth in Schedule 0.1 (the
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"Systems").
Buyer desires to acquire the Systems and all the assets used or held for
use in the operation of the Systems from Seller (except the Excluded Assets, as
defined in Section 1.2).
Seller desires to sell, transfer and assign the Systems and the assets used
in the Systems to Buyer.
THEREFORE, in consideration of the covenants and agreements and in reliance
on the representations and warranties set forth herein, and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties agree as follows:
Section 1. Purchase and Sale of Assets.
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1.1. Conveyance of Assets. At the Closing (as defined in Section 8.1),
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Seller will sell, transfer, assign and convey to Buyer, by instruments of
conveyance in the forms reasonably acceptable to Buyer, at Seller's expense
(except as otherwise expressly provided herein), good, valid and marketable
title to all of the assets (tangible and intangible, real, personal and mixed)
comprising the Systems which are owned, used or held for use by Seller primarily
in connection with the operation of the Systems (the "Transferred Assets"),
except for the Excluded Assets (as defined in Section 1.2), free and clear of
all defaults, liens, encumbrances, security interests and pledges, and all
adverse claims, charges, restrictions and title impediments (other than (i)
liens for taxes not yet due and payable and liens for taxes the payment of which
is being contested or the time for doing so has not yet expired, and for which
adequate reserves have been provided; (ii) zoning laws and ordinances and
similar legal requirements; (iii) rights reserved to any governmental authority
to regulate the affected property; and (iv) as to Real Property (as defined in
Section 3.9(c)) interests, any easements, rights-of-way, servitudes, permits,
restrictions and minor imperfections or irregularities in title which are
reflected in the public records and which do not individually or in the
aggregate materially interfere with the right or ability to own, use or operate
the Real Property or to convey good, marketable and indefeasible title to such
Real Property (collectively, "Permitted Liens"); provided that classification of
any
item as a Permitted Lien will not affect any liability Seller may have for such
item, including pursuant to any indemnity obligation under this Agreement); all
of the above with such warranties of title and full substitution and subrogation
to all rights and actions of warranty against all preceding owners to the
fullest extent that such warranties are transferable. The Transferred Assets
shall include (not by way of limitation) the following:
(a) All of the tangible assets owned, used or held for use by Seller
in connection with the ownership or operation of the Systems, including,
but not by way of limitation, all physical plant and equipment, machinery,
electronic devices, trunk and distribution cable, conduit, vaults and
pedestals, grounding and pole hardware, head-end equipment, microwave
transmission and reception sites and related equipment, installed
subscribers' devices (including, without limitation, drop lines, encoders,
transformers and terminals for television sets and fittings), local
origination equipment, all inventories of materials and supplies, and all
spare parts, equipment (including, but not limited to, all receiving,
transmission and related equipment), converters, other signal control
devices, house-drop inventory, tools, vehicles, real property, personal
property and other assets, including (but not by way of limitation) the
items listed in Schedule 1.1(a);
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(b) The licenses, authorizations, registrations and permits from the
Federal Communications Commission (the "FCC") and the Federal Aviation
Administration (the "FAA") required for the operation of the Systems (the
"FCC Licenses", and the "FAA Licenses", respectively), copyright licenses
and registrations, and all other governmental permits, consents, licenses,
authorizations, registrations and certificates which relate to the
ownership or operation of the Systems, including, but not limited to, all
community antenna relay services, business radio, earth station and other
licenses (collectively, the "Governmental Authorizations"), each of which
Seller has listed in Schedule 1.1(b);
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(c) The franchises and similar grants of governmental authority
(collectively, the "Franchises") which relate to the ownership or operation
of the Systems, each of which Seller has listed in Schedule 1.1(c);
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(d) The pole attachment agreements, easements, public and private
rights-of-way, permits for crossings over or under highways, railroads or
other property, and similar grants of authority which relate to the
ownership or operation of the Systems (collectively, the "Access
Agreements"), each of which Seller has listed in Schedule 1.1(d);
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(e) All instruments of title, rights or claims of Seller under any
warranty, business records, customer lists, files, books, records, maps and
engineering data, blue prints, schematics, drawings, diagrams, surveys,
engineering and technical data, annual FCC proof of performance tests, and
all documents and logs relating to the Transferred
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Assets or the construction and operation of the Systems, including, but not
limited to, all subscriber complaint files, and other records maintained
pursuant to the Franchises or applicable law;
(f) The leases of real and personal property used in connection with,
or which relate to the ownership or operation of the Systems (collectively,
the "Leases"), each of which Seller has listed in Schedule 1.1(f);
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(g) The real property interests owned or held by Seller which relate
to the ownership or operation of the Systems, including all improvements
thereon and rights related thereto, such as towers, fixtures, easements,
rights-of-way and other interests therein, each of which Seller has listed
in Schedule 1.1(g), together with a legal description of all owned real
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property;
(h) All accounts receivable of Seller from customers of the Systems or
otherwise related to the Systems or the Transferred Assets existing and
uncollected as of the Closing (the "Closing Accounts Receivable");
(i) All customer subscription agreements, contracts, agreements,
commitments and other arrangements of Seller to provide television signal
in connection with the operation of the Systems (including, but not limited
to, agreements with trailer parks, apartments, condominiums, commercial
users and other multiple dwelling users), all agreements to broadcast
advertising and all other contracts applicable to the operation of the
Systems (collectively, the "Other Agreements"), each of which Seller has
listed in Schedule 1.1(i), and a true and correct copy of each written form
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of which has been delivered to Buyer by Seller, Seller having included in
Schedule 1.1(i) a description of each such agreement which is not in
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written form; and
(j) All subscriber deposits (including converter deposits) and amounts
collected by Seller for services, materials or equipment to be supplied
from and after the Closing Date or which is refundable.
The general language of sale, transfer, assignment and conveyance of assets to
Buyer contained in this Section 1.1 shall be controlling regardless of whether
individual assets are described in this Section 1.1 or on any of the attached
Schedules, all such assets to be transferred and conveyed to Buyer at Closing,
subject to the terms and conditions of this Agreement.
1.2. Excluded Assets. Notwithstanding anything herein, the following
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assets (the "Excluded Assets") are excluded from the Transferred Assets:
(a) Seller's cash on hand and bank deposits on the Closing Date;
(b) Seller's prepaid assets;
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(c) Seller's contracts other than the Assumed Contracts (as defined in
Section 2.5);
(d) Seller's partnership assets and books and records and other
agreements and documents which relate to matters among Seller's partners
and/or their affiliates, provided, however, that Seller shall permit Buyer
to have access thereto to the extent and in the manner contemplated by this
Agreement;
(e) All of the patents, trademarks, service marks, trade names and
copyrights (and all applications therefor), and rights to receive payments
with respect thereto, owned or used by Seller in connection with the
operation of the Systems; provided, however, that for a period of 90 days
after the Closing Date, Buyer shall have the right to operate the Systems
using Seller's name and all derivations of such name and related trade
names, trademarks and service marks in use in connection with the Systems
on the Closing Date;
(f) All insurance policies, construction and performance bonds,
letters of credits or other similar items and any cash surrender value in
regard thereto, and any stocks, bonds, certificates of deposit and similar
investments;
(g) Any claims, rights and interests in and to any refunds of federal,
state or local franchise, income or other taxes or fees for periods prior
to the Closing Date; and
(h) Those assets which are listed in Schedule 1.2(h).
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Section 2. Purchase Price and Method of Payment.
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2.1. Purchase Price. At Closing, Buyer shall acquire and accept from
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Seller, and Seller shall transfer and convey to Buyer, the Transferred Assets,
and, in consideration therefor, Buyer will:
(a) Pay Seller the sum of Twenty Million One Hundred Thousand Dollars
($20,100,000), in the manner and subject to adjustment as provided herein
(the "Cash Consideration");
(b) Pay Seller in the manner provided herein: (i) 100% of the face
amount of all bona fide Closing Accounts Receivable outstanding for thirty
(30) days or less from the date of first billing thereof and (ii) 90% of
bona fide Closing Accounts Receivable outstanding for 31 through 60 days
from the date of first billing thereof; and
(c) Assume the Assumed Obligations contemplated by Section 2.5 under
the form of Assignment and Assumption Agreement attached as Exhibit A (the
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"Assumption Agreement").
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The payments made by Buyer and the obligations of Seller which are assumed by
Buyer are sometimes collectively referred to herein as the "Purchase Price."
2.2. Deposit. Upon execution and delivery of this Agreement by Seller and
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Buyer, Buyer shall deliver $500,000 (the "Deposit") to Colorado National Bank
("Escrow Agent"), to be held and applied pursuant to the terms of that certain
Deposit Escrow Agreement, dated the date hereof, by and among Seller, Buyer and
Escrow Agent.
2.3. Method of Payment. The Cash Consideration shall be paid on the
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Closing Date in the following manner:
(a) Escrow Agent shall wire to Seller the amount of the Deposit and
all interest thereon in immediately available funds;
(b) Buyer shall wire to Escrow Agent in immediately available funds
the amount of any Reserve Account to be established under Section 2.4(c);
(c) Buyer shall wire to Escrow Agent One Million Dollars ($1,000,000)
(the "Indemnity Escrow Amount"), which will secure payment by Seller of any
indemnification obligations to Buyer in accordance with the terms of an
indemnity escrow agreement in substantially the form attached hereto as
Exhibit B (the "Indemnity Escrow Agreement"); and
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(d) Buyer shall wire to Seller Nineteen Million One Hundred Thousand
Dollars ($19,100,000), (A) minus: (i) the amount of the Deposit and all
interest earned thereon, and (ii) the amount of the Reserve Account, and
(B) plus or minus, as applicable, any other adjustments made at Closing
hereunder in immediately available funds (the "Closing Wire Transfer").
For purposes of all wire transfers which are contemplated by this
Agreement, Seller agrees to provide complete written wire transfer instructions
to Buyer at least three (3) business days prior to the Closing Date.
2.4. Definitions; Adjustments.
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(a) For the purpose of this Agreement, the following terms shall have
the meanings set forth below:
(i) "Basic Subscriber" shall mean, as to any System and as of any
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date of determination thereof, persons who pay Seller the standard
monthly rates for basic cable service (whether for broadcast basic or
expanded basic service) (each a "Standard Basic Rate") as set forth in
Schedule 2.4(a)(i), each of whom has paid at least one monthly ▇▇▇▇
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generated and mailed in the ordinary course of business for cable
television services and one additional payment (which can
5
include a pro rata payment in respect of a partial month's service or
a full or reasonably discounted payment in respect of installation,
none of whom is pending disconnection for any reason, and none of whom
is delinquent in payment for such cable television services; provided,
however, that those persons who are participants in the "Sprint"
program described on Schedule 2.4(a) (the "Sprint Subscribers") and
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who pay Seller the standard monthly rate therefor shall be deemed to
be paying the standard monthly rate for cable service; and, provided
further, that the parties agree that the Systems had 239 Seasonal
Subscribers in 1996, none of whom shall be deemed to be a Basic
Subscriber. For this purpose, a Basic Subscriber shall be delinquent
if, as of the Listing Date (as hereinafter defined), such Basic
Subscriber is more than fifty-nine (59) days delinquent in payment and
has more than a $5.00 balance which is over two months past due
(excluding amounts in dispute).
(ii) "Equivalent Basic Subscriber Number" shall mean, as of the
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date of determination thereof, the sum of the aggregate number of
Basic Subscribers for each System, the aggregate number of Equivalent
Subscribers for each System, in each case computed as of the Listing
Date, and the aggregate number of Seasonal Subscribers for each
System, determined as provided in Section 2.4(a)(iv).
(iii) "Equivalent Subscribers" shall mean, as to any System and
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as to the date of determination thereof, the number of equivalent
Basic Subscribers served by such System derived by dividing (A) the
total monthly ▇▇▇▇▇▇▇▇ for sales by Seller of basic cable services to
bulk and commercial accounts, by (B) the monthly standard rate charged
by Seller to single family households for broadcast basic cable
services and expanded basic service, where available, as of the
Listing Date in such System. For purposes of the foregoing, there
shall be excluded all ▇▇▇▇▇▇▇▇ to any bulk or commercial account
which, as of the Listing Date, is more than two months delinquent in
payment and has more than a $5.00 balance (excluding amounts in
dispute).
(iv) "Seasonal Subscribers" shall mean those subscribers who,
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during some portion of 1996, were subscribers to a "vacation plan"
offered by the Systems, in which such subscribers paid $6.95 per month
for cable service during months in which the subscribers did not
reside at the locations to which service was being provided. For the
purposes of the determination of the Equivalent Basic Subscriber
Number the aggregate number of Seasonal Subscribers for the Systems
shall be deemed to be 174.
(v) "Tentative Subscribers" shall mean as to any System and as of
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the date of determination thereof, persons who have paid one payment
(which can include a pro rata payment in respect of a partial month's
service or a payment in respect of installation equal to at least 50%
of the standard installation fees at
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hook-up), but have not yet paid at least one full monthly ▇▇▇▇
generated and mailed in the ordinary course of business. Tentative
Subscribers shall be identified on a schedule at Closing. A Tentative
Subscriber who, within sixty (60) days following Closing pays a full
monthly ▇▇▇▇ generated in the ordinary course of business, shall be
deemed a Basic Subscriber.
For the purposes hereof with respect to all accounts receivable and the
computation of the number of Basic Subscribers, Equivalent Subscribers,
Tentative Subscribers and Seasonal Subscribers, Seller and Buyer shall
credit only actual customer payments. Seller shall deliver to Buyer five
(5) days prior to the Closing Date a written list of all cable television
subscribers of Seller as of the close of business 10 days prior to the
Closing Date (the "Listing Date"), separately identifying all of such
subscribers meeting the definitions of Basic Subscriber, Equivalent
Subscriber, Tentative Subscriber and Seasonal Subscriber hereunder (the
"Pre-Closing Subscriber List").
(b) Seller has delivered, or within 10 days after the date hereof,
will deliver, to Buyer a list of all of the number of Seller's subscribers,
including Basic Subscribers, Sprint Subscribers, Equivalent Subscribers,
each separately identified as such. For the purposes of this Agreement,
the number of Basic Subscribers, in the aggregate, shall be considered to
equal the Equivalent Basic Subscriber Number. Seller represents that in
1996, it had no more than 239 Seasonal Subscribers.
(c) Each Tentative Subscriber included on the Pre-Closing Subscriber
List shall be removed from the Pre-Closing Subscriber List and placed on a
Tentative Subscriber List (the "Tentative Subscriber List") on the Listing
Date for the purpose of making a preliminary determination of the
Equivalent Basic Subscriber Number delivered to Buyer by Seller at Closing.
If and to the extent that accounts which are placed on the Tentative
Subscriber List cause the Equivalent Basic Subscriber Number delivered to
Buyer by Seller at Closing to fall below 15,700, Buyer shall deliver into a
separate escrow account at Closing, funds (the "Reserve Account") equal to
$1,280 multiplied by the difference between 15,700 and the Equivalent Basic
Subscriber Number (the "Subscriber Adjustment Amount"). The amount of
funds transferred to the Reserve Account shall reduce the amount of the
Closing Wire Transfer as provided in Section 2.3(d). If and to the extent
that Tentative Subscribers pay a full monthly ▇▇▇▇ generated in the
ordinary course of business within 60 days following the Closing Date such
subscribers shall be deleted from the Tentative Subscriber List and
returned to the Pre-Closing Subscriber List. Upon completion of such
reconciliation and agreement thereto by Seller and Buyer, but in no event
later than 90 days following the Closing Date, Seller shall be paid out of
the Reserve Account $1,280 per Tentative Subscriber returned to the Pre-
Closing Subscriber List from the Tentative Subscriber List (subject to the
Pre-Closing Subscriber List reconciliation provided for in Section 2.4(d)
below), plus a pro rata share of any interest or other income earned on the
Reserve Account and applicable to the amount thereof so paid to Seller.
After such payment is made to Seller, all amounts remaining in the Reserve
Account shall be paid to Buyer. In order to obtain payment from
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subscribers on the Tentative Subscriber List, Buyer shall exert such
efforts as it exerts in the ordinary course of business to obtain payment
from similarly situated subscribers in other cable systems it owns, but in
no event shall Buyer be required to file a lawsuit (or to hire a collection
agency or law firm) with respect thereto. Buyer: (i) will provide Seller
a list of payments upon reconciliation of the Tentative Subscriber List,
and (ii) will not grant to any subscriber on the Tentative Subscriber List
a deferred payment option which would cause said subscriber not to be
counted as a Basic Subscriber. It is understood that Buyer may, but will
not be obligated to, provide continuing cable service to any account which
is delinquent in any amount payable to Buyer.
(d) Promptly after the expiration of 60 and not more than 90 days
following the Closing Date, Seller and Buyer shall review and reconcile the
Pre-Closing Subscriber List and the Tentative Subscriber List, to determine
the Equivalent Basic Subscriber Number existing on the Listing Date, in
accordance with the foregoing definition and as adjusted with respect to
the Tentative Subscriber List under Section 2.4(c). If, as a result of
such reconciliation, the Equivalent Basic Subscriber Number actually
delivered to Buyer at Closing is less than 15,700, the Cash Consideration
shall be reduced by an amount equal to $1,280 multiplied by the number by
which the Equivalent Basic Subscriber Number is less than 15,700. Any such
adjustment to the Cash Consideration shall be paid to Buyer first out of
any Reserve Account created under Section 2.4(c) or, if such funds are
insufficient, out of the Escrow, and Seller shall pay any remaining balance
due upon demand if the Reserve Account and the Escrow are not sufficient to
pay such adjustment.
(e) The parties agree to make cash adjustments and payments between
them at Closing to transfer to Buyer any converter and other subscriber
deposits received or held by Seller, and any sums which Seller would have a
present or future legal obligation to refund. Seller and Buyer further
agree to make such cash adjustments and payments between them at Closing
and as soon as practicable after the Closing Date (but not later than 90
days following the Closing) to reflect the principles that: (i) all
expenses and income attributable to the Excluded Assets are for the account
of Seller, (ii) all expenses and income attributable to the construction,
installation, ownership or operation of the Systems prior to the Closing
Date are for the account of Seller (including amounts payable for supplies,
inventories and other assets acquired by Seller, which Seller shall deliver
to Buyer at Closing) (the "Current Adjustment Amount"), and (iii) all
expenses and income attributable to the construction, installation,
ownership or operation of the Systems on and after the Closing Date are for
the account of Buyer. Such adjustments shall include, but shall not be
limited to, an allocation of the following between Seller and Buyer: (i)
franchise, copyright, license or other fees; (ii) pole attachment fees and
rentals and charges payable in respect of leasehold interests; (iii)
property taxes and assessments payable in respect of any Transferred
Assets; (iv) charges for utilities, microwave relay and other services
furnished to or in connection with the business of operating the Systems,
provided that pay television and other programming expenses will be
independently incurred and paid for by Seller and Buyer before and after
Closing,
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respectively, and will not be subject to adjustment; (v) fees payable to
the FCC or other governmental authority in connection with the Systems or
the ownership or operation thereof; and (vi) wages, salaries, commissions,
bonuses (based on any commitment therefor or amount thereof paid for the
most recent year), accrued vacation (except as otherwise provided below)
and other fringe benefits (and related payroll taxes, etc.) of Seller's
employees as of the Closing Date who become and continue as employees of
Buyer during and beyond the 90 day period following the Closing Date (it
being agreed that Seller shall be liable for all forms of compensation due
to Seller's employees who do not so become and continue as Buyer's
employees, except for actual wage or salary payments and directly related
fringe benefits payable solely with respect to the employment of such
employees by Buyer and services rendered by such employees to Buyer at the
request of Buyer, which shall be paid by Buyer). Seller shall make all
payments due to its employees for services rendered by such employees prior
to the Closing Date or otherwise accruing to such employees as of the
Closing Date in accordance with Seller's normal payment practices, but in
no event later than 30 days following the Closing Date. Nothing herein
shall be deemed to require the pro-rating of any income tax or similar type
of tax.
(f) For purposes of this Agreement, the average monthly revenue per
subscriber paid to Seller by the Basic Subscribers for the last three (3)
complete calendar months prior to Closing shall be computed by dividing (i)
the average monthly total revenue from operations of the Systems for the
last three (3) complete calendar months prior to Closing, computed on the
accrual basis in a manner consistent with Seller's past practices,
(including charges for basic and pay cable television service, home
----------
shopping revenues, installation fees, converter and other equipment fees,
late charges, revenues from advertising sales, and franchise fees not
separately billed, but excluding sales taxes, equipment sales, franchise
---------
fees separately billed, revenues from pay-per-view programming,
extraordinary items and interest income) by (ii) the Equivalent Basic
Subscriber Number (which for this purpose shall be computed based on the
weighted average number of subscribers for the period) (the "Three Month
Average Revenue"). If the Three Month Average Revenue per subscriber is
less than $28.56 for the Systems as of the Closing Date, the Cash
Consideration shall be reduced by an amount equal to the product of the
Cash Consideration, multiplied by a fraction, the numerator of which is the
amount by which the Three Month Average Revenue is less than $28.56 and the
denominator of which is $28.56 (the "Revenue Adjustment Amount").
(g) The Subscriber Adjustment Amount, the Current Adjustment Amount
and the Revenue Adjustment Amount (collectively, the "Adjustment Amounts")
shall be estimated in good faith by Seller, and set forth, together with a
detailed statement of the calculation thereof, in a certificate (the
"Initial Adjustment Certificate") executed by a duly authorized
representative of Seller and delivered to Buyer not later than 10 days
prior to the Closing. Seller shall use reasonable efforts to keep Buyer
informed during its preparation of the Initial Adjustment Certificate. If
accepted by Buyer, the Initial Adjustment Certificate shall constitute the
basis on which the Adjustment Amounts are
9
calculated for purposes of the Closing. Seller and Buyer shall endeavor in
good faith to agree upon the actual Adjustment Amounts within 90 days after
the Closing. Seller or Buyer, as appropriate, shall pay to the other party
within five (5) business days after the final determination the amount by
which the parties agree that the Adjustment Amounts differ from the
Adjustment Amounts as estimated in the Initial Adjustment Certificate. Any
amounts in dispute at the end of such 90 day period will be determined
within 120 days after the Closing Date by an accounting firm mutually
agreed upon by the parties, whose determination will be conclusive. Buyer
and Seller will each be responsible for one-half of the fees and expenses
payable to such firm in connection with such determination. The payment
required after determination of all disputed amounts will be made by the
responsible party within five business days after the final determination.
2.5. Limited Assumption of Liabilities. At the Closing, Seller shall
---------------------------------
assign and transfer to Buyer, and Buyer shall assume, be obligated to pay or
otherwise satisfy or be responsible for, (i) the obligations and liabilities
arising or accruing on or after the Closing Date under all of the Franchises,
Leases and Governmental Authorizations, and under those Access Agreements and
Other Agreements listed on Schedules 1.1(d) and 1.1(i) (such Franchises, Leases,
---------------- ------
Governmental Authorizations, Access Agreements and Other Agreements are
sometimes referred to herein as the "Assumed Contracts"); (ii) other obligations
and liabilities of Seller only to the extent that there shall be an adjustment
in favor of Buyer with respect thereto pursuant to Section 2.4; and (iii) all
obligations and liabilities arising out of Buyer's ownership of the Transferred
Assets or operation of the Systems after the Closing Date (collectively, the
"Assumed Obligations"). Notwithstanding the foregoing, upon the agreement of
Buyer, if the assignment and transfer of any Assumed Obligation would cause a
breach of or default under the Assumed Contract under which the Assumed
Obligation arises, and if the required consent to its transfer and assignment
has not been obtained by Closing, Seller agrees to continue, at Buyer's expense
(other than charges for personnel or internal operating administrative or
overhead expenses of Seller or any creditor of Seller), the Assumed Contract in
effect, and Buyer shall have and enjoy the benefit of the rights and obligations
thereunder as agent for Seller until such time as the consent is obtained (but
not to extend more than 90 days beyond the Closing Date, at which time such item
shall be deemed to have been automatically assigned and transferred to Buyer,
without any further act on the part of Buyer or Seller). All debts, liabilities
and obligations arising out of or relating to the Transferred Assets or the
operation of the Systems other than the Assumed Obligations shall remain and be
the obligations and liabilities solely of Seller, and Buyer shall not assume or
have any obligation or liability for such debts, liabilities or obligations.
Section 3. Representations, Warranties, Covenants and Agreements of Seller.
--------- ---------------------------------------------------------------
Seller represents, warrants, covenants and agrees, as of the date hereof
and on the Closing Date (except where another date or period of time is
expressly mentioned) that:
10
3.1. Organization, Qualification and Authority.
-----------------------------------------
(a) Seller is a limited partnership duly organized under the laws of
the State of Colorado and is duly qualified to transact business, and is in
good standing, in the State of Illinois;
(b) The character and location of the properties, assets, licenses and
rights used in the operation of the Systems and the nature of the Systems
as operated by Seller do not require Seller to qualify to transact business
in any jurisdiction other than the states set forth in Section 3.1(a); and
(c) Seller has full partnership power, capacity and authority to own
and lease the properties and assets used in the operation of the Systems,
to carry on the business of the Systems as presently conducted, and to
operate the Systems as heretofore operated by Seller.
3.2. Due Authorization. The execution and delivery of this Agreement and
-----------------
the performance of the transactions contemplated hereby have been duly
authorized and approved by all necessary partnership action of Seller, and by
appropriate resolutions duly adopted, and all other actions required to be taken
by law, by Seller's general partner. Seller has full partnership power to enter
into and to perform this Agreement and the transactions contemplated hereby.
This Agreement constitutes a valid and binding Agreement of Seller and is
enforceable against Seller in accordance with its terms (except as such
enforceability may be limited by bankruptcy, insolvency or similar laws, or by
general principles of equity relating to the availability of equitable
remedies).
3.3. No Conflicts. Subject to the receipt of the consents set forth in
------------
Schedule 3.3, neither the execution and delivery of this Agreement by Seller nor
------------
the consummation by Seller of the transactions contemplated by Seller herein,
nor the compliance by Seller with the terms, conditions and provisions hereof,
conflict with or will conflict with Seller's limited partnership agreement or
the articles of incorporation or bylaws of Seller's general partner, nor any
Lease, Access Agreement, Other Agreement or indenture, mortgage, deed of trust,
covenant, instrument, contract or agreement to which Seller is a party or by
which Seller, the Transferred Assets or the Systems is bound; any Franchise or
Governmental Authorization; the Communications Act; the Copyright Act; the
rules, regulations or policies of the FCC, the FAA or United States Copyright
Office; or any applicable federal, state or local law; nor result in a breach or
violation of or default under any of the same (whether immediate or subject to
the passage of time or giving of notice), nor cause the suspension, revocation,
impairment, forfeiture, nonrenewal or termination of any Governmental
Authorization or Franchise, or any other license, permit, franchise,
certificate, registration, consent or authorization.
11
3.4. Financial Statements.
--------------------
(a) The books of account and financial records of Seller are current
and have been maintained by Seller in the ordinary course of business.
Seller has prepared its financial statements relating to the Systems in
accordance with generally accepted accounting principles applied on a basis
consistent from period to period. Seller has delivered to Buyer: (i)
unaudited financial statements relating to the Systems (including opening
and year end balance sheets and an income and expense statement for each of
the two fiscal years ended December 31, 1994 and 1995, (collectively, the
"Historical Financial Statements"); (ii) monthly reports of all accounts
receivable of the Systems (including an aging thereof in month end
increments) ("Receivable Reports") for the period commencing January 1,
1996; and (iii) monthly managers' subscriber summary reports ("Subscriber
Reports") which include the Systems, separately listing total subscribers,
for the period following December 31, 1995. Seller also has delivered to
Buyer consistently prepared monthly financial statements for each of the
months since the end of Seller's fiscal year ended 1995 ("Operating
Reports") which reflect all ▇▇▇▇▇▇▇▇ for basic and premium services and
other sources of revenues, by category, for the interim period between
December 31, 1995 and the end of the month preceding the date of this
Agreement. Seller will deliver to Buyer: (A) as soon as they are
available, but in no event later than thirty (30) days after the end of
each month an Operating Report, a Subscriber Report and Receivable Report
for the Systems for the most recent month; and (B) such other financial and
operating information regarding the Systems and the Transferred Assets as
Buyer reasonably requests. Such financial statements have been and will be
prepared on a basis consistent from period to period. Except as set forth
in the Schedules hereto, each of such financial statements, Historical
Financial Statements, Receivable Reports, Subscriber Reports and such other
reports provided to Buyer is and will be true, correct and complete in all
material respects with respect to the subject matter contained therein, and
fairly presents, and will fairly present, the results of operation of
Seller and the Systems and related information, for the periods covered
thereby, and does not and will not omit to state or reflect any material
fact required to be stated or reflected therein or necessary to make the
statements therein not misleading, subject, however, to normal year end
audit adjustments with respect to unaudited information, which adjustments
are not material individually or in the aggregate.
(b) Since January 1, 1996, (i) with respect to the Systems, Seller has
not incurred any obligation or liability, contingent or otherwise (except
normal trade or business obligations incurred in the ordinary course of
business), the performance of which would be reasonably likely,
individually or in the aggregate, to have a material adverse effect on the
financial conditions or results of operations of the Systems, (ii) there
has been no material adverse change in the Transferred Assets or the
financial condition, liabilities or operations of the Systems, and to the
knowledge of Seller and without notice to the contrary, no fact or
condition exists or is contemplated or threatened that could reasonably be
expected to cause such material adverse change, other than changes
affecting the United States cable industry as a whole, including any change
12
arising from (A) legislation, litigation, rulemaking or regulation or (B)
competition caused by or arising from other multiple channel distribution
services.
(c) Except as set forth in Schedule 3.4(c), the Systems have no
---------------
outstanding claims, contingent obligations (whether as a guarantor,
indemnitor, surety, accommodation party or otherwise), liability for taxes
which are due and unpaid or long-term commitments or obligations, and, to
Seller's knowledge and without notice to the contrary, there are no
potential unasserted claims with respect to Seller, the Systems or the
Transferred Assets; to the knowledge of Seller and without notice to the
contrary, no person or entity has threatened to assert any of such claims
against Seller, the Systems or the Transferred Assets, except as set forth
in the financial statements provided under Section 3.4(a) or as set forth
in the Schedules to this Agreement.
3.5. Regulatory Licenses and Filings.
-------------------------------
(a) Except as set forth in Schedule 3.5(a): (i) Seller has timely
---------------
filed all notices and all Statements of Account and has made all required
royalty payments under the Copyright Act so as to qualify for the
compulsory license for the carriage of radio and television stations, and
has completed and filed all other registrations and filings required to be
filed with the FCC and FAA, copies of which have been delivered to Buyer by
Seller, and paid all amounts due in connection with such filings or arising
as a result of the information shown thereon; (ii) all Statements of
Account in connection with the operation of the Systems during the last
three (3) years have been completed in compliance in all material respects
with (S)111 of the Copyright Act; (iii) all royalty payments required to be
made in connection with the operation of the Systems during the last three
(3) years were remitted to the Copyright Office and were computed and
reported in accordance with the regulations adopted pursuant to (S)111 of
the Copyright Act; and (iv) the statements, representations, warranties and
calculations contained in and amounts paid under each of such notices,
filings and registrations are true and correct in all material respects and
consistent with applicable federal regulations.
(b) Except as set forth in Schedule 3.5(b), there is no legal action,
---------------
investigation or proceeding pending or, to the knowledge of Seller, and
without notice to the contrary, threatened (or basis existing therefor) for
the purpose of modifying, revoking, terminating, suspending or canceling
any of the Governmental Authorizations, the FCC Licenses, the FAA Licenses,
any Franchise, the compulsory copyright license under (S)111 of the
Copyright Act, or any of Seller's other authorizations or certificates, or
which would have a material adverse effect upon, or cause material
disruption to, the Systems or the consummation of the transactions
contemplated hereby.
(c) Within 90 days after Closing, or such shorter period as may be
required to enable Buyer to make a timely filing with respect to the six-
month Copyright reporting period in which the Closing occurs, upon the
request of Buyer Seller shall deliver to Buyer a certificate in the form
attached as Exhibit C signed by Seller setting forth
---------
13
Seller's gross receipts (calculated in a manner which is consistent with
the regulations of the Copyright Office adopted under (S)111 of the
Copyright Act) derived from the retransmission of any television or radio
broadcast signals during the portion of the applicable six-month reporting
period that includes the Closing Date.
3.6. Franchises and Other Authorities.
--------------------------------
(a) Except as set forth in Schedule 3.6, Seller has, and is in
------------
compliance in all material respects with (without waiver or other
forbearance of compliance), all Franchises and Governmental Authorizations,
including, but not limited to, all permits (including environmental
permits), licenses, consents, certificates, registrations and other
authorities and rights required by any statute, ordinance, regulation or
other legal authority relating or applicable to the Systems or the
Transferred Assets, and/or the ownership or operation thereof (the
Franchises, Governmental Authorizations and all of the foregoing being
collectively referred to herein as the "Authorities"). A photocopy of each
of which Authorities, as currently in effect, including all amendments,
modifications, consents or waivers of compliance thereof (including,
without limitation, all agreements relating to any form of rate regulation,
customer service and consumer protection requirements or standards) has
been delivered to Buyer by Seller. The Systems have no Authorities which
are not in written form. Seller also has delivered to Buyer a copy of all
material correspondence which resulted in any such amendment, modification,
consent or waiver. A list of the current franchise fees required to be
paid by Seller made under each of such Franchises is set forth in Schedule
--------
1.1(c);
------
(b) Except as set forth in Schedule 3.6, Seller has not previously
------------
caused, suffered or permitted any material default, dispute or
noncompliance to occur or exist, and there is no current default, dispute
or noncompliance, with respect to any Authority, and to the knowledge of
Seller, and without notice to the contrary, no ground or basis exists,
whether or not subject to the giving of notice or passage of time, for
cancellation, termination, suspension, restriction or limitation upon the
rights granted by any Authority; except as set forth in Schedule 3.6, all
------------
Authorities are in full force and effect; and
(c) For any Franchise that has an unexpired term of fewer than three
(3) years from the date of Closing, a timely request for renewal has been
submitted to the appropriate governmental authority pursuant to Section 626
of the Communications Act of 1934, as amended. Except as set forth on
Schedule 3.6, Seller (i) has not been notified in writing by a governmental
------------
authority with respect to any such Franchise of a preliminary decision not
to renew or of any finding that could reasonably be expected to serve as a
basis for a decision not to renew; and (ii) has no knowledge that any such
notice is to be received.
14
3.7. Status of the Systems.
---------------------
(a) The Systems have not less than 23,750 homes passed by not more
than approximately 313 miles of constructed and activated coaxial and/or
fiber optic cable. Seller's posted combined basic and tier rate as of the
date hereof is not less than the current rates set forth in Schedule 3.7(a)
---------------
and as of the Closing shall not be less than the Closing rates set forth in
Schedule 3.7(a).
---------------
(b) Schedule 3.7(b) sets forth as to the Systems: (i) each type of
---------------
cable television service offered by Seller; (ii) as of the date of this
Agreement the number of subscribers for each such service; (iii) as of the
date of this Agreement the rates charged for each service as of a date
within the most recent 10 day period; and (iv) as of the date of this
Agreement the subscribers in such System who receive services at a rate
below the Standard Basic Rate for such System, the amount charged to such
subscribers for such services and the term of the commitment to provide any
such services at less than the Standard Basic Rate. The Systems have the
ability, without additional capital expenditures, to deliver both a basic
and expanded basic service sold and supplied separately to subscribers
using the minimum bandwidth set forth in Schedule 3.7(b). The basic
---------------
service is composed of not more than the number of channels specifically
identified in Schedule 3.7(b) as those channels presently constituting
---------------
Seller's basic service package. Seller has delivered to Buyer strand maps
covering the areas comprising the Systems if Seller has such maps. Except
as set forth in Schedule 3.7(b), as of the date of this Agreement no other
---------------
person or entity has a franchise or is otherwise licensed to offer or
provide, or does offer or provide, cable television services as a cable
operator in any franchise territory of Seller, and to Seller's knowledge
without notice to the contrary (which knowledge shall include any written
application filed with a franchising authority) as of the date of this
Agreement no person or entity has made application to any franchising
authority to provide cable television services in any franchise territory
of Seller.
(c) Schedule 3.7(c) sets forth: (i) the channel capacity of each of
---------------
the Systems to carry video/aural signals which are the equivalent of
television signals (excluding FM channels), each of which delivers the
number of channels set forth therein without additional capital
expenditures; and (ii) the separate identity of such channels which have
been activated and which have not been activated.
(d) Except as set forth in Schedule 3.7(d), each of the Systems and
---------------
all of the channels carried thereon, without additional capital
expenditures, complies in all material respects with all applicable FCC
technical regulations, including the regulations contained at 47 C.F.R.
Part 76 and, to the extent applicable, Part 78 thereof, and with all
technical standards contained in the Authorities. The picture quality
delivered by the Systems through the Closing Date will not deteriorate from
the quality of picture currently being delivered by the Systems as of the
date hereof. Each of the Systems is currently maintained. There are no
obligations or liabilities to subscribers of the Systems
15
except: (i) with respect to deposits made by such subscribers which will
be transferred to Buyer at the Closing, (ii) the obligation to supply
services to subscribers in the ordinary course of business, and (iii) as
disclosed herein or in the Schedules attached hereto. There are no
complaints of subscribers of which Seller has knowledge or notice that have
not been resolved or (A) will not be resolved in the ordinary course of
business without unusual expense or (B) if not resolved, which will have a
material adverse effect on the Systems individually or in the aggregate.
Since January 1, 1996, Seller has provided a consistent level of customer
service to subscribers of the Systems. Except as set forth in Schedule
--------
3.7(d), the customer service level provided by Seller complies with the
------
standards established by the customer service regulations adopted by the
FCC which became effective on July 1, 1993 and, if applicable, all other
customer service standards established by the grantors of the Franchises.
Except as set forth in Schedule 3.7(d), as of the date of this Agreement
---------------
Seller has received no notice that any franchising authority will seek to
impose the customer service levels established by such FCC regulations.
(e) Except with respect to debts or accounts payable that are being
contested in good faith and for which adequate reserves have been provided:
(i) all debts to contractors, subcontractors, materialmen and other persons
supplying services or property with respect to the construction or
maintenance of the Systems have been paid in full or are included in
Seller's accounts payable, and (ii) all accounts payable with respect to
the construction, maintenance or operation of the Systems have been paid or
are current in accordance with their terms and will be paid by Seller in
accordance with such terms.
(f) There has not occurred any sale or other transfer of ownership of
any System or any material portion thereof since October 4, 1989 other than
assets sold in the ordinary course of business.
(g) Seller has delivered, or within 10 days after the date of this
Agreement will deliver:
(i) a list of the channels presently constituting Seller's
"basic" television package, any "expanded basic" package and each of
Seller's tiers of pay and premium channels on a tier-by-tier basis,
and a description of all changes in channels carried in Seller's
"basic" television package, any expanded basic package and its tiers
of pay and premium channels, including all changes in rates with
respect thereto, since January 1, 1992;
(ii) a list of all local commercial television and radio
broadcast stations presently carried on the Systems, together with the
channel on which each such station was carried on the Systems on (A)
January 1, 1992 and (B) July 19, 1985, to the extent such information
is available. Seller has not received any notice from any local
commercial television or radio broadcast station presently carried on
the Systems that such station desires to be carried on any channel
other than the channel on which such station presently is carried;
16
(iii) a list of all local non-commercial television and radio
broadcast stations presently carried on the Systems, together with the
channel on which each such station was carried on the Systems on July
19, 1985, to the extent such information is available; and
(iv) a list of each commercial and non-commercial television
broadcast station which Seller and/or its predecessors notified, and
each such station which Seller and/or its predecessors was legally
entitled to notify, on or prior to May 3, 1993, that such station did
not legally qualify for mandatory carriage under the FCC's "must
carry" rules due to signal level, copyright or other legal exemptions,
and specifying for each such station the legal reason why such station
was not entitled to mandatory carriage.
(h) None of the grantors of the Authorities is entitled to be
grandfathered to establish rates under 47 U.S.C. (S)543(j) or the
regulations thereunder.
(i) Each of the Systems was initially activated prior to October 4,
1989.
(j) Except as set forth on Schedule 3.7(j), as of the date of this
---------------
Agreement, (i) no grantor of any of the Authorities has applied to the FCC
for certification under 47 U.S.C. (S)543 and the regulations thereunder or
has indicated an intention to make such application, and (ii) no person has
filed a Form 329 or other complaint with the FCC thereunder.
(k) Except as set forth in Schedule 3.7(k), no basis exists under the
---------------
1992 Act (after giving effect to provisions of the 1992 Act which otherwise
would be effective but for the passage of time) as in effect on the date of
this Agreement, for any rollback of rates for "basic" service, or any
rollback or refund of rates for any premium or pay service, with respect to
any of the Systems.
3.8. Legality of Signals Carried; Compliance with Applicable Laws.
------------------------------------------------------------
(a) Schedule 3.8(a) lists all television and radio stations and other
---------------
programming or signals carried by each of the Systems, separately setting
forth and listing all: (i) commercial and non-commercial television and
radio broadcast stations and (ii) satellite delivered programming carried
by each System. As to each such television and radio broadcast station,
Schedule 3.8(a) also indicates whether its signal is of local or distant
---------------
origin under the Communications Act, and whether such signal is received
off-air, or via satellite or microwave. Timely notice was given to each
commercial and non-commercial station carried by the Systems, and to each
such station which was entitled to notice, under the FCC's mandatory
broadcast station carriage rules contained in and adopted under the 1992
Act. There are no broadcast stations that are entitled to carriage under
the FCC rules which are not carried by the Systems, except as separately
listed in Schedule 3.8(a), which list specifies the exemption which
---------------
provides the basis for not
17
carrying each such station. Schedule 3.8(a) also indicates, as to each
---------------
broadcast station that is entitled to carriage on the Systems under FCC
rules, whether the station has elected mandatory carriage or retransmission
consent and the date of such station's notice. As to each such station
which requested retransmission consent, the status as of the date of this
Agreement of any negotiations therefor is set forth in Schedule 3.8(a).
---------------
Each retransmission agreement which has been entered into by Seller with
respect to the Systems is listed in Schedule 3.8(a). A copy of each
---------------
retransmission agreement entered into by Seller with respect to the
Systems, and of all written notices and correspondence sent or received in
connection with such mandatory carriage and retransmission consent matters
has been provided to Buyer. The Systems have no retransmission agreement
which is not written. No notices or demands have otherwise been received
by Seller with respect to the Systems challenging the right of any of the
Systems to carry any television or radio broadcast channel or other
programming, or asserting an obligation of any of the Systems to carry any
television or radio broadcast channel or other programming not carried by
the Systems. Except as set forth in Schedule 3.8(a) or 3.8(b), the Systems
--------------- ------
are operated in compliance in all material respects with all FCC and FAA
regulations and rules and Seller is charging such rates as are allowable
under rules and regulations promulgated by the FCC under the 1992 Act and
any authoritative interpretation thereof and any other Governmental
Authority, if such rates are subject to regulation by any Governmental
Authority, including the local franchising authority and/or the FCC. The
Systems are in full compliance in all material respects with all FCC and
FAA regulations relating to tower lighting and marking requirements and
aeronautical frequency signal leakage requirements, including compliance
with the Cumulative Leakage Index specifications ("CLI") and Proof of
Performance technical tests of the FCC. All Systems using restrictive
frequencies (108-137 mhz and 225-245 mhz) comply with CLI requirements.
(b) Except as set forth in Schedule 3.8(b), Seller has conducted the
---------------
business of the Systems, including the ownership and use of the Transferred
Assets, in accordance with, and Seller, the Systems and the Transferred
Assets are in compliance in all material respects with the Communications
Act, the Copyright Act and all other applicable federal, state and local
laws, ordinances, rules and regulations, including, but not limited to, all
laws, ordinances, rules and regulations relating to the installation,
maintenance or operation of cable television systems, building
construction, use or occupancy, zoning, the environment, and the treatment,
handling, use, existence or disposal of pollutants, contaminants or
hazardous, toxic or regulated substances or wastes. Seller has not
received any notice of noncompliance, or any waiver or postponement of or
stay from full and immediate compliance with, and neither Seller nor the
Transferred Assets is the subject of any pending, or, to the knowledge of
Seller and without notice to the contrary, a potential subject, of any
claims, charges or fines under, any of the Franchises, the Governmental
Authorizations or the Authorities or under any such laws, rules or
regulations, nor has Seller received any notice calling attention to the
need for any work, repairs, construction, alterations or installation on or
in connection with the Transferred Assets or the Systems that has not been
corrected.
18
(c) Neither Seller nor, to the knowledge of Seller, its officers,
general partner, employees or agents has made any illegal or questionable
payments to any third party.
3.9. Real Property and Leases.
------------------------
(a) All real property (including, without limitation, all interests in
any rights to real property) and improvements located thereon, and in each
case a general description thereof, which is owned by Seller is set forth
in Schedule 1.1(g) (the "Owned Real Property").
---------------
(b) A description of real property leased by Seller and of the
improvements thereon and the use made thereof are set forth in Schedule
--------
1.1(f) (the "Leased Real Property").
------
(c) Seller has (and will convey to Buyer at the Closing) fee simple
title to the Owned Real Property and valid and binding leasehold interests
(the "Real Estate Leases") with respect to the Leased Real Property
(collectively, the "Real Property"). Except as set forth in Schedule
--------
3.9(c), Seller is in peaceable possession of the Owned Real Property and
------
Leased Real Property. The Owned Real Property and Seller's interest in the
Leased Real Property are free and clear of all liens, security interests,
pledges and encumbrances, other than the Permitted Liens or liens, security
interests, pledges and encumbrances which will be discharged and released
on or prior to the Closing Date, and are free and clear of all defaults,
adverse claims, title impediments, encroachments, boundary disputes,
covenants, restrictions, rights of way and title objections that would
conflict in any material respect with Buyer's use of said property in the
manner heretofore used by Seller. With respect to each Real Estate Lease:
(i) the Lease is in full force and effect; (ii) all accrued and payable
rents have been paid; (iii) there is no default of Seller, nor to Seller's
knowledge, of any other party thereunder, and there is no waiver,
indulgence or postponement of any obligations thereunder; (iv) to Seller's
knowledge and without notice to the contrary, no event that with the giving
of notice, the lapse of time, the happening of any further event or
otherwise would become a default, has occurred under any such Lease; and
(v) Seller has provided Buyer with a photocopy of each written Real Estate
Lease, including all amendments, modifications, consents, waivers and all
material correspondence relating thereto, and has included in Schedule
--------
1.1(f) a description of each such Real Estate Lease which is not in written
------
form.
(d) Seller has delivered to Buyer all surveys of and title
commitments and title policies with respect to, the Owned Real Property and
the Leased Real Property which are in the possession or control of Seller.
3.10. Personal Property. Seller has (and will convey to Buyer at the
-----------------
Closing): (a) good, valid and marketable title to all of the tangible assets,
machinery, equipment and other tangible personal property of the Systems
("Seller's Personal Property"), including, without limitation, the personal
property listed in Schedule 1.1(a), the Governmental Authorizations, the
---------------
19
Franchises and the Access Agreements, and (b) valid and binding leasehold
interests with respect to the Leased Personal Property (as hereinafter defined),
in each case free and clear of all liens, security interests, pledges and
encumbrances, other than Permitted Liens or liens, security interests, pledges
and encumbrances which will be discharged and released on or prior to the
Closing Date, and free and clear from any other interest, adverse claim,
covenant or restriction that would conflict in any material respect with Buyer's
use thereof in the manner heretofore used by Seller. All personal property
leased by Seller is identified in Schedule 1.1(f) (the "Leased Personal
---------------
Property"). With respect to each such Lease: (i) the Lease is in full force
and effect; (ii) all accrued and payable rents have been paid; (iii) there is no
default by Seller thereunder nor to Seller's knowledge, of any other party
thereunder, and there is no waiver, indulgence or postponement of any
obligations thereunder; (iv) to Seller's knowledge and without notice to the
contrary, no event that with the giving of notice, the lapse of time, the
happening of any further event or otherwise would become a default, has occurred
under any such Lease; and (v) Seller has provided Buyer a photocopy of each
written Lease, including all amendments, modifications, consents, waivers and
all material correspondence relating thereto, and has included in Schedule
--------
1.1(f) a description of each such Lease which is not in written form.
------
3.11. Contracts. The Leases, Access Agreements, and Other Agreements
---------
listed in the Schedules to this Agreement constitute all of the contracts which
are used, held for use or are required primarily to conduct the business of the
Systems as heretofore conducted by Seller (except oral subscriber contracts and
miscellaneous service or other contracts or agreements, none of which is
material and each of which is terminable without penalty at will). Except as
set forth in the Schedules hereto, each of such contracts and agreements is in
full force and effect and current in all material respects as to the performance
thereof by Seller, and to Seller's knowledge (and without notice to the
contrary) by the other party(ies) thereto, in accordance with its terms, without
waiver, indulgence or postponement of any of the obligations thereunder; and to
the knowledge of Seller and without notice to the contrary, no event has
occurred which constitutes, or with the giving of notice, passage of time or
otherwise will constitute, a default thereunder. Seller is not entitled to the
benefit of any representations, warranties and agreements in connection with
Seller's acquisition or the construction of the Systems or any Transferred
Assets.
3.12. Employee Agreements and Benefits; Labor Matters. Schedule 3.12
----------------------------------------------- -------------
lists as of the date of this Agreement the employees of Seller in connection
with the operation of the Systems. Schedule 3.12 also lists the date of
-------------
employment, age, current compensation level, date of last increase in
compensation and prior compensation level of each of such persons and describes
all compensation plans or arrangements, profit sharing, equity option or
purchase plans, and other agreements or arrangements under which employees of
Seller or their dependents receive, or are entitled to receive in the future,
compensation or benefits. Seller has delivered to Buyer a true and correct copy
of all employment handbooks and written materials stating employment policies of
Seller. Seller has no non-written employment policies. In connection with the
Systems, Seller is not a party to or bound by any written or unwritten
employment, non-competition or consulting agreement or understanding which is
not terminable at will without penalty. In
20
connection with the Systems, Seller is not a party to any collective bargaining
agreement and is not the subject of any complaint or proceeding before the
National Labor Relations Board or similar regulatory body. As of the date of
this Agreement, Seller is not aware of any activities of any labor union or
other party which is currently seeking to represent or organize the employees of
Seller, and Seller has not made any agreement with or commitment to or conducted
negotiations with any labor union or employee association with respect to any
future agreement. There is neither pending nor (to the knowledge of Seller and
without notice to the contrary) threatened any labor dispute, strike or work
stoppage or slowdown which affects or may affect Seller, the Transferred Assets
or the Systems. Except as set forth in Schedule 3.12, Seller is in compliance,
-------------
and since January 1, 1996 has complied, in all material respects with the
relevant provisions of the Communications Act, Subpart E of Part 76 of the FCC's
rules and regulations and all other federal, state and local laws and related
rules and regulations and agreements relating to employment generally and all
aspects thereof, including hiring, firing, discipline, leave, wages, hours,
employee safety and conditions of employment. With respect to the employees of
the Systems, Seller has no liability for any arrears in wages, salaries or
overtime pay (other than for Seller's current pay period) or for any vacation,
time off or pay in lieu of vacation or time off (other than for normal accruals)
or for any other payments or penalties for failure to comply with any statute,
law, rule or regulation or agreement. Seller shall indemnify Buyer and hold
Buyer harmless from and against all such sums (including, but not limited to,
those sums which relate to Seller's current pay period and its normal accruals).
Except as set forth on Schedule 3.5(b), as of the date of this Agreement, no
---------------
proceedings before any court, governmental agency, or arbitrator relating to
such matters, including, but not limited to, unfair labor practice claims, are
pending or (to the knowledge of Seller and without notice to the contrary)
threatened involving Seller. Buyer shall have no obligation to hire any
employee or agent of Seller in connection with the transactions contemplated
hereby.
3.13. ERISA.
-----
(a) Other than as set forth in Schedule 3.13, Seller does not
-------------
provide, contribute to or maintain for the benefit of employees of the
Systems any employee benefit plan (hereinafter referred to as a "Plan"), as
defined in Section 3(3) of the Employee Retirement Income Security Act of
1974, as amended, and the rules and regulations thereunder ("ERISA"), any
Plan which is a "Group Health Plan" (as defined in Section 4980B(g)(2) of
the Code), or any Plan which is an "Employee Welfare Benefit Plan" (as
defined in Section 3(1) of ERISA), nor has Seller provided to such
employees any benefit which is a "Disqualified Benefit" (as defined in
Section 4976(b) of the Code) for which an excise tax would be imposed. [For
purposes of this Section 3.13, Seller shall include all trades or
businesses (whether or not incorporated) which are a member of a group of
which Seller is a member and which are under common control within the
meaning of Section 414 of the Internal Revenue Code of 1986, as amended,
and the rules and regulations thereunder (hereinafter the "Code").]
(b) The execution and delivery of this Agreement and the consummation
of the transactions contemplated hereby will not result in: (i) a complete
or partial
21
withdrawal from any Plan, (ii) any funding deficiency or lien under ERISA,
(iii) any payment obligation (whether of severance pay or otherwise),
acceleration, vesting or increase in benefits to any person, or (iv) the
assessment of any amounts, including interest and penalties, or incurrence
of any costs or expenses (including additional taxes, payment of any
funding deficiency, expenses of compliance or any related accounting or
legal fees and costs) attributable to the existence of any Plan.
3.14. Access Agreements. Seller possesses and is in compliance in all
-----------------
material respects with all Access Agreements (including, but not limited to,
rights of access to all trailer parks, hotels, motels, apartments, condominiums
and other multiple dwelling units served by the Systems and the Transferred
Assets), permits and authorizations used by Seller or necessary for the
installation, operation, maintenance, repair or replacement of all cables,
lines, towers, equipment and other facilities which relate to the ownership or
operation of the Systems and the Transferred Assets. A list of each pole
attachment agreement and the number of poles to which Seller has attached cable
under each of such agreements is set forth in Schedule 1.1(d). Except as set
---------------
forth in Schedule 1.1(d), Seller has not made, and is not required to make, any
---------------
deposits under any of such agreements in order to secure Seller's performance
thereunder. Seller has delivered to Buyer a true and complete photocopy of each
such Access Agreement, permit and similar authorization. Seller has no such
Access Agreements, permits or authorizations which are not in written form.
Seller also has delivered to Buyer a copy of all material correspondence which
resulted in any amendment, modification, consent or waiver of such Access
Agreements. Except as set forth in Schedule 1.1(d), Seller has not received
---------------
notice of any noncompliance or additional make-ready or other requirements under
any of such Access Agreements, permits or authorizations which has not been
remedied or will not be remedied by Seller prior to Closing.
3.15. Bonds, Insurance and Letters of Credit. A description of each
--------------------------------------
insurance policy, each performance bond and each letter of credit required to be
maintained, or which is maintained covering the property comprising the Systems
and Transferred Assets, and/or the operation of the Systems, is set forth in
Schedule 3.15, and a copy of each such letter of credit or bond has been
-------------
delivered to Buyer by Seller. Each of such policies, letters of credit and
bonds is current and in full force and effect. Seller has not received any
notice of default under or intended cancellation or nonrenewal of any such
policies, letter of credit or bonds. There are no pending or, to Seller's
knowledge without notice to the contrary, threatened requests to make a draw
under any such letter of credit.
3.16. Litigation. Except as set forth in Schedule 3.5(b) or Schedule
---------- --------------- --------
3.16, neither Seller nor the Transferred Assets is a party to, subject to or
----
bound by any judgment, order, injunction or decree of any court, administrative
agency, arbitration proceeding or other governmental authority that may restrict
or interfere with the execution and delivery of this Agreement or the
consummation of the transactions contemplated hereby, the operation of the
Systems or the ownership or use of the Transferred Assets by Buyer subsequent to
the Closing. Seller is not a party to, nor to the knowledge of Seller and
without notice to the contrary is Seller threatened with, any investigation by
any governmental agency or any legal action or other proceeding before any
court, arbitrator or mediator, administrative or regulatory agency which might
22
adversely affect the properties, business or condition (financial or otherwise)
of the Systems or the transactions contemplated hereby, and Seller does not know
or have notice of any basis for any such action or proceeding.
3.17. Intellectual Property. Other than Seller's name and the name of
---------------------
Seller's general partner, Seller is not the owner, user or licensee of any
patent, trademark, service ▇▇▇▇, trade name or copyright (or application
therefor), nor are any of such items used in connection with the Systems.
Seller has not, nor has the use of any such item in connection with the Systems,
infringed upon or conflicted with any patent, trademark, service ▇▇▇▇, trade
name or copyright of others, and Seller has not received any notice of any such
claimed infringement or conflict. During the past five (5) years, Seller has
not existed under or used any name other than "Cable TV Fund 14-A, Ltd.", "▇▇▇▇▇
Intercable, Inc." and "▇▇▇▇▇ Intercable."
3.18. Payment of Taxes. Within the time and in the manner prescribed by
----------------
law, except as otherwise set forth in Schedule 3.18, Seller has: (a) filed all
-------------
federal, state and local tax returns required to be filed; and (b) fully paid
all federal, state and local taxes, charges and assessments of every kind that
are due and payable with respect to the Transferred Assets, the Systems or the
operation thereof, including, without limitation, all payroll, sales, use,
copyright, license, franchise, property and income taxes, charges and
assessments, the failure of which to be filed or paid could adversely affect the
Transferred Assets or result in the imposition of an encumbrance upon the
Transferred Assets, except such amounts as are being contested diligently and in
good faith and for which adequate reserves have been established. Except as set
forth in Schedule 3.18 hereto, no audit or investigation of the tax treatment of
-------------
any of Seller's returns or reports in connection with the Systems or the
Transferred Assets is in progress, pending or, to the knowledge of Seller and
without notice to the contrary, threatened, and, to the knowledge of Seller and
without notice to the contrary, there exists no basis for the assertion or
assessment of any additional taxes against Seller, the Systems or the
Transferred Assets. No waiver or consent to the extension of any statute of
limitations has been given and is in effect with respect to the assessment of
any taxes against Seller, the Systems or the Transferred Assets. Seller has
accrued on its books all taxes, charges and assessments accruing on the
Transferred Assets, the Systems or the operation thereof which are not presently
payable and will pay the same when due and in any event prior to the time when
any penalty or interest arises for the nonpayment thereof, or when the
nonpayment thereof will result in or constitute a lien, charge, security
interest, encumbrance or adverse claim upon or against the Transferred Assets,
the Systems or Buyer.
3.19. Seller's Accounts and Promotions.
--------------------------------
(a) Except as set forth in Schedule 3.19(a), Seller bills its
----------------
subscribers for cable television services monthly and is current in its
▇▇▇▇▇▇▇▇. Such bills are due and payable in full on the 10th day of the
month in which services are received.
(b) As of the date of this Agreement, except as set forth in
Schedule 3.19(b), Seller does not enter into any written subscription or
----------------
converter deposit agreements.
23
(c) Seller's other billing and collection terms and practices are set
forth in Schedule 3.19(c).
----------------
(d) Since January 1, 1996, Seller has not given any concession, price
discount, free service, free installation or promotional allowance, except
as set forth in Schedule 3.19(a) or in Seller's 1996 and 1997 marketing
----------------
plans, which are attached as Schedules 3.19(d) and 3.7(b).
----------------- ------
(e) As of the date of this Agreement, except as set forth in Schedule
--------
3.19(e), Seller has no obligation to provide advertising time or other
-------
concessions under any barter or trade-out arrangement.
3.20. Environmental Compliance.
------------------------
(a) Except as set forth in Schedule 3.20, no asbestos-containing
-------------
materials, equipment containing PCB's, underground storage tanks, hazardous
substances, wastes or other pollutants or contaminants [as such terms are
defined under applicable federal and state environmental laws, including
the Comprehensive Environmental Response, Compensation and Liability Act of
1980 and the rules and regulations thereunder, as amended, 42 U.S.C.
(S)9601(14)] are or have been located, disposed of, installed, used or
exposed on or in connection with any of the Transferred Assets, including
the Owned Real Property and the Leased Real Property ("Environmental
Matters"). In connection with the Systems and the Transferred Assets,
Seller has not disposed of or requested any person to dispose of any
asbestos-containing materials, equipment containing PCBs, underground
storage tanks, hazardous substances, wastes, pollutants or contaminants at
any site, including any site being investigated by any environmental agency
or which is the subject of any administrative or judicial proceeding
relating to the clean-up of materials, except at a site duly licensed for
the receipt and disposal of such materials and except in compliance with
all applicable law.
(b) Except as set forth in Schedule 3.20, Seller has no knowledge or
-------------
information of the existence of any Environmental Matters affecting any
other property which would adversely affect any Owned Real Property or
Leased Real Property.
3.21. Continuation of Business. Since June 1, 1996, Seller has continued
------------------------
the operations of the Systems in accordance with Seller's past practices and has
maintained inventories of supplies and equipment in connection with the
operation of the Systems and provided services to subscribers in accordance with
Seller's past practices. Seller has continued to perform routine and required
maintenance on, and replaced when necessary and otherwise in accordance with
Seller's past practices, all machinery, equipment, devices, cable, tools,
vehicles and other items of personal property owned or used by Seller.
3.22. Approvals and Consents. Seller has included in Schedule 3.22 a
---------------------- -------------
complete list and description of the relationship of all persons (including, but
not limited to, governmental
24
authorities and agencies, creditors, and each party to any other instrument or
agreement to which Seller is a party or by which Seller or the Transferred
Assets is bound or who is affected by the assignment of any rights to be
transferred or obligations to be assumed hereunder) who are entitled to notice
of, or whose consent is required for, the execution of this Agreement or the
consummation of the transactions contemplated hereby by Seller in order to
accomplish the assignment or transfer of any property, instruments or documents
contemplated herein or to preclude any cancellation, suspension, termination or
reformation of any instrument, agreement or right.
3.23. Other Financial Interests. Except as set forth in Schedule 3.23,
------------------------- -------------
Seller has no direct or indirect financial interest in any video programmer, or
any competitor, supplier, customer, lessor or lessee of Seller.
3.24. Complete Disclosure. Seller has no knowledge of any proposed or
-------------------
actual increase in fees or charges under any Franchise, Governmental
Authorization, Authority, Access Agreement or any other contract or agreement,
which would materially adversely affect the Systems or the operation or
financial condition thereof or any of Seller's rights or ability to enter into
and consummate the transactions contemplated by this Agreement or comply with
the terms and conditions hereof. No information, representation, warranty,
covenant or agreement of Seller in this Agreement or any Schedule hereto or
given in any certificate, memorandum, instrument or document or otherwise
furnished by or on behalf of Seller in connection with the transactions
contemplated hereby contains or will contain any untrue statement of a material
fact or omits or will omit to state a material fact necessary to make the
statements contained herein and therein not misleading.
Section 4. Representations, Warranties, Covenants and Agreements of Buyer.
--------- --------------------------------------------------------------
Buyer represents, warrants, covenants and agrees as of the date hereof and
on the Closing Date (except where another date or period of time is expressly
mentioned) that:
4.1. Organization and Authority of Buyer. Buyer is a limited partnership
-----------------------------------
duly organized and validly existing under the laws of the State of Missouri and
is duly qualified to transact business and is in good standing in the State of
Illinois. Buyer has full partnership power, capacity and authority to enter
into this Agreement, to consummate the transactions contemplated herein and to
own and operate its properties, including the Transferred Assets, and to carry
on the business of the Systems subsequent to the Closing.
4.2. Due Authorization by Buyer. The execution and delivery of this
--------------------------
Agreement and the performance of the transactions contemplated herein have been
duly authorized and approved by all necessary partnership actions of Buyer, and
by appropriate resolutions duly adopted, and all other actions required to be
taken by law, by Buyer's general partner. Buyer has full partnership power, to
enter into and to perform this Agreement and the transactions contemplated
hereby. This Agreement constitutes a valid and binding agreement of Buyer and
25
is enforceable against Buyer in accordance with its terms (except as such
enforceability may be limited by bankruptcy, insolvency or similar laws or by
general principles of equity relating to the availability of equitable
remedies).
4.3. No Conflicts. Neither the execution and delivery of this Agreement
------------
nor the consummation of the transactions contemplated by Buyer herein, nor the
compliance by Buyer with the terms, conditions and provisions hereof, conflict
with or will conflict with the terms of the certificate or agreement of limited
partnership of Buyer or of Buyer's general partner or any indenture, mortgage,
deed of trust, covenant, agreement or other instrument to which Buyer is a party
or by which Buyer or any of its property is bound; the Communications Act; the
rules, regulations or policies of the FCC, the FAA or United States Copyright
Office; or any applicable federal, state or local law, nor cause the suspension,
revocation, impairment, forfeiture, nonrenewal or termination of any license,
permit, franchise, certificate, consent or authorization to which Buyer is a
party or is subject.
4.4. Litigation. Buyer is not a party or subject to, or bound by any
----------
judgment, order, injunction or decree of any court, administrative agency,
arbitration proceeding or other governmental authority that may restrict or
interfere with the execution and delivery of this Agreement or the consummation
of the transactions contemplated hereby.
4.5. Complete Disclosure. No information, representation, warranty,
-------------------
covenant or agreement of Buyer in this Agreement or given in any certificate,
memorandum, instrument or document or otherwise furnished or to be furnished by
or on behalf of Buyer in connection with the transactions contemplated hereby
contains or will contain any untrue statement of a material fact or omits or
will omit to state a material fact necessary to make the statements contained
herein and therein not misleading.
Section 5. Covenants and Further Agreements.
--------- --------------------------------
5.1. Application for Assignment of Franchises and Licenses.
-----------------------------------------------------
(a) Seller and Buyer agree to join in and file and to take such other
actions as are necessary, on forms provided by Buyer or otherwise
satisfactory to Buyer and its lenders, to obtain, at Seller's expense
(excluding Buyer's attorneys' fees, personnel costs and travel expenses),
the approval of applications or requests for approval or consent: (a) with
each local government, the consent of which is necessary to the assignment
of the Franchises and for the operation of the Systems by Buyer on and
after the Closing, (b) with the FCC and the FAA for the assignment of the
FCC Licenses and the FAA Licenses, if any, and (c) with every other
authority, person or entity with respect to any Governmental Authorization,
license, permit, copyright, Lease, Access Agreement or Other Agreement to
which Seller is a party or which affects the transfer or operation of the
Transferred Assets and the Systems, the approval or consent to transfer of
which is required by the terms of the underlying document. Buyer agrees to
provide to any
26
authority, person or party such information as may be reasonably requested
to determine whether to grant approval or consent to the transactions
contemplated by this Agreement.
(b) If applicable, Buyer and Seller, as soon as practicable following
the execution and delivery of this Agreement, shall file the required
notification with the Federal Trade Commission and the Antitrust Division
of the Department of Justice under the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Anti-Trust
Improvements Act of 1976, as amended (the "HSR Act"). Buyer and Seller
shall comply fully with all applicable notification, reporting and other
requirements of the HSR Act, and any similar requirements of any other
jurisdiction. All actions required by Buyer and Seller under this Section
5.1(b) shall be at their own respective expenses, except that Buyer and
Seller shall each pay one-half of the filing fee with respect to such HSR
Act filing.
5.2. Information; Consultation; Confidentiality.
------------------------------------------
(a) Seller will give Buyer (at Buyer's expense) access to and permit
Buyer to review the Transferred Assets and the Systems, the related books
and records, and such other information as shall be reasonably requested by
Buyer, including, but not limited to, access to all books, records and
other information as Buyer may request for the purpose of providing the
FCC, state cable commissions, the grantors of the Franchises or the
Authorities and others with such information concerning rates and the
operations of the Systems, as Buyer, the FCC, state cable commissions, the
grantors of the Franchises or Authorities and others may request or
require, such information and records to include information as to original
cost of services for the purpose of justifying rates. Seller agrees to
continue to be reasonably available through the Closing Date and for 90
days thereafter, at no charge or cost to Buyer, for consultation with
representatives of Buyer with respect to the operation, management and
business of the Systems; provided that Seller will not be required to
maintain any representative at the Systems. Seller has preserved in
confidence, and from and after the date hereof will continue to preserve in
confidence, all of the Systems' confidential information and trade and
business secrets. No party hereto will make or authorize any public
announcement or disclosure relating to the transactions contemplated by
this Agreement without first consulting with the other party, except for
disclosures necessary, useful or appropriate in order to satisfy the
conditions to Closing or as required by law.
(b) If this Agreement terminates without a Closing, Buyer agrees to
return to Seller all written information in Buyer's possession furnished to
Buyer by Seller, including copies thereof, and all other materials and
tangible media relating to the Systems or Seller. From the date of this
Agreement to the Closing Date, or indefinitely hereafter if this Agreement
terminates without a Closing, Buyer will preserve in confidence and not
disclose, any confidential information of Seller to any third party,
27
except to Buyer's legal, accounting and other advisors, to Buyer's
employees and agents, and as otherwise necessary, useful or appropriate in
order to take such steps as are necessary or desirable to satisfy the
conditions of Closing or as required by law.
5.3. Period Pending Closing. Seller covenants and agrees that between the
----------------------
date of this Agreement and the Closing Date:
(a) Seller will:
(i) pay, when due, all its accounts payable and other debts
relating to Seller, the Systems and the Transferred Assets, the
failure of which to be paid could adversely affect the Transferred
Assets or result in the imposition of an encumbrance upon the
Transferred Assets, except such amounts as are being contested
diligently and in good faith and for which adequate reserves have been
maintained; and
(ii) promptly give notice to Buyer of the receipt by Seller of
any notice of any action, proceeding or investigation with respect to
the Systems or the Transferred Assets.
(b) Seller will not, without Buyer's prior written consent, which
consent shall not be unreasonably withheld in the case of Section (i)
below:
(i) Transfer. Sell, assign, transfer or convey any of the
--------
Transferred Assets or any portion of the Systems with a book value or
sale price of more than $10,000;
(ii) Encumbrances. Subject any of the Transferred Assets or the
------------
Systems to any security interest, lien, restriction, pledge, charge,
adverse claim or encumbrance not set forth in the Schedules hereto as
of the date of execution of this Agreement which would not be
discharged on or prior to the Closing Date;
(iii) Maintenance. Fail to: (A) keep the Transferred Assets,
-----------
the Systems or the physical plant constituting a part thereof in a
current state of repair and operating efficiency, ordinary wear and
tear excepted; (B) maintain the level of inventories and supplies of
the Systems in accordance with Seller's past practice or otherwise as
necessary to the operation of the Systems as heretofore conducted by
Seller; or (C) maintain any insurance policies, bond or letter of
credit affecting the Transferred Assets or the Systems in effect;
(iv) Books and Records. Fail to currently maintain the books
-----------------
and records relating to the Systems' financial condition, the
Transferred Assets or the operation of the Systems, including, but not
limited to, books and records relating to subscriber orders,
disconnections or complaints;
28
(v) Promotions. Other than as described in Schedule 3.19(d),
----------
waive the charge for the first month of cable service or installation
or grant any other promotion (whether consisting of free or reduced
charge for installation or service or otherwise which are not in
accordance with Seller's past practices);
(vi) Retransmission Consents. Enter into any agreement with
-----------------------
respect to the retransmission of signals of commercial stations,
Buyer's consent to such agreement not to be unreasonably withheld,
provided, however, that Buyer shall not be required to consent to any
such agreement which would require a payment by Buyer;
(vii) Insurability. Take any action or refrain from taking any
------------
action if the taking of such action or failure to take such action,
respectively, adversely affects the insurability of the Transferred
Assets or the Systems; or
(viii) Other. Otherwise deal with the Transferred Assets or the
-----
Systems or conduct and manage the Transferred Assets or the Systems in
a manner which, when judged in relationship to Seller's past dealings
and operations, is extraordinary or outside the usual and ordinary
course of routine operation, including, but not limited to, any
modifications in Seller's marketing efforts, subscriber services,
subscriber relations programs and installations. Seller will use its
good faith efforts to preserve the goodwill of suppliers, subscribers
and others having business relations with the Systems. Seller shall
not make, enter into, modify, amend or allow to lapse or become
impaired, any contract, agreement, commitment or other obligation
affecting the Systems, the Transferred Assets or any right or
obligation to be assigned to or assumed by Buyer, except agreements
which are cancelable within 90 days, without penalty, or under which
the commitment of Seller does not exceed $20,000 individually or
$100,000 in the aggregate.
5.4. Cooperation. After the Closing Date, Buyer shall provide Seller and
-----------
Seller's representatives with reasonable access to the books of account and
other records of the Systems and Transferred Assets which are reasonably
required or requested by Seller for the preparation of income tax returns and
other proper purposes applicable to periods prior to the Closing Date,
including, without limitation, any determination of amounts to be paid by one
party hereto to another. Seller will provide Buyer and Buyer's representatives
with reasonable access to any records or documents pertaining to the Systems and
the Transferred Assets which are reasonably required or requested by Buyer for
proper purposes and which are retained by Seller and not delivered to Buyer, and
if such documents are retained by someone other than Seller, Seller will cause
such person(s) to provide Buyer and Buyer's representatives access thereto.
5.5. Expenses. Seller agrees to indemnify Buyer and hold Buyer harmless
--------
against any and all loss, damage, liability, cost and expense, including
reasonable attorneys' fees, suffered or incurred by reason of, or arising out
of: (i) any law pertaining to bulk sales or transfers of
29
assets or affecting the rights of creditors of Seller (as to which Buyer agrees
to waive compliance in consideration of the indemnification agreement of Seller
hereunder) or the effectiveness of the sale or transfer of assets as against
creditors of Seller; (ii) any sales, use, transfer, documentary, vehicle title
transfer, excise or license tax, fee or charge applicable to any of the
Transferred Assets, to any part of the Systems or to the transactions
consummated hereunder; and (iii) any appraisal rights or other liability owing
to any partner of Seller. All other expenses incurred in connection with the
negotiation, preparation, execution and performance of this Agreement shall be
paid by the party incurring such expenses, unless expressly provided otherwise
hereunder.
5.6. Brokerage. Seller represents to Buyer that Seller has not utilized
---------
any brokerage firm or finder in connection with this transaction, except for
▇▇▇▇▇ Financial Group, Ltd., whose fees will be paid by Seller. Buyer
represents to Seller that it has not utilized any brokerage firm or finder with
respect to this transaction. Buyer agrees to indemnify Seller and hold Seller
harmless against any claim of any person for a broker's or finder's fee or
similar compensation relating to this Agreement or the transactions contemplated
hereby based on an asserted agreement with Buyer; and Seller agrees to indemnify
Buyer and hold Buyer harmless against any such claim based on an asserted
agreement with Seller.
5.7. Reliance Upon and Survival of Representations and Warranties.
------------------------------------------------------------
Notwithstanding any investigation at any time conducted by any of the parties
hereto, each party may rely on the representations and warranties of the other
party or parties set forth herein or in any Schedule hereto or other instrument
or document delivered in connection herewith. Notwithstanding any investigation
made, or information obtained, by any party hereto, the representations and
warranties contained in this Agreement and in any document delivered at Closing
shall survive for a period ending on the date which is one year after the
Closing Date, except for representations and warranties set forth in Sections
3.2, 3.3, 3.13, 3.18, 3.20, 4.2 and 4.3, which shall survive for the period of
the applicable statute of limitations.
5.8. Further Assurances.
------------------
(a) Subject to Section 5.1, Seller and Buyer shall use their good
faith commercially reasonable efforts to obtain all necessary approvals,
consents, waivers and authorizations from all appropriate governmental
authorities, bodies, agencies and persons to the transfer or assignment to
Buyer of all rights and obligations contemplated by this Agreement.
(b) Each party agrees to execute and deliver or cause to be executed
and delivered at all reasonable times and places such additional
instruments and documents as the other party may reasonably request or
which are required for the purpose of carrying out this Agreement.
(c) Seller will maintain all Access Agreements, permits,
authorizations, insurance policies, letters of credit currently maintained
by Seller in connection with the
30
Systems and the Transferred Assets in full force and effect at all times
through the Closing Date, and thereafter as and to the extent provided in
Section 2.5.
(d) Buyer shall be entitled to participate in any meetings relating
to the extension, transfer or assignment of the Franchises, Authorities,
Access Agreements, and any Lease. The terms and conditions of the
extension, transfer and assignment of the Franchises, Authorities or Access
Agreements, or any Lease, or consents thereto and of all requests for the
extension, transfer and assignment thereof shall be satisfactory and
approved in advance by Buyer, such approval not to be withheld
unreasonably. The approvals of the transfer of the Franchises, Authorities,
Access Agreements and Leases shall not contain any conditions to their
transfer, or changes to the terms of the underlying instruments to which
such consents apply, without the advance approval of Buyer, which approval
shall not be withheld unreasonably; provided, however, that in no event
will the withholding of consent by Buyer to any condition or change that
will cause Buyer to incur costs in excess of $8,000 be deemed to be
unreasonable. Except as otherwise provided above, nothing herein shall
require Buyer or Seller to agree to make any payment as a condition to
obtaining any such extension or approval for transfer.
(e) Seller shall use its good faith efforts to obtain a five (5) year
extension with respect to any Franchise which expires within five (5) years
after the date hereof, other than the Franchises by which the Systems serve
the communities of Chenoa, Pesotum and Rantoul. Any conditions imposed by
the franchising authorities to the extension of such Franchises, or changes
required by the franchising authorities to the underlying terms of the
Franchises in connection with such extensions shall be approved in advance
by Buyer and, if so approved, shall be the sole obligation of Buyer;
provided, however, that if Buyer does not approve such conditions or
changes, and the extensions are not obtained, Seller will be deemed have
used its good faith efforts to obtain any such extensions.
(f) Seller shall use its good faith efforts to obtain a five (5) year
extension of the Franchise by which the Systems serve the community of
Rantoul (the "Rantoul Franchise") or, if unable to obtain such an
extension, shall use its good faith efforts to have the Rantoul Franchise
renewed for a term of at least five (5) years on terms and conditions
reasonably satisfactory to Buyer and Seller.
5.9. Indemnification.
---------------
(a) Seller agrees to indemnify and defend Buyer against and hold
Buyer harmless from any loss, claim, damage, liability or expense
(including reasonable attorneys' fees): (i) incurred or sustained by Buyer
on account of any and all liabilities of Seller, except: (A) the Assumed
Obligations (but subject to the terms of Section 2.5), and (B) liabilities
and obligations arising or accruing after the Closing Date with respect to
the ownership or operation of the Systems or the Transferred Assets which
are
31
expressly assumed by Buyer under the Assumption Agreement; (ii) incurred or
sustained by Buyer as a result of any misrepresentation or breach of any
representation or warranty of Seller under Section 3 or in any Schedule or
other instrument or document delivered pursuant hereto; (iii) arising under
Sections 5.5 and 5.6 for which Seller is liable thereunder, and (iv)
otherwise arising from Seller's breach of this Agreement.
(b) Buyer agrees to indemnify and defend Seller against and hold
Seller harmless from and against any loss, claim, damage, liability or
expense (including reasonable attorneys' fees): (i) incurred or sustained
by Seller after the Closing Date: (A) under the Assumed Obligations (but
subject to the terms and provisions of Section 2.5); and (B) arising out of
the ownership or operation of the Systems or the Transferred Assets after
the Closing Date; (ii) incurred or sustained by Seller on account of any
misrepresentation or breach of any representation or warranty of Buyer
included in Section 4 or in any Schedule or other document delivered by
Buyer pursuant hereto; (iii) arising under Sections 5.5 and 5.6 for which
Buyer is liable thereunder, and (iv) otherwise arising from Buyer's breach
of this Agreement.
(c) No claim for indemnification, damages or other relief under
Section 5.9(a) or Section 5.9(b) may be brought after the date which is one
(1) calendar year from the Closing Date, except that: (i) Seller's
obligations to indemnify under Section 5.9(a) shall continue and remain in
effect with respect to matters covered by Sections 3.2, 3.3, 3.13, 3.18 and
3.20 for the period of the statute of limitations applicable thereto,
including any extensions thereof, and (ii) Buyer's obligations to indemnify
under Section 5.9(b) shall continue and remain in effect with respect to
matters covered by Section 4.2 and 4.3 for the period of the statute of
limitations applicable thereto, including any extensions thereof. In
addition, Seller and Buyer shall have no liability under Sections 5.9(a)
and 5.9(b), respectively, unless the aggregate amount of losses otherwise
subject to its indemnification obligations thereunder exceeds $50,000 (the
"Threshold Amount"); provided, however, that when the losses of an
indemnified party exceed the Threshold Amount, the indemnifying party shall
be liable for the indemnified party's aggregate losses of the Threshold
Amount and any losses in excess of the Threshold Amount. All losses shall
be computed net of any insurance proceeds received which reduce the losses
that would otherwise be sustained, and provided further that in determining
the Threshold Amount, the term "material" shall not be applied when used in
the representations and warranties of Seller under this Agreement so as to
reduce the obligations of Seller under such representations and warranties
in an amount which would exceed, in the aggregate, if the word material
were not used therein, $5,000. It is further agreed that if Buyer is
required to pay any amount with respect to the usage of the pole line
system owned by the Village of Rantoul during any period on or before the
Closing Date, Seller will indemnify and reimburse Buyer for the amount of
such payment, without application of the Threshold Amount.
(d) Promptly after receipt by a party entitled to indemnification
under this Agreement (the "Indemnified Party") of written notice of the
assertion or the
32
commencement of any claim, action, suit or proceeding by any person who is
not a party to this Agreement (collectively, an "Action") with respect to
any matter referred to in Sections 5.9(a) and 5.9(b), the Indemnified Party
shall give written notice thereof to the party from whom indemnification is
sought pursuant hereto (the "Indemnifying Party") and thereafter shall keep
the Indemnifying Party reasonably informed with respect thereto; provided,
however, that failure of the Indemnified Party to give the Indemnifying
Party notice as provided herein shall not relieve the Indemnifying Party of
its obligations hereunder. In case any Action shall be brought against any
Indemnified Party, the Indemnifying Party shall be entitled to participate
in such Action and, at the request of the Indemnified Party, shall assume
the defense thereof with counsel reasonably satisfactory to the Indemnified
Party, at the Indemnifying Party's sole expense. If the Indemnifying Party
shall assume the defense of any Action, it shall not settle the litigation
unless the settlement shall include as an unconditional term thereof the
giving by the claimant or the plaintiff of a release of the Indemnified
Party, satisfactory to the Indemnified Party, from all liability with
respect to such Action.
(e) Notwithstanding any provision contained herein to the contrary,
Seller shall not be deemed to have violated its representations or
warranties by virtue of any subscriber claiming ownership of his or her
home wiring to the extent permitted by the 1992 Act.
5.10. No Negotiation. Until this Agreement is terminated, Seller agrees
--------------
not to negotiate or otherwise discuss the sale of the Systems or any interest
therein, any possible sale or other transfer of any ownership interest in
Seller, or the transactions contemplated hereby, directly or indirectly, with
any party other than Buyer other than as may be required, useful or advantageous
to obtain any consent or approval contemplated by this Agreement or otherwise to
facilitate consummation of the transactions contemplated by this Agreement.
5.11. Special Covenants of Seller. At Closing, Seller will lease its
---------------------------
▇▇▇▇▇▇ City office (which is contained in the Excluded Assets) to Buyer on a
month to month basis for $1,000 per month for a period determined by Buyer not
exceeding three months. In addition, Seller leases the premises occupied by
Seller in Rantoul, Illinois, on a month-to-month basis and will renew this lease
for a one-year term on terms mutually acceptable to Buyer and Seller.
5.12. Employees. Buyer shall have no obligation to employ any of Seller's
---------
employees. Within 60 days after the date of this Agreement, Buyer shall notify
Seller of those of Seller's employees which Buyer intends to hire, provided,
however, that such notification shall not be deemed to alter the employment at
will nature of the relationship between Buyer and any such individual.
33
Section 6. Conditions Precedent to the Obligation of Buyer to Close.
--------- --------------------------------------------------------
The obligation of Buyer to consummate the transactions herein contemplated
is subject to the satisfaction at or before the Closing of the following
conditions:
6.1. Truth of Representations and Warranties. The representations and
---------------------------------------
warranties of Seller included in this Agreement and in each Schedule or other
instrument or document delivered hereunder shall be true and correct in all
material respects on and as of the Closing Date, with the same effect as though
such representations and warranties had been made on and as of such date (except
for representations and warranties which by their terms relate to a specific
date, which shall remain true and correct as of such date). Buyer shall have
received a certificate to the foregoing effect dated the Closing Date signed by
Seller, together with evidence satisfactory to Buyer that all security interests
in and liens, pledges and encumbrances upon the Transferred Assets have been
satisfied, terminated and released or will be satisfied, terminated and released
simultaneously with the receipt by Seller's lenders of certain portions of the
Closing Wire Transfer. Buyer, in its sole discretion, shall have the right to
waive compliance with any representation and warranty of Seller and proceed with
the Closing.
6.2. Performance of Agreements. Each payment, delivery or other action
-------------------------
required of Seller under this Agreement, and each agreement of Seller to be
performed at or before the Closing under the terms hereof or as contemplated
herein, shall have been duly performed. Buyer shall have received a certificate
to this effect dated the Closing Date and signed by Seller.
6.3. Consents of Third Parties. Seller shall have obtained and delivered
-------------------------
to Buyer on the forms set forth in Exhibit D (with respect to Franchises) and
---------
Exhibit E (with respect to other third parties) or such other forms as are
---------
reasonably satisfactory to Buyer, the consents of the third parties listed in
the "Consent" section of Schedule 6.3 and shall have issued notifications to
------------
third parties listed in the "Notices" section of Schedule 6.3 in sufficient time
------------
in advance so that any necessary notice period shall have been met (such
consents and notices being referred to herein as "Required Consents"); provided,
however, that for purposes of this Section 6.3, the consent of the respective
utilities with which Seller has pole attachment agreements listed on Schedule
--------
6.3 shall be deemed to have been given if, as of the Closing, any such utility
---
is not threatening: (a) to refuse to: (i) consent to the assignment to Buyer
of Seller's pole attachement agreement with such utility, or (ii) execute with
Buyer a replacement pole attachment agreement in such form as is customarily
executed by such utility with cable television companies and which does not
contain material changes from the agreement heretofore existing between Seller
and the utility, or (b) to order or otherwise compel the removal of the cable
plant owned by Seller from such utility's poles. Notwithstanding the foregoing,
however, Seller agrees to continue to use Seller's good faith commercially
reasonable efforts subsequent to the Closing to complete the transfer to Buyer
of any pole attachment agreements not actually transferred to Buyer as of the
Closing Date and to pay any costs or fees charged by the applicable utility in
connection with such transfers. Without Buyer's consent, the Required Consents
shall contain no changes to the underlying documents to which they apply,
without the advance approval of Buyer, which approval shall not be withheld
unreasonably; provided, however, that in no event
34
will the withholding of consent by Buyer to any condition or change that will
cause Buyer to incur costs in excess of $8,000 be deemed to be unreasonable.
Except as otherwise provided above, nothing herein shall require Buyer or Seller
to agree to make any payment as a condition to obtaining any such extension or
approval for transfer.
6.4. Opinion of Seller's Counsel. Seller shall provide to Buyer and
---------------------------
Buyer's lenders the favorable opinion, dated the Closing Date, of ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇, general counsel to the general partner of Seller, or other counsel
satisfactory to Buyer, substantially in the form attached hereto as Exhibit F.
---------
6.5. Opinion of FCC and Copyright Counsel. Seller shall provide to Buyer
------------------------------------
and Buyer's lenders the favorable opinion, dated the Closing Date, of ▇▇▇▇,
Raywid & ▇▇▇▇▇▇▇▇▇, FCC and copyright counsel to Seller, or other FCC and
copyright counsel satisfactory to Buyer and its lenders, in form and substance
satisfactory to counsel for Buyer and its lenders, substantially in the form
attached hereto as Exhibit G.
---------
6.6. No Adverse Change. There shall have been no material adverse change
-----------------
in the Transferred Assets or the financial condition, liabilities or operations
of the Systems.
6.7. Inventories. Seller shall deliver to Buyer on the Closing Date
-----------
inventories of supplies and equipment consistent with those levels maintained as
of the date of this Agreement.
6.8. No Litigation. There shall be no legal requirement, and no judgment
-------------
shall have been entered and not vacated by any governmental authority or court
of competent jurisdiction in any litigation or arising therefrom, which enjoins,
restrains, makes illegal, or prohibits consummation of the transactions
contemplated by this Agreement.
6.9. HSR Act Compliance. All waiting periods under the HSR Act applicable
------------------
to this Agreement or the transaction contemplated hereby shall have expired or
been terminated.
6.10. Deliveries. Seller shall have made or stand willing and able to
----------
make all the deliveries to Seller set forth in Section 8.2.
6.11. Rantoul Franchise. If Seller has not obtained a five (5) year
-----------------
extension of the Rantoul Franchise, the Rantoul Franchise shall have been
renewed for a term of not less than five (5) years on terms and conditions
reasonably satisfactory to Buyer and Seller.
6.12. Monticello Lease. The lease for a tower located in Monticello,
----------------
Illinois referred to in Schedule 6.3, under "Leases", #5, shall have been
------------
renewed for a five year term on terms mutually acceptable to Buyer and Seller.
35
Section 7. Conditions Precedent to the Obligation of Seller to Close.
--------- ---------------------------------------------------------
The obligation of Seller to consummate the transactions herein
contemplated is subject to the satisfaction at or before the Closing of the
following conditions:
7.1. Truth of Representations and Warranties. The representations and
---------------------------------------
warranties of Buyer included in this Agreement and in any Schedule or other
instrument or document delivered by Buyer hereunder shall be true and correct in
all material respects on and as of the Closing Date with the same effect as
though such representations and warranties had been made on and as of such date
(except for representations and warranties which by their terms relate to a
specific date, which shall remain true and correct as of such date). Seller
shall have received a certificate to this effect dated the Closing Date and
signed by Buyer.
7.2. Performance of Agreements. Each payment, delivery or other action
-------------------------
required of Buyer under this Agreement, and each agreement of Buyer to be
performed at or before the Closing under the terms hereof or as contemplated
herein, shall have been duly performed. Seller shall have received a
certificate to this effect dated the Closing Date and signed by Buyer.
7.3. Opinion of Counsel for Buyer. Buyer shall provide to Seller the
----------------------------
favorable opinion of Gallop, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇, ▇.▇., counsel to Buyer, dated the
Closing Date, substantially in the form attached hereto as Exhibit H.
---------
7.4. Consents of Third Parties. The Required Consents shall have been
-------------------------
obtained.
7.5. No Adverse Change. There shall have been no material adverse change
-----------------
in the Transferred Assets or the financial condition, liabilities or operations
of the Systems.
7.6. No Litigation. There shall be no legal requirement, and no judgment
-------------
shall have been entered and not vacated by any governmental authority or court
of competent jurisdiction in any litigation or arising therefrom, which enjoins,
restrains, makes illegal, or prohibits consummation of the transactions
contemplated by this Agreement.
7.7. HSR Act Compliance. All waiting periods under the HSR Act applicable
------------------
to this Agreement or the transaction contemplated hereby shall have expired or
been terminated.
7.8. Deliveries. Buyer shall have made or stand willing and able to make
----------
all the deliveries to Buyer set forth in Section 8.3.
7.9. Subscriber Adjustment Amount and Revenue Adjustment Amount. The sum
----------------------------------------------------------
of the Subscribers Adjustment Amount and the Revenue Adjustment Amount, if any,
shall be no greater than $800,000.
36
Section 8. The Closing.
--------- -----------
8.1. Time and Place. The closing of the transactions contemplated
--------------
hereunder (the "Closing") shall be held at the offices of Triax
Telecommunications Company, L.L.C., ▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇ ▇▇▇▇▇ at 10:00 a.m. on or before May 30, 1997, or at such other time or
place as may be agreed to in writing by the parties (the "Closing Date").
Either party may terminate this Agreement without penalty or liability if the
Closing has not occurred by July 31, 1997 and such failure is not due to any
breach or default by the terminating party.
8.2. Deliveries by Seller. At the Closing, Seller shall execute, where
--------------------
applicable, and deliver to Buyer:
(a) Such bills of sale, deeds, assignments, consents and other
instruments of conveyance and transfer as may, in the opinion of counsel
for Buyer, be required or appropriate in order to effectively vest in Buyer
title to, and physical possession of, all of the Transferred Assets;
(b) The Assumption Agreement;
(c) The Indemnity Escrow Agreement;
(d) All other certificates, instruments, documents, surveys, lists
and opinions required to be delivered by Seller under this Agreement;
(e) Possession of the Systems and the Transferred Assets; and
(f) All documents, records, files and agreements of Seller relating
to the operations or assets of Seller, including all copies thereof, except
for the Excluded Assets.
(g) Such other instruments and documents as Buyer or its counsel may
reasonably request, including, without limitation, pay off letters from
Seller's lenders indicating that upon receipt of a certain portion of the
Closing Wire Transfer, they will release or terminate financing statements
filed under the Uniform Commercial Code or otherwise recorded under the
laws of any state and any other release or termination of lien and
encumbrance requested for the purpose of closing the transactions
contemplated by this Agreement.
8.3. Deliveries by Buyer. At the Closing, Buyer shall pay or cause to be
-------------------
paid or execute and deliver to or on behalf of Seller:
(a) The Good Faith Deposit, including all interest earned thereon;
37
(b) The Closing Wire Transfer;
(c) Proof that the Indemnity Escrow Amount and any amount required to
be paid into a Reserve Account have been deposited with the Escrow Agent;
(d) The Indemnity Escrow Agreement;
(e) The Assumption Agreement; and
(f) All other certificates, instruments, consents, documents and
opinions as Seller or its counsel may reasonably request for the purpose of
closing the transactions contemplated by this Agreement.
8.4. Other Action. The parties shall take such further actions, execute
------------
such additional instruments and documents and make such further deliveries as
may be required or desirable to close the transactions contemplated by this
Agreement.
Section 9. Allocation of Purchase Price.
--------- ----------------------------
The Purchase Price shall be allocated among the Transferred Assets
as set forth in Schedule 9. Each of the parties hereto covenants and agrees for
----------
purposes of all federal, state and other income tax returns filed: (a) to adopt
the allocation of the Purchase Price among the Transferred Assets set forth in
Schedule 9; (b) to execute any forms required by Section 1060 of the Internal
----------
Revenue Code of 1986, as amended; and (c) not to take any position inconsistent
therewith upon examination of any such tax return, or in any refund claim,
litigation or otherwise.
Section 10. Termination.
---------- -----------
10.1. Termination Events. This Agreement may be terminated and the
------------------
transaction contemplated by this Agreement may be abandoned:
(a) at any time, by the mutual agreement of Buyer and Seller;
(b) by either Buyer or Seller, at any time, if the other is in
material breach or default of its respective covenants, agreements, or
other obligations in this Agreement, or if any of its representations in
this Agreement or any document to be delivered at Closing are not true and
accurate in all material respects when made or when otherwise required by
this Agreement to be true and accurate, provided that such breach or
default is incapable of cure or has not been cured within 15 calendar days
after receipt of written notice of such breach, default or
misrepresentation from the other party;
38
(c) by either Buyer or Seller, upon written notice to the other, if
any of the conditions to its obligations set forth in Sections 6 and 7,
respectively, shall not have been satisfied on or before July 31, 1997 for
any reason other than (i) a breach or default by such party of its
respective covenants, agreements, or other obligations hereunder, or (ii)
any representations of such party herein not being true and accurate in all
material respects when made or when otherwise required by this Agreement to
be true and accurate in all material respects; or
(d) as otherwise provided in this Agreement.
10.2. Effect of Termination.
---------------------
(a) Costs and Return of Information. Without limiting any other
-------------------------------
provision of this Section 10.2, if the transaction contemplated by this
Agreement is terminated and abandoned as provided herein: (i) each party
shall pay the costs and expenses incurred by it in connection with this
Agreement, and no party (or any of its officers, directors, employees,
agents, representatives or partners) shall be liable to any other party for
any costs, expenses or damages except as expressly specified herein; (ii)
each party shall re-deliver all documents, work papers and other materials
of the other party relating to the transaction contemplated hereby, whether
so obtained before or after the execution hereof, to the party furnishing
the same; (iii) all confidential information received by either party
hereto shall be treated in accordance with Section 5.2 hereof; and (iv)
neither party hereto shall have any liability or further obligation to the
other party to this Agreement except (A) as stated in subparagraphs (ii)
and (iii) of this Section 10.2(a), and (B) to the extent applicable, as set
forth in Sections 10.2(b) and 10.2(c) below.
(b) Buyer's Remedies. If both: (i) this Agreement is terminated by
----------------
Buyer pursuant to Section 10.1(b), and (ii) Seller is in breach in any
material respect of any of its representations and warranties made herein
or its covenants or agreements made herein (and Buyer is not in breach in
any material respect of any of its representations and warranties made
herein or its covenants or agreements made herein), the Deposit and all
accrued interest thereon shall be returned to Buyer, and Buyer shall also
have (in addition to its right to receive the Deposit and all accrued
interest thereon) the right to seek monetary damages from Seller in an
amount equal to the Deposit.
(c) Seller's Remedies. If both: (i) this Agreement is terminated by
-----------------
Seller pursuant to Section 10(b), and (ii) Buyer is in breach in any
material respect of any of its representations and warranties made herein
or its covenants or agreements made herein (and Seller is not in breach in
any material respect of any of its representations and warranties made
herein or its covenants or agreements made herein), the Deposit and all
accrued interest thereon shall be delivered to Seller.
39
Section 11. Casualty Losses.
---------- ---------------
The risk of any loss or damage to the Transferred Assets resulting
from fire, theft, or any other casualty (except reasonable wear and tear) shall
be borne by Seller at all times prior to the Closing. If any such loss or
damage shall be sufficiently substantial so as to preclude and prevent within 30
days after the occurrence of the event resulting in such loss or damage
resumption of normal operations of any portion of the Systems or replacement or
restoration of the lost or damaged Transferred Assets, Seller shall immediately
notify Buyer in writing of its inability to resume normal operations or to
replace or restore the lost or damaged Transferred Assets, and Buyer, at any
time within 10 days after receipt of such notice, may elect by written notice to
Seller to either (i) waive such defect and proceed toward consummation of the
transaction in accordance with terms of this Agreement, or (ii) terminate this
Agreement. If Buyer elects to terminate this Agreement, Buyer and Seller shall
stand fully released and discharged of any and all obligations hereunder, and
the Deposit and all interest accrued thereon shall be returned to Buyer. If
Buyer shall elect to consummate the transaction contemplated by this Agreement
notwithstanding such loss or damage and does so, all insurance proceeds payable
as a result of the occurrence of the event resulting in such loss or damage
shall be delivered by Seller to Buyer, or the rights thereto shall be assigned
by Seller to Buyer if not yet paid over to Seller.
Section 12. Non-competition.
---------- ---------------
In consideration of the allocation of $200,000 out of the Purchase
Price (the "Non-Competition Payment"), which it is hereby agreed is fair and
adequate compensation therefor, Seller shall agree in writing with Buyer at
Closing (in the form of Non-Competition Agreement set forth in Exhibit I),
---------
effective on and after the Closing Date and for the three (3) year period
following the Closing Date, not to engage, directly or indirectly, either
personally, or as an owner, employee, partner, associate, officer, manager,
agent, advisor, consultant or otherwise in any business which is competitive
with the business of Buyer within a five (5) mile radius of the Franchise areas
of the Systems. For the purposes hereof, a business will be deemed competitive
with the business of Buyer if it involves the development, construction, sale,
lease, rental or operation of any cable television system, satellite master
antenna television system, multi-point distribution system, low power television
system, direct broadcast satellite system or "open video" system, as such terms
are generally defined and used in the communications industry; provided,
however, that nothing herein shall prohibit Seller from (a) owning securities of
any company in amounts which are not more than 5% of the issued and outstanding
securities of such company, (b) providing programming and programming-related
services to video distributors, provided such services are offered to Buyer on
not less favorable terms than those offered to other third parties, or (c)
engaging or participating in any telephony, satellite or wireless business that
has multi-state distribution capabilities, except that Seller will not purchase
or own an interest in an entity which offers wireless services in any geographic
area in which a System is operated.
40
Section 13. Notices.
---------- -------
Any notice or other communication required or permitted hereunder
shall be sufficiently given if in writing and sent by certified or registered
mail, postage prepaid, or by next business day courier service (such as Federal
Express) or confirmed telecopy, addressed as follows:
(a) If to Seller, addressed to:
Cable TV Fund 14-A, Ltd.
c/▇ ▇▇▇▇▇ Intercable, Inc.
▇▇▇▇ ▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: President
Telecopy #: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to:
General Counsel
▇▇▇▇▇ Intercable, Inc.
▇▇▇▇ ▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Telecopy #: (▇▇▇) ▇▇▇-▇▇▇▇
(b) If to Buyer, addressed to:
TRIAX MIDWEST ASSOCIATES, L.P.
c/o Triax Telecommunications Company, L.L.C.
Attention: ▇▇▇ ▇. ▇▇▇▇▇, President
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Telecopy #: 303-333-1110
With a copy to:
▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
Gallop, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇, ▇.▇.
16th Floor
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇
▇▇. ▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Telecopy #: ▇▇▇-▇▇▇-▇▇▇▇
or to such other address(es) as Seller or Buyer shall give notice to the other
by like means. Any such notice or communication shall be deemed to have been
given upon receipt.
41
Section 14. Parties in Interest.
---------- -------------------
Neither party may assign this Agreement or any interest in this
Agreement without the prior written consent of the other party; provided that at
the Closing Buyer may collaterally assign its interest to the financial
institutions who are lenders to Buyer in connection with the transactions
contemplated hereby. This Agreement shall be binding upon and shall inure to
the benefit of the parties hereto and their successors and assigns.
Section 15. Entire Agreement.
---------- ----------------
The Schedules hereto are incorporated in and form an integral part
of this Agreement. All understandings and agreements between the parties
relating to the subject matter hereof are merged into this Agreement, which
fully and completely expresses the agreement of the parties and supersedes any
prior agreement or understanding relating to the subject matter hereof,
including, without limitation, any letter of intent and related correspondence
among the parties.
Section 16. Governing Law.
---------- -------------
This Agreement and the agreements and instruments contemplated
hereby shall be governed by and construed in accordance with the law of the
State of Colorado, without regard to the conflict of law provisions thereof.
Section 17. Counterparts.
---------- ------------
This Agreement may be executed in several counterparts, all of
which taken together shall constitute one instrument.
Section 18. Descriptive Headings.
---------- --------------------
The descriptive headings of the several sections of this Agreement
are inserted for convenience only and shall not be deemed to affect the meaning
or construction of any of the provisions hereof.
Section 19. Definitions.
---------- -----------
Each of the terms set forth in Schedule 19 shall have the meaning
-----------
ascribed to it in the Section of the Agreement referred to in Schedule 19.
------------
42
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed as of the day and year first above written.
TRIAX MIDWEST ASSOCIATES, L.P.
By: TRIAX MIDWEST GENERAL PARTNER, L.P., its
Managing General Partner
By: TRIAX MIDWEST, L.L.C., its sole General
Partner
By: /s/ ▇▇▇ ▇. ▇▇▇▇▇
--------------------------------
▇▇▇ ▇. ▇▇▇▇▇, President
CABLE TV FUND 14-A, LTD.
By: ▇▇▇▇▇ INTERCABLE, INC., its General Partner
By: /s/ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
--------------------------------
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, Vice President
43
