EXHIBIT 10.3.4
ASSET PURCHASE AGREEMENT
BY AND BETWEEN
TCI CABLEVISION OF TEXAS, INC.
AND
▇▇▇▇▇ CABLE INCOME FUND 1-B/C VENTURE
DATED AS OF
JANUARY 30, 1998
TABLE OF CONTENTS
SECTION 1. DEFINITIONS..................................................... 3
SECTION 2. SALE OF ASSETS.................................................. 9
SECTION 3. CONSIDERATION................................................... 10
3.1 Base Purchase Price.................................................... 10
3.2 Adjustments to Base Purchase Price..................................... 10
3.3 Determination of Adjustments........................................... 11
3.4 Allocation of Consideration............................................ 12
SECTION 4. ASSUMED LIABILITIES AND EXCLUDED ASSETS......................... 12
4.1 Assignment and Assumption.............................................. 12
4.2 Excluded Assets........................................................ 13
SECTION 5. REPRESENTATIONS AND WARRANTIES OF SELLER........................ 13
5.1 Organization and Qualification......................................... 13
5.2 Authority and Validity................................................. 13
5.3 No Conflict; Required Consents......................................... 14
5.4 Assets................................................................. 14
5.5 Governmental Permits................................................... 15
5.6 Seller Contracts....................................................... 15
5.7 Real Property.......................................................... 15
5.8 Environmental Matters.................................................. 16
5.9 Compliance with Legal Requirements..................................... 17
5.10 Patents, Trademarks and Copyrights..................................... 18
5.11 Financial Statements................................................... 19
5.12 Absence of Certain Changes............................................. 19
5.13 Legal Proceedings...................................................... 19
5.14 Tax Returns; Other Reports............................................. 20
5.15 Employment Matters..................................................... 20
5.16 Systems Information.................................................... 21
5.15 Bonds.................................................................. 21
5.18 Finders and Brokers.................................................... 21
SECTION 6. BUYER'S REPRESENTATIONS......................................... 21
6.1 Organization and Qualification......................................... 22
6.2 Authority and Validity................................................. 22
6.3 No Conflicts; Required Consents........................................ 22
6.4 Finders and Brokers.................................................... 23
6.5 Legal Proceedings...................................................... 23
SECTION 7. ADDITIONAL COVENANTS............................................ 23
7.1 Access to Premises and Records......................................... 23
7.2 Continuity and Maintenance of Operations; Financial Statements......... 23
7.3 Employee Matters....................................................... 25
7.4 Leased Vehicles; Other Capital Leases.................................. 26
7.5 Required Consents; Estoppel Certificates............................... 26
7.6 Title Commitments and Surveys.......................................... 27
7.7 HSR Notification....................................................... 28
7.8 No Shopping............................................................ 28
7.9 Lien and Judgment Searches............................................. 28
7.10 Transfer Taxes......................................................... 29
7.11 Distant Broadcast Signals.............................................. 29
7.12 Guaranty............................................................... 29
7.13 Letter to Programmers.................................................. 29
7.14 Updated Schedules...................................................... 29
7.15 Use of Names and Logos................................................. 30
7.16 Subscriber Billing Services............................................ 30
7.17 Satisfaction of Conditions............................................. 30
7.18 Confidentiality and Publicity.......................................... 30
7.19 Bulk Transfers......................................................... 31
7.20 Environmental Reports.................................................. 31
7.21 Board Approvals........................................................ 31
7.22 Section 1031........................................................... 31
SECTION 8. CONDITIONS PRECEDENT............................................ 31
8.1 Conditions to the Obligations of Buyer and Seller...................... 32
8.2 Conditions to the Obligations of Buyer................................. 32
8.3 Conditions to Obligations of Seller.................................... 33
8.4 Waiver of Conditions................................................... 34
SECTION 9. CLOSING......................................................... 34
9.1 The Closing; Time and Place............................................ 34
9.2 Seller's Delivery Obligations.......................................... 35
9.3 Buyer's Delivery Obligations........................................... 36
SECTION 10. TERMINATION.................................................... 37
10.1 Termination Events.................................................... 37
10.2 Effect of Termination................................................. 37
SECTION 11. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION.... 37
11.1 Survival of Representations and Warranties............................ 38
11.2 Indemnification by Seller............................................. 38
11.3 Indemnification by Buyer.............................................. 39
11.4 Third Party Claims.................................................... 39
11.5 Limitations on Indemnification........................................ 40
11.6 Limitations on Indemnification - Buyer................................ 41
SECTION 12. MISCELLANEOUS.................................................. 41
12.1 Parties Obligations and Benefited..................................... 41
12.2 Notices............................................................... 41
12.3 Attorneys' Fees....................................................... 42
12.4 Waiver................................................................ 42
12.5 Captions.............................................................. 42
12.6 Choice of Law......................................................... 42
12.7 Terms................................................................. 42
12.8 Rights Cumulative..................................................... 43
12.9 Further Actions....................................................... 43
12.10 Time................................................................. 43
12.11 Late Payments........................................................ 43
12.12 Counterparts......................................................... 43
12.13 Entire Agreement..................................................... 43
12.14 Severability......................................................... 43
12.15 Construction......................................................... 43
12.16 Expenses............................................................. 44
12.17 Risk of Loss; Condemnation........................................... 44
LIST OF EXHIBITS AND SCHEDULES
EXHIBITS
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A - ▇▇▇▇ of Sale
B - Assignment and Assumption of Contracts
C - Assignment of Leases
D - Guaranty
E - Letter to Programmers
F - FIRPTA Affidavit
G - Opinion of Seller's Counsel
H - Opinion of Buyer's Counsel
SCHEDULES
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1.9 - Owned Equipment and Vehicles
4.2 - Excluded Assets
5.3 - Required Consents
5.4 - Encumbrances to Be Discharged Prior to Closing
5.5 - Governmental Permits
5.6 - Seller Contracts
5.7 - Real Property
5.8 - Environmental Matters
5.9 - Cost of Service Filings
5.11 - Financial Statements
5.13 - Proceedings and Judgments
5.14 - Tax Matters
5.15 - Employee Matters
5.16 - The Business/Systems Information (including Rate Schedule)
5.17 - Bonds
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ASSET PURCHASE AGREEMENT
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This Asset Purchase Agreement ("Agreement") is made as of January 30, 1998,
by and between TCI Cablevision of Texas, Inc., a Texas corporation ("Buyer"),
and ▇▇▇▇▇ Cable Income Fund 1-B/C Venture, a Colorado general partnership
("Seller").
RECITALS
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A. Seller is engaged in the business of providing cable television
service to subscribers in and around the Service Area. Buyer desires to
purchase and Seller desires to sell substantially all the assets of Seller used
or useful in connection with that business.
B. Buyer intends to complete the transfer of the Assets in a transaction
to which Section 1031 of the Internal Revenue Code of 1986, as amended (the
"Code"), applies, and Seller is willing to take such steps as are reasonably
necessary on its part to enable the transactions contemplated hereby to so
qualify, including, without limitation, permitting the assignment of this
Agreement by Buyer to a qualified intermediary in order that Buyer's acquisition
of the Assets (as defined below) may be accomplished as part of a deferred
exchange pursuant to applicable Treasury Regulations; provided that if such
exchange is not accomplished, Buyer desires to purchase the Assets directly,
subject to the terms and conditions described herein.
AGREEMENT
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In consideration of the above recitals and the mutual agreements stated in
this Agreement, the parties agree as follows:
SECTION 1. DEFINITIONS.
In addition to terms defined elsewhere in this Agreement, the following
capitalized terms, when used in this Agreement, will have the meanings set forth
below:
1.1 Affiliate. With respect to any Person, any other Person controlling,
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controlled by or under common control with such Person, with "control" for such
purpose meaning the possession, directly or indirectly, of the power to direct
or cause the direction of the management and policies of a Person, whether
through the ownership of voting securities or voting interests, by contract or
otherwise.
1.2 Assets. All properties, privileges, rights, interests and claims,
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real and personal, tangible and intangible, of every type and description that
are owned, leased, held, used or useful in the Business in which Seller has any
right, title or interest or in which Seller acquires any right, title or
interest on or before the Closing Date,
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including Governmental Permits, Intangibles, Seller Contracts, Equipment, Real
Property and deposits relating to the Business that are held by third parties
for the account of Seller or for security for Seller's performance of its
obligations, but excluding any Excluded Assets.
1.3 Basic Service. The lowest tier of service offered to subscribers of a
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System.
1.4 Business. The cable television business conducted by Seller on the
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date of this Agreement through one or more Systems, as described on SCHEDULE
5.16.
1.5 Business Day. Any day other than Saturday, Sunday or a day on which
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banking institutions in Denver, Colorado are required or authorized to be
closed.
1.6 Closing. The consummation of the transactions contemplated by this
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Agreement, as described in SECTION 9, the date of which is referred to as the
Closing Date.
1.7 Encumbrance. Any security interest, security agreement, financing
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statement filed with any Governmental Authority, conditional sale or other title
retention agreement, any lease, consignment or bailment given for purposes of
security, any mortgage, lien, indenture, pledge, option, encumbrance, adverse
interest, constructive trust or other trust, claim, attachment, exception to or
defect in title or other ownership interest (including but not limited to
reservations, rights of entry, possibilities of reverter, encroachments,
easements, rights-of-way, restrictive covenants, leases and licenses) of any
kind, which constitutes an interest in or claim against property, whether
arising pursuant to any Legal Requirement, Governmental Permit, Seller Contract
or otherwise.
1.8 Environmental Law. Any Legal Requirement relating to pollution or
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protection of public health, safety or welfare or the environment, including
those relating to emissions, discharges, releases or threatened releases of
Hazardous Substances into the environment (including ambient air, surface water,
ground water or land), or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling of
Hazardous Substances.
1.9 Equipment. All electronic devices, trunk and distribution coaxial and
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optical fiber cable, amplifiers, power supplies, conduit, vaults and pedestals,
grounding and pole hardware, subscriber's devices (including converters,
encoders, transformers behind television sets and fittings), headend hardware
(including origination, earth stations, transmission and distribution system),
test equipment, vehicles and other tangible personal property owned, leased,
used or held for use in the Business, the principal items of which are described
on SCHEDULE 1.9 (and, with respect to leased Equipment, on SCHEDULE 5.6).
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1.10 Equivalent Basic Subscribers (or EBSs). An active customer for Basic
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Service either in a single household, a commercial establishment or in a multi-
unit dwelling (including a hotel unit); provided, however, that the number of
customers in a multi-unit dwelling or commercial establishment that obtain
service on a "bulk-rate" basis will be determined on a System by System basis by
dividing the gross bulk-rate ▇▇▇▇▇▇▇▇ for Basic Service and Expanded Basic
Service (but not ▇▇▇▇▇▇▇▇ from a la carte tiers or premium services,
installation or other non-recurring charges, converter rental or from any outlet
or connection other than the first outlet or connection or from any pass-through
charge for sales taxes, line-itemized franchise fees, fees charged by the FCC
and the like), attributable to such multi-unit dwelling or commercial
establishment during the most recent billing period ended prior to the date of
calculation (but excluding ▇▇▇▇▇▇▇▇ in excess of a single month's charge) by the
rate charged at the time of determination to individual households for the
highest level of Basic Service and Expanded Basic Service offered by such
System, such rate not to be less than the rate for such System set forth on
SCHEDULE 5.16 (excluding a la carte tiers or premium services, installation or
other non-recurring charges, converter rental, pass-through charges for sales
taxes, line-itemized franchise fees charged by the FCC and the like). For
purposes of this definition, an "active customer" will mean any person,
commercial establishment or multi-unit dwelling at any given time that is paying
for and receiving Basic Service from the System who has an account that is not
more than 60 days past due (except for past due amounts of $5 or less, provided
such account is otherwise current). For purposes of this definition, an "active
customer" does not include any person, commercial establishment or multi-unit
dwelling that as of the date of calculation has not paid in full the charges for
at least one month of the services ordered or any subscriber whose service is
pending disconnection for any reason. For purposes of this definition, the
number of days past due of a customer account will be determined from the first
day of the period for which the applicable billing relates.
1.11 Expanded Basic Service. Any video programming provided over a cable
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television system, regardless of service tier other than (a) Basic Service, (b)
any new product tier and (c) video programming offered on a per channel or per
program basis.
1.12 GAAP. Generally accepted accounting principles as in effect from time
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to time in the United States of America.
1.13 Governmental Authority. The United States of America, any state,
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commonwealth, territory or possession of the United States of America and any
political subdivision or quasi-governmental authority of any of the same,
including any court, tribunal, department, commission, board, bureau, agency,
county, municipality, province, parish or other instrumentality of any of the
foregoing.
1.14 Governmental Permits. All franchises, approvals, authorizations,
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permits, licenses, easements, registrations, qualifications, leases, variances
and similar
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rights obtained with respect to the Business or Assets from any Governmental
Authority, including those set forth on SCHEDULE 5.5.
1.15 Hazardous Substances. Any pollutant, contaminant, chemical,
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industrial, toxic, hazardous or noxious substance or waste which is regulated by
any Governmental Authority, including (a) any petroleum or petroleum compounds
(refined or crude), flammable substances, explosives, radioactive materials or
any other materials or pollutants which pose a hazard or potential hazard to the
Real Property or to Persons in or about the Real Property or cause the Real
Property to be in violation of any laws, regulations or ordinances of federal,
state or applicable local governments, (b) asbestos or any asbestos-containing
material of any kind or character, (c) polychlorinated biphenyls ("PCBs"), as
regulated by the Toxic Substances Control Act, 15 U.S.C. (S) 2601 et seq., (d)
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any materials or substances designated as "hazardous substances" pursuant to the
Clean Water Act, 33 U.S.C. (S) 1251 et seq., (e) "economic poison," as defined
-- ----
in the Federal Insecticide, Fungicide and Rodenticide Act, 7 U.S.C. (S) 135 et
--
seq., (f) "chemical substance," "new chemical substance" or "hazardous chemical
---
substance or mixture" pursuant to the Toxic Substances Control Act, 15 U.S.C.
(S) 2601 et seq., (g) "hazardous substances" pursuant to the Comprehensive
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Environmental Response, Compensation, and Liability Act, 42 U.S.C. (S) 9601 et
--
seq. and (h) "hazardous waste" pursuant to the Resource Conservation and
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Recovery Act, 42 U.S.C. (S) 6901 et seq.
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1.16 Intangibles. All intangible assets, including subscriber lists,
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accounts receivable, claims (excluding any claims relating to Excluded Assets),
patents, copyrights and goodwill, if any, owned, used or held for use in the
Business.
1.17 Knowledge. The actual knowledge of a particular matter of one or more
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of the executive officers of a Person or the general manager or one or more of
the managers of such Person's Systems.
1.18 Legal Requirement. Applicable common law and any statute, ordinance,
-----------------
code, or other law, rule, regulation, order, technical or other written standard
or procedure enacted, adopted or applied by any Governmental Authority,
including judicial decisions applying common law or interpreting any other Legal
Requirement.
1.19 Losses. Any claims, losses, liabilities, damages, penalties, costs
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and expenses, including interest that may be imposed in connection therewith,
expenses of investigation, reasonable fees and disbursements of counsel and
other experts, and the cost to any Person making a claim or seeking
indemnification under this Agreement with respect to funds expended by such
Person by reason of the occurrence of any event with respect to which
indemnification is sought.
1.20 Pay TV. Premium programming services selected by and sold to
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subscribers on a per channel or per program basis.
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1.21 Permitted Encumbrances. The following Encumbrances: (a) liens
----------------------
securing Taxes, assessments and governmental charges not yet due and payable,
(b) any zoning law or ordinance or any similar Legal Requirement, (c) any right
reserved to any Governmental Authority to regulate the affected property and (d)
as to Real Property interests, any Encumbrance reflected in the public records
and that does not individually or in the aggregate interfere with the right or
ability to own, use or operate the Real Property or to convey good, marketable
and indefeasible fee simple title to such Real Property, provided that
"Permitted Encumbrances" will not include any Encumbrance which could prevent or
inhibit in any way the conduct of the business of the affected System and
provided further that classification of any Encumbrance as a "Permitted
Encumbrance" will not affect any liability Seller may have for such Encumbrance,
including pursuant to any indemnity obligation under this Agreement.
1.22 Person. Any natural person, corporation, partnership, trust,
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unincorporated organization, association, limited liability company,
Governmental Authority or other entity.
1.23 Real Property. All assets held by Seller related to the Business
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consisting of realty, including appurtenances, improvements and fixtures located
on such realty, and any other interests in real property, including fee
interests, leasehold interests and easements, wire crossing permits, rights of
entry (except agreements related to multiple dwelling units) described on
SCHEDULE 5.7.
1.24 Required Consents. All franchises, licenses, authorizations,
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approvals and consents required under Governmental Permits, Seller Contracts or
otherwise for (a) Seller to transfer the Assets and the Business to Buyer, (b)
Buyer to conduct the Business and to own, lease, use and operate the Assets at
the places and in the manner in which the Business is conducted as of the date
of this Agreement and on the Closing Date (assuming that the ▇▇▇▇▇▇▇▇▇▇▇
Transaction and the Vicksburg Transaction (both as defined below) close on the
Closing Date) and (c) Buyer to assume and perform the Governmental Permits,
Seller Contracts and the other Assumed Liabilities.
1.25 ▇▇▇▇▇▇▇▇▇▇▇ Purchase Agreement. That certain Asset Purchase Agreement
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of even date herewith between Seller and Television Cable Service, Inc., a Texas
corporation ("TCS"), by which TCS has agreed to purchase from Seller the assets
which comprise the ▇▇▇▇▇▇▇▇▇▇▇ System.
1.26 ▇▇▇▇▇▇▇▇▇▇▇ System. The cable television system owned by Seller
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serving the County of La Grange, Indiana, the Village of ▇▇▇▇▇▇▇▇▇▇▇ and the
Townships of ▇▇▇▇▇▇▇▇▇▇▇ and Flowerfield, all in Michigan.
1.27 ▇▇▇▇▇▇▇▇▇▇▇ Transaction. The transaction contemplated by the
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▇▇▇▇▇▇▇▇▇▇▇ Purchase Agreement.
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1.28 Seasonal Subscribers. Customers of the System who, between the date
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hereof and Closing, have participated in, or will have participated in, Seller's
seasonal subscriber program by paying $5 per month during the months that such
subscribers were out of town, and by resuming service, or agreeing to resume
service, upon their return to town (which service will resume without a
reconnection charge).
1.29 Seller Contracts. All contracts and agreements, other than
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Governmental Permits and those relating to Real Property, pertaining to the
ownership, operation and maintenance of the Assets or the Business or used or
held for use in the Business, as described on SCHEDULE 5.6 or, in the case of
contracts and agreements relating to Real Property, on SCHEDULE 5.7.
1.30 Service Area. The area in which Seller operates the Business,
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specifically in and around the Townships of ▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇,
Fabius, Hagar, Hartford, La Grange, Lockport, Mendon, Mottville, Newburg,
Nottawa, Park, Pavilian, Penn, Pipestone, Pokagon, ▇▇▇▇▇▇, Prairie Ronde,
Sherman, Silver Creek, Watervliet, ▇▇▇▇▇ and White Pigeon, the Villages of
Centreville, ▇▇▇▇▇▇▇▇▇▇▇, Vandalia, and White Pigeon, the Cities of Coloma,
Dowagiac, Three Rivers, and Watervliet, all in the State of Michigan, and the
County of Elkhart, Indiana.
1.31 System. A complete cable television reception and distribution system
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operated in the conduct of the Business, consisting of one or more headends,
subscriber drops and associated electronic and other equipment, and which is, or
is capable of being without modification, operated as an independent system
without interconnections to other systems. Any systems which are interconnected
or which are served in total or in part by a common headend will be considered a
single System.
1.32 Taxes. All levies and assessments of any kind or nature imposed by
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any Governmental Authority, including all income, sales, use, ad valorem, value
added, franchise, severance, net or gross proceeds, withholding, payroll,
employment, excise or property taxes and levies or assessments related to
unclaimed property, together with any interest thereon and any penalties,
additions to tax or additional amounts applicable thereto.
1.33 Vicksburg Purchase Agreement. That certain Asset Purchase Agreement
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of even date herewith between Seller and Tempo Cable, Inc., an Oklahoma
corporation ("Tempo"), by which Tempo has agreed to purchase from Seller the
assets which comprise the Vicksburg System.
1.34 Vicksburg System. The cable television system owned by Seller serving
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the Village of Vicksburg, Michigan.
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1.35 Vicksburg Transaction. The transaction contemplated by the Vicksburg
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Purchase Agreement.
1.36 Other Definitions. The following terms are defined in the Sections
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indicated:
Term Section
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Action 11.4
Antitrust Division 7.7
Approval Deadline 10.1.4
Assumed Liabilities 4.1
Base Purchase Price 3.1(b)
▇▇▇▇▇▇ Transaction 8.2.8
Buyer Damages 11.5
Closing Date 1.8
Code 5.15.2
Cost of Service Election 5.9.4
Employee Benefit Plans 5.15.2
ERISA 5.15.1
Excluded Assets 4.2
FCC 1.12
Final Adjustments Report 3.3.2
Financial Statements 5.11
FTC 7.7
HSR Act 7.7
Indemnified Party 11.4
Indemnifying Party 11.4
Intercable 5.2
1992 Cable Act 5.9.4
Preliminary Adjustments Report 3.3.1
Rate Regulation Documents 5.9.4
Seller Damages 11.6
Survival Period 11.1
Taking 12.17.2
Transaction Documents 5.2
SECTION 2. SALE OF ASSETS.
Subject to the terms and conditions set forth in this Agreement, at the
Closing, Seller will sell to Buyer, and Buyer will purchase from Seller, all of
Seller's rights, titles and interests in, to and under the Assets. Except as
otherwise specifically provided in this Agreement, all the Assets are intended
to be transferred to Buyer, whether or not described in the Schedules.
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SECTION 3. CONSIDERATION.
3.1 Base Purchase Price. Buyer will pay to Seller total cash
-------------------
consideration of $27,350,000 (the "Base Purchase Price"), subject to adjustment
as provided in SECTIONS 3.2 and 3.3. Such consideration will be paid at Closing
by wire transfer of immediately available funds pursuant to wire instructions
delivered by Seller to Buyer no later than two Business Days prior to the
Closing Date.
3.2 Adjustments to Base Purchase Price. The Base Purchase Price will be
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adjusted as follows:
3.2.1 If (a) the number of EBS's of the Business as of the Closing
Date, combined with the number of EBS's of the ▇▇▇▇▇▇▇▇▇▇▇ System and the
Vicksburg System, is fewer than 17,400 and (b) the number of EBS's of the
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Business as of the Closing Date is fewer than 15,180, then the Base Purchase
Price will be reduced by an amount equal to $1,802 multiplied by the positive
difference between (x) 15,180 and (y) the number of EBS's of the Business as of
the Closing Date; provided, however, that in calculating the number of EBS's,
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the parties will consider 210 Seasonal Subscribers to be EBS's, and will not
count any additional Seasonal Subscribers as EBS's. In addition, if a reduction
is made in the Base Purchase Price as described above, and as of the Closing
Date, the ▇▇▇▇▇▇▇▇▇▇▇ System has more than 1,512 EBS's and/or the Vicksburg
System has more than 708 EBS's, the Base Purchase Price, as reduced above, shall
be increased by (A) an amount equal to $1,719 multiplied by the positive
difference between (i) the number of EBS's of the ▇▇▇▇▇▇▇▇▇▇▇ System as of the
Closing Date and (ii) 1512 and (B) an amount equal to $1,836 multiplied by the
positive difference between (X) the number of EBS's of the Vicksburg System as
of the Closing Date and (Y) 708; provided, however, that no such increase in the
Base Purchase Price shall cause the aggregate of (I) the Base Purchase Price so
adjusted, (II) the purchase price for the Vicksburg System as adjusted pursuant
to Section 3.2.1 of the Vicksburg Purchase Agreement and (III) the purchase
price for the ▇▇▇▇▇▇▇▇▇▇▇ System, as adjusted pursuant to Section 3.2.1 of the
▇▇▇▇▇▇▇▇▇▇▇ Purchase Agreement, to exceed $31,250,000.
3.2.2 Adjustments on a pro rata basis as of the Closing Date will be
made for all prepaid expenses (but only to the extent the full benefit thereof
will be realizable by Buyer within 12 months after the Closing Date), accrued
expenses (including real and personal property Taxes and the economic value of
all accrued vacation time permitted by Buyer's policies to be taken after the
Closing Time by Seller's System employees hired by Buyer), prepaid income,
subscriber prepayments and accounts receivable related to the Business, all as
determined in accordance with GAAP consistently applied, and to reflect the
principle that all expenses and income attributable to the Business for the
period prior to the Closing Date are for the account of Seller, and all expenses
and income attributable to the Business for the period on and after the Closing
Date are for the account of Buyer. Seller will receive no credit for
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any accounts receivable (a) resulting from cable service sales any portion of
which is 60 days or more past due as of the Closing Date, (b) from subscribers
whose accounts are inactive or whose service is pending disconnection for any
reason as of the Closing Date or (c) resulting from advertising sales any
portion of which is 120 days or more past due as of the Closing Date.
3.2.3 Buyer's account will be credited for the amount of all advance
payments to, or funds of third parties on deposit with, Seller as of the Closing
Date, relating to the Business, including advance payments and deposits by
subscribers served by the Business for converters, encoders, decoders, cable
television service and related sales, and the liability therefor will be assumed
by Buyer.
3.3 Determination of Adjustments. Preliminary and final adjustments to
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the Base Purchase Price will be determined as follows:
3.3.1 Not later than a date Seller reasonably believes is at least 10
Business Days prior to the expected Closing Date, Seller will deliver to Buyer a
report (the "Preliminary Adjustments Report"), certified as to completeness and
accuracy by Seller, showing in detail the preliminary determination of the
adjustments referred to in SECTION 3.2, which are calculated as of the Closing
Date (or as of any other date agreed by the parties) and any documents
substantiating the adjustments proposed in the Preliminary Adjustments Report.
The Preliminary Adjustments Report will include a complete list of subscribers,
a detailed calculation of the number of Equivalent Basic Subscribers and a
schedule setting forth advance payments made to or by Seller and deposits made
by Seller, as well as accounts receivable information relating to the Business
(showing sums due and their respective aging as of the Closing Date). Seller
also will furnish to Buyer its billing report for the most current period as of
the Closing Date. Following receipt of such Preliminary Adjustments Report and
supporting information, Buyer will have five Business Days to review such
Preliminary Adjustments Report and supporting information and to notify Seller
of any disagreements with Seller's estimates. If Buyer provides a notice of
disagreement with Seller's estimates of the adjustments referred to in SECTION
3.2 within such five Business Day period, Buyer and Seller will negotiate in
good faith to resolve any such dispute and to reach an agreement prior to the
Closing Date on such estimated adjustments as of the Closing Date. The basis
for determining the Base Purchase Price to be paid at Closing will be (a) the
estimate so agreed upon by Buyer and Seller or (b) if no notice of disagreement
is provided, or if such notice is provided but the parties do not reach such an
agreement prior to the Closing Date, the estimate of such adjustments set forth
in the Preliminary Adjustments Report.
3.3.2 Within 90 days after the Closing, Seller will deliver to Buyer
a report (the "Final Adjustments Report"), similarly certified by Seller,
showing in detail the final determination of all adjustments which were not
calculated as of the Closing Date and containing any corrections to the
Preliminary Adjustments Report, together
11
with any documents substantiating the adjustments proposed in the Final
Adjustments Report. Buyer will provide Seller with reasonable access to all
records which Buyer has in its possession and which are necessary for Seller to
prepare the Final Adjustments Report.
3.3.3 Within 30 days after receipt of the Final Adjustments Report,
Buyer will give Seller written notice of Buyer's objections, if any, to the
Final Adjustments Report. If Buyer makes any such objection, the parties will
agree on the amount, if any, which is not in dispute within 30 days after
Seller's receipt of Buyer's notice of objections to the Final Adjustments
Report. Any disputed amounts will be determined within 120 days after the
Closing Date by the accounting firm of Price Waterhouse, whose determination
will be conclusive. Seller and Buyer will bear equally the fees and expenses
payable to such firm in connection with such determination. The payment
required after such determination will be made by the responsible party by wire
transfer of immediately available funds to the other party within three Business
Days after the final determination.
3.4 Allocation of Consideration. The consideration payable by Buyer under
---------------------------
this Agreement will be allocated among the Assets as set forth in a schedule to
be prepared not later than 180 days after the Closing Date (or April 1 of the
year following the Closing Date if earlier) by an independent appraiser with
significant experience in the cable television industry. Such appraiser will be
selected by the mutual agreement of Buyer and Seller within 30 days after the
date of this Agreement, and the fees of such appraiser will be shared equally by
Buyer and Seller. Buyer and Seller agree to be bound by the allocation and will
not take any position inconsistent with such allocation and will file all
returns and reports with respect to the transactions contemplated by this
Agreement, including all federal, state and local Tax returns, on the basis of
such allocation.
SECTION 4. ASSUMED LIABILITIES AND EXCLUDED ASSETS.
4.1 Assignment and Assumption. Seller will assign, and Buyer will assume
-------------------------
and after the Closing will pay, discharge and perform the following (the
"Assumed Liabilities"): (a) Seller's obligations to subscribers of the Business
for (i) subscriber deposits held by Seller as of the Closing Date and which are
refundable, in the amount for which Buyer received credit under SECTION 3.2,
(ii) subscriber advance payments held by Seller as of the Closing Date for
services to be rendered by a System after the Closing Date, in the amount for
which Buyer received credit under SECTION 3.2 and (iii) the delivery of cable
television service to subscribers of the Business after the Closing Date; and
(b) obligations accruing and relating to periods after the Closing Date under
Governmental Permits listed on SCHEDULE 5.5 (to the extent that such
Governmental Permits are transferable) and Seller Contracts. Buyer will not
assume or have any responsibility for any liabilities or obligations of Seller
other than the
12
Assumed Liabilities. In no event will Buyer assume or have any responsibility
for any liabilities or obligations associated with the Excluded Assets.
4.2 Excluded Assets. The Excluded Assets, which will be retained by
---------------
Seller, will consist of the following: (a) programming contracts,
retransmission consent agreements and pole attachment agreements (except for
those set forth on SCHEDULE 5.6); (b) Employee Benefit Plans; (c) insurance
policies and rights and claims thereunder (except as otherwise provided in
SECTION 12.17); (d) bonds, letters of credit, surety instruments and other
similar items; (e) cash and cash equivalents and notes receivable; (f) Seller's
trademarks, trade names, service marks, service names, logos and similar
proprietary rights (subject to Buyer's rights under SECTION 7.5); (g) Seller's
rights under any agreement governing or evidencing an obligation of Seller for
borrowed money; (h) Seller Contracts for subscriber billing and equipment; (i)
Seller's rights under any contract, license, authorization, agreement or
commitment other than those creating or evidencing Assumed Liabilities; and (j)
the assets described on SCHEDULE 4.2.
SECTION 5. REPRESENTATIONS AND WARRANTIES OF SELLER.
Seller represents and warrants to Buyer, as of the date of this Agreement
and as of the Closing, as follows:
5.1 Organization and Qualification. Seller is a general partnership duly
------------------------------
organized and validly existing under the laws of the State of Colorado and has
all requisite partnership power and authority to own, lease and use the Assets
owned, leased or used by it and to conduct the Business as it is currently
conducted. Seller is duly qualified to do business in the States of Michigan
and Indiana, and under the laws of each jurisdiction in which the ownership,
leasing or use of the Assets owned, leased or used by it or the nature of
Seller's activities makes such qualification necessary, except in any such
jurisdiction where the failure to be so qualified and in good standing would not
have a material adverse effect on the Business, the Assets or the Systems or on
the ability of Seller to perform its obligations under this Agreement. The
general partners of Seller are ▇▇▇▇▇ Cable Income Fund 1-B, Ltd. and ▇▇▇▇▇ Cable
Income Fund 1-C, Ltd.
5.2 Authority and Validity. Seller has all requisite partnership power
----------------------
and authority to execute and deliver, to perform its obligations under, and to
consummate the transactions contemplated by, this Agreement and all other
documents and instruments to be executed and delivered in connection with the
transactions contemplated by this Agreement (collectively, the "Transaction
Documents") to which Seller is a party. Subject to approval by the Board of
Directors of ▇▇▇▇▇ Intercable, Inc. ("Intercable"), the sole general partner of
each of the general partners of Seller, the execution and delivery by Seller of,
the performance by Seller of its obligations under, and the consummation by
Seller of the transactions contemplated by, this
13
Agreement and the Transaction Documents to which Seller is a party have been
duly and validly authorized by all necessary action by or on behalf of Seller.
This Agreement has been, and when executed and delivered by Seller the
Transaction Documents will be, duly and validly executed and delivered by Seller
and the valid and binding obligations of Seller, enforceable against Seller in
accordance with their terms, except as the same may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws now or
hereafter in effect relating to the enforcement of creditors' rights generally
or by principles governing the availability of equitable remedies.
5.3 No Conflict; Required Consents. Except for the Required Consents, all
------------------------------
of which are listed on SCHEDULE 5.3, the execution and delivery by Seller, the
performance of Seller under, and the consummation of the transactions
contemplated by, this Agreement and the Transaction Documents to which Seller is
a party do not and will not: (a) violate any provision of the Partnership
Agreement of Seller; (b) violate any Legal Requirement; (c) require any consent,
approval or authorization of, or filing of any certificate, notice, application,
report or other document with any Governmental Authority or other Person; or (d)
(i) violate or result in a breach of or default under (without regard to
requirements of notice, lapse of time, or elections of any Person, or any
combination thereof), (ii) permit or result in the termination, suspension or
modification of, (iii) result in the acceleration of (or give any Person the
right to accelerate) the performance of Seller under, or (iv) result in the
creation or imposition of any Encumbrance under any Seller Contract or any other
instrument evidencing any of the Assets or by which Seller or any of its assets
is bound or affected, except for purposes of this clause (d) such violations,
conflicts, breaches, defaults, terminations, suspensions, modifications, and
accelerations as would not, individually or in the aggregate, have a material
adverse effect on any System, the Business or Seller, the validity, binding
effect or enforceability of this Agreement or on the ability of Seller to
perform its obligations under this Agreement or the Transaction Documents to
which Seller is a party.
5.4 Assets. Seller has exclusive, good and marketable title to (or, in
------
the case of Assets that are leased, valid leasehold interests in) the Assets
(other than Real Property, as to which the representations and warranties in
SECTION 5.7 apply). The Assets are free and clear of all Encumbrances, except
(a) Permitted Encumbrances and (b) Encumbrances described on SCHEDULE 5.4, all
of which will be terminated, released or, in the case of rights of refusal
listed on SCHEDULE 5.4, waived, as appropriate, at or prior to the Closing.
Except as described on SCHEDULE 5.6, none of the Equipment is leased by Seller
from any other Person. All the Equipment is in good operating condition and
repair (ordinary wear and tear excepted). Except for items included in the
Excluded Assets and the assets which comprise the ▇▇▇▇▇▇▇▇▇▇▇ System and the
Vicksburg System, the Assets constitute all the assets necessary to permit Buyer
to (i) conduct the Business and to operate the Systems substantially as they are
being conducted and operated on the date of this Agreement and in compliance in
all material
14
respects with all Legal Requirements, Governmental Permits and Seller Contracts
and (ii) perform all the Assumed Liabilities.
5.5 Governmental Permits. All Governmental Permits are listed on SCHEDULE
--------------------
5.5. Complete and correct copies of all Governmental Permits have been
delivered by Seller to Buyer. Each Governmental Permit is in full force and
effect and Seller is not and, to Seller's Knowledge, the other party thereto is
not, in breach or default of any material terms or conditions thereunder, and is
valid under all applicable Legal Requirements according to its terms. There is
no legal action, governmental proceeding or investigation, pending or, to
Seller's Knowledge threatened, to terminate, suspend or modify any Governmental
Permit and Seller is in compliance with the material terms and conditions of all
the Governmental Permits and with other material applicable requirements of all
Governmental Authorities (including the FCC and the Register of Copyrights)
relating to the Governmental Permits, including all requirements for
notification, filing, reporting, posting and maintenance of logs and records.
As of the date of this Agreement, to Seller's Knowledge, no third party has been
granted or has applied for a cable television franchise or is providing or
intending to provide cable television services in any of the communities or
unincorporated areas currently served by the Business.
5.6 Seller Contracts. All Seller Contracts (other than those constituting
----------------
Excluded Assets) are described on SCHEDULE 5.6 or 5.7. Complete and correct
copies of all Seller Contracts have been delivered by Seller to Buyer. Each
Seller Contract is in full force and effect and constitutes the valid, legal,
binding and enforceable obligation of Seller, and Seller is not and to Seller's
Knowledge each other party thereto is not, in breach or default of any material
terms or conditions thereunder.
5.7 Real Property.
-------------
5.7.1 All the Assets consisting of Real Property interests are
described on SCHEDULE 5.7. Except as otherwise disclosed on SCHEDULE 5.7,
Seller holds good, marketable and indefeasible fee simple title to the Real
Property shown as being owned by Seller on SCHEDULE 5.7 and the valid and
enforceable right to use and possess such Real Property, subject only to the
Permitted Encumbrances. Seller has valid and enforceable leasehold interests in
Real Property shown as being leased by Seller on SCHEDULE 5.7 and, with respect
to other Real Property not owned or leased by Seller, Seller has the valid and
enforceable right to use all such other Real Property pursuant to the easements,
licenses, rights-of-way or other rights described on SCHEDULE 5.7, subject only
to Permitted Encumbrances. Except for routine repairs, all of the material
improvements, leasehold improvements and the premises of the Real Property are
in good condition and repair and are suitable for the purposes used. The
current use and occupancy of the Real Property do not constitute nonconforming
uses under any applicable zoning Legal Requirements.
15
5.7.2 The documents delivered by Seller to Buyer as evidence of each
Seller Contract that is a lease of Real Property constitute the entire agreement
with the landlord in question. There are no leases or other agreements, oral or
written, granting to any Person other than Seller the right to occupy or use any
Real Property, except as described on SCHEDULE 5.7. All easements, rights-of-
way and other rights appurtenant to, or which are necessary for Seller's current
use of, any Real Property are valid and in full force and effect, and Seller has
not received any notice with respect to the termination, breach or impairment of
any of those rights. Each parcel of Real Property, any improvements constructed
thereon and their current use (a) has access to and over all public streets, or
private streets for which Seller has a valid right of ingress and egress, (b)
conforms in its current use and occupancy to all zoning requirements without
reliance upon a variance issued by a Governmental Authority or a classification
of the parcel in question as a nonconforming use, and (c) conforms in all
material respects in its use to all restrictive covenants, if any, or other
Encumbrances affecting all or part of such parcel.
5.8 Environmental Matters.
---------------------
5.8.1 The Real Property currently complies in all material respects
with and, to Seller's Knowledge, has previously been operated in compliance in
all material respects with, all Environmental Laws. Seller has not directly or
indirectly (a) generated, released, stored, used, treated, handled, discharged
or disposed of any Hazardous Substances at, on, under, in or about, or in any
other manner affecting, any Real Property, (b) transported any Hazardous
Substances to or from any Real Property or (c) undertaken or caused to be
undertaken any other activities relating to the Real Property which could
reasonably give rise to any liability under any Environmental Law, and, to
Seller's Knowledge, no other present or previous owner, tenant, occupant or user
of any Real Property or any other Person has committed or suffered any of the
foregoing. To Seller's Knowledge, (i) no release of Hazardous Substances
outside the Real Property has entered or threatens to enter any Real Property,
nor (ii) is there any pending or threatened claim based on Environmental Laws
which arises from any condition of the land surrounding any Real Property. No
litigation based on Environmental Laws which relates to any Real Property or any
operations on conditions on it (A) has been asserted or conducted in the past or
is currently pending against or with respect to Seller or, to Seller's
Knowledge, any other Person, or (B) to Seller's Knowledge is threatened or
contemplated.
5.8.2 To Seller's Knowledge, other than as described on SCHEDULE 5.8,
(a) no aboveground or underground storage tanks are currently or have been
located on any Real Property, (b) no Real Property has been used at any time as
a gasoline service station or any other facility for storing, pumping,
dispensing or producing gasoline or any other petroleum products or wastes and
(c) no building or other structure on any Real Property contains asbestos-
containing material.
16
5.8.3 Seller has provided Buyer with complete and correct copies of
(a) all studies, reports, surveys or other materials in Seller's possession or,
to Seller's Knowledge to which it has access, relating to the presence or
alleged presence of Hazardous Substances at, on or affecting the Real Property,
(b) all notices or other materials in Seller's possession or, to Seller's
Knowledge to which it has access, that were received from any Governmental
Authority having the power to administer or enforce any Environmental Laws
relating to current or past ownership, use or operation of the Real Property or
activities at the Real Property and (c) all materials in Seller's possession or,
to Seller's Knowledge to which it has access, relating to any litigation or
allegation by any Person concerning any Environmental Law.
5.9 Compliance with Legal Requirements.
----------------------------------
5.9.1 The ownership, leasing and use of the Assets as they are
currently owned, leased and used and the conduct of the Business and the
operation of the Systems as they are currently conducted and operated do not
violate or infringe, in any material respect, any Legal Requirements currently
in effect (other than the Legal Requirements described in SECTION 5.9.4, as to
which the provisions of SECTION 5.9.4 will apply). Seller has received no
notice of any violation by Seller or the Business of any Legal Requirement
applicable to the Business or the Systems as currently conducted, and to
Seller's Knowledge, there is no basis for the allegation of any such a
violation.
5.9.2 A valid request for renewal has been duly and timely filed
under Section 626 of the Cable Communications Policy Act of 1984 with the proper
Governmental Authority with respect to applicable Governmental Permits with
franchising authorities that have expired prior to, or will expire within 36
months after, the date of this Agreement.
5.9.3 Seller has complied, and the Business is in compliance, in all
material respects, with the specifications set forth in Part 76, Subpart K of
the rules and regulations of the FCC, Section 111 of the U.S. Copyright Act of
1976 and the applicable rules and regulations thereunder and the applicable
rules and regulations of the U.S. Copyright Office, the Register of Copyrights,
the Copyright Royalty Tribunal and the Communications Act of 1934, including
provisions of any thereof pertaining to signal leakage, to utility pole make
ready and to grounding and bonding of cable television systems (in each case as
the same is currently in effect), and all other applicable Legal Requirements
relating to the construction, maintenance, ownership and operation of the
Assets, the Systems and the Business.
5.9.4 Notwithstanding the foregoing, to Seller's Knowledge, each
System is in compliance in all material respects with the provisions of the
Cable Television Consumer Protection and Competition Act of 1992 and the FCC
rules and regulations promulgated thereunder (the "1992 Cable Act") as such
Legal Requirements
17
relate to the operation of the Business; provided, however, that Seller does not
hereby make any representation about rates charged to subscribers, other than
the representation regarding the rates charged to subscribers set forth below.
Seller has complied in all material respects with the must carry and
retransmission consent provisions of the 1992 Cable Act. Seller has used
reasonable good faith efforts to establish rates charged to subscribers,
effective since September 1, 1993, that are or were allowable under the 1992
Cable Act and any authoritative interpretation thereof now or then in effect,
whether or not such rates are or were subject to regulation at that date by any
Governmental Authority, including any local franchising authority and/or the
FCC, unless such rates were not subject to regulation pursuant to a specific
exemption from rate regulation contained in the 1992 Cable Act other than the
failure of any franchising authority to have been certified to regulate rates.
Notwithstanding the foregoing, Seller makes no representation or warranty that
the rates charged to subscribers (a) are allowable under any rules and
regulations of the FCC or any authoritative interpretation thereof, or (b) would
be allowable under any rules and regulations of the FCC or any authoritative
interpretation thereof promulgated after the date of the Closing. Seller has
delivered to Buyer complete and correct copies of all FCC Forms 393, 1200, 1205,
1210, 1215, 1220, 1225, 1235 and 1240 filed with respect to the Systems and
copies of all other FCC Forms filed by Seller and of all correspondence with any
Governmental Authority relating to rate regulation generally or specific rates
charged to subscribers with respect to the Systems, including copies of any
complaints filed with the FCC with respect to any rates charged to subscribers
of the Systems, and any other documentation supporting an exemption from the
rate regulation provisions of the 1992 Cable Act claimed by Seller with respect
to any of the Systems (collectively, "Rate Regulation Documents"). As of the
date of this Agreement, Seller has received no notice from any Governmental
Authority with respect to an intention to enforce customer service standards
pursuant to the 1992 Cable Act and Seller has not agreed with any Governmental
Authority to establish customer service standards that exceed the customer
service standards promulgated pursuant to the 1992 Cable Act. In addition,
Seller has also delivered to Buyer documentation for each of the Systems in
which the franchising authority has not certified to regulate rates as of the
date of this Agreement showing a determination of allowable rates using a
benchmark methodology. Except as described in SCHEDULE 5.9, Seller has not made
any election with respect to any cost of service proceeding conducted in
accordance with Part 76.922 of Title 47 of the Code of Federal Regulations or
any similar proceeding (a "Cost of Service Election") with respect to any of the
Systems.
5.10 Patents, Trademarks and Copyrights. Seller has timely and accurately
----------------------------------
made all requisite filings and payments with the Register of Copyrights with
respect to the Business. Seller has delivered to Buyer complete and correct
copies of all current reports and filings, and all reports and filings for the
past three years, made or filed pursuant to copyright rules and regulations with
respect to the Business. Seller does not possess any patent, patent right,
trademark or copyright material to the operation of
18
the Business and Seller is not a party to any license or royalty agreement with
respect to any patent, trademark or copyright except for licenses respecting
program material and obligations under the Copyright Act of 1976 applicable to
cable television systems generally. The Business and the System have been
operated in such a manner so as not to violate or infringe upon the rights of,
or give rise to any rightful claim of any Person for copyright, trademark,
service ▇▇▇▇, patent, license, trade secret infringement or the like.
5.11 Financial Statements. A correct copy of the combined unaudited
--------------------
financial statements for the Systems and the ▇▇▇▇▇▇▇▇▇▇▇ System and the
Vicksburg System as of September 30, 1997, including an unaudited income
statement and balance sheet which fairly present the financial condition of the
Systems, is attached as SCHEDULE 5.11 (collectively, the "Financial
Statements"). At the date of the Financial Statements, Seller had no liability
or obligation, whether accrued, absolute, fixed or contingent (including
liabilities for Taxes or unusual forward or long-term commitments), required by
GAAP to be reflected or reserved against therein that were not fully reflected
or reserved against on the balance sheet included in the Financial Statements,
other than liabilities included in current liabilities, and none of which was or
would be material to the Business.
5.12 Absence of Certain Changes. Since September 30, 1997 (a) 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 condition
or results of operations of the Business, (b) there has been no material adverse
change (except any change affecting the United States cable industry as a whole,
including any change arising from (i) legislation, litigation, rulemaking or
regulation or (ii) competition caused by or arising from other multiple channel
distribution services) in the business, condition (financial or otherwise) or
liabilities of the Business, and (c) the Business has been conducted only in the
ordinary course of business.
5.13 Legal Proceedings. Except as set forth in SCHEDULE 5.13: (a) there
-----------------
is no claim, investigation or litigation pending or, to Seller's Knowledge,
threatened, by or before any Governmental Authority or private arbitration
tribunal against Seller which, if adversely determined, would materially
adversely affect the financial condition or operations of the Business, the
Systems, the Assets or the ability of Seller to perform its obligations under
this Agreement, or which, if adversely determined, would result in the
modification, revocation, termination, suspension or other limitation of any of
the Governmental Permits, Seller Contracts or leases or other documents
evidencing the Real Property; and (b) there is not in existence any judgment
requiring Seller to take any action of any kind with respect to the Assets or
the operation of the Systems, or to which Seller (with respect to the Systems),
the Systems or the Assets are subject or by which they are bound or affected.
19
5.14 Tax Returns; Other Reports. Seller has duly and timely filed in
--------------------------
correct form all federal, state and local Tax returns and all other Tax reports
required to be filed by Seller and has timely paid all Taxes which have become
due and payable, whether or not shown on any such report or return, the failure
of which to be filed or paid could adversely affect the Assets or result in the
imposition of an Encumbrance upon the Assets, except such amounts as are being
contested diligently and in good faith and are not in the aggregate material.
Except as specifically identified on SCHEDULE 5.14, Seller has received no
notice of, nor does Seller have any Knowledge of, any deficiency, assessment or
audit, or proposed deficiency, assessment or audit from any taxing Governmental
Authority which could affect or result in the imposition of an Encumbrance upon
the Assets.
5.15 Employment Matters.
------------------
5.15.1 SCHEDULE 5.15 contains a complete and correct list of names
and positions of all employees of Seller engaged in the Business as of the date
set forth in such SCHEDULE. Seller has no employment agreements, either written
or oral, with any employee of the Business. Seller has complied in all material
respects with applicable Legal Requirements relating to the employment of labor,
including WARN, the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), continuation coverage requirements with respect to group health
plans, and those relating to wages, hours, collective bargaining, unemployment
insurance, worker's compensation, equal employment opportunity, age and
disability discrimination, immigration control and the payment and withholding
of Taxes.
5.15.2 Each "employee benefit plan" or "multiemployer plan" (as
those terms are defined in ERISA) with respect to which Seller or any ERISA
Affiliate (as defined in ERISA) of Seller has any liability is set forth on
SCHEDULE 5.15 (the "Employee Benefit Plans"). Neither Seller nor its ERISA
Affiliates nor any Employee Benefit Plan is in material violation of any
provision of ERISA. No "reportable event," as defined in Section 4043 of ERISA,
has occurred and is continuing with respect to any Employee Benefit Plan. No
"prohibited transaction," within the meaning of Section 406 of ERISA, has
occurred with respect to any such Employee Benefit Plan, and no "accumulated
funding deficiency" or "withdrawal liability" (both as defined in Section 302 of
ERISA) exists with respect to any such Employee Benefit Plan. After the
Closing, Buyer will not be required, under ERISA, the Internal Revenue Code of
1986, as amended (the "Code") or any collective bargaining agreement, to
establish, maintain or continue any Employee Benefit Plan currently maintained
by Seller or any of its ERISA Affiliates.
5.15.3 Seller is not a party to any collective bargaining
agreements and Seller has not recognized or agreed to recognize and has no duty
to bargain with any labor organization or collective bargaining unit. There are
not pending any unfair
20
labor practice charges against Seller, any demand for recognition or any other
request or demand from a labor organization for representative status with
respect to any Person employed by Seller. To Seller's Knowledge, its employees
are not engaged in organizing activity with respect to any labor organization.
Seller has no employment agreement, either written or oral, express or implied,
that would require Buyer to employ any Person after the Closing Date.
5.16 Systems Information. SCHEDULE 5.16 sets forth a materially true and
-------------------
accurate description of the following information relating to the Business as of
the most recent monthly report generated by Seller in the ordinary course of
business containing the information required to prepare such SCHEDULE (provided
that such date is no earlier than two months prior to the date of this
Agreement):
(a) the approximate number of miles of plant included in the Assets;
(b) the number of subscribers and EBS's served by the Systems for each
Franchise;
(c) the approximate number of single family homes and residential
dwelling units passed by the Systems;
(d) a description of basic and optional or tier services available
from the Systems, the rates charged by Seller for each and the number of
subscribers and subscriber equivalents receiving each optional or tier
service;
(e) the stations and signals carried by the Systems and the channel
position of each such signal and station; and
(f) the cities, towns, villages, townships, boroughs and counties
served by the Systems.
5.17 Bonds. Except as set forth on SCHEDULE 5.17, as of the date of this
-----
Agreement, there are no franchise, construction, fidelity, performance, or other
bonds or letters of credit posted by Seller in connection with its operation or
ownership of any of the Systems or Assets.
5.18 Finders and Brokers. Seller has not employed any financial advisor,
-------------------
broker or finder or incurred any liability for any financial advisory,
brokerage, finder's or similar fee or commission in connection with the
transactions contemplated by this Agreement for which Buyer could be liable.
SECTION 6. BUYER'S REPRESENTATIONS AND WARRANTIES.
21
To induce Seller to enter into this Agreement, Buyer represents and
warrants to Seller, as of the date of this Agreement and as of the Closing, as
follows:
6.1 Organization and Qualification. Buyer is a corporation duly
------------------------------
organized, validly existing and in good standing under the laws of the State of
Texas and has all requisite corporate power and authority to own, lease and use
the assets owned, leased or used by it and to conduct its business as it is
currently conducted. Buyer is duly qualified to do business and is in good
standing under the laws of Michigan and Indiana, and of each jurisdiction in
which the ownership, leasing or use of the assets owned, leased or used by it or
the nature of Buyer's activities makes such qualification necessary, except in
any such jurisdiction where the failure to be so qualified and in good standing
would not have a material adverse effect on Buyer or on the ability of Buyer to
perform its obligations under this Agreement.
6.2 Authority and Validity. Buyer has all requisite corporate power and
----------------------
authority to execute and deliver, to perform its obligations under, and to
consummate the transactions contemplated by, this Agreement and the Transaction
Documents to which Buyer is a party. The execution and delivery by Buyer of,
the performance by Buyer of its obligations under, and the consummation by Buyer
of the transactions contemplated by, this Agreement and the Transaction
Documents to which Buyer is a party have been duly and validly authorized by all
necessary action by or on behalf of Buyer. This Agreement has been, and when
executed and delivered by Buyer the Transaction Documents will be, duly and
validly executed and delivered by Buyer and the valid and binding obligations of
Buyer, enforceable against Buyer in accordance with their terms, except as the
same may be limited by applicable bankruptcy, insolvency, reorganization,
moratorium or similar laws now or hereafter in effect relating to the
enforcement of creditors' rights generally or by principles governing the
availability of equitable remedies.
6.3 No Conflicts; Required Consents. Except for the Required Consents,
-------------------------------
the execution and delivery by Buyer, the performance of Buyer under, and the
consummation of the transactions contemplated by, this Agreement and the
Transaction Documents to which Buyer is a party do not and will not (a) violate
any provision of the charter or bylaws of Buyer, (b) violate any Legal
Requirement, (c) require any consent, approval or authorization of, or filing of
any certificate, notice, application, report or other document with any
Governmental Authority or other Person or (d) (i) violate or result in a breach
of or constitute a default under (without regard to requirements of notice,
lapse of time or elections of any Person or any combination thereof), (ii)
permit or result in the termination, suspension, modification of, (iii) result
in the acceleration of (or give any Person the right to accelerate) the
performance of Buyer under, or (iv) result in the creation or imposition of any
Encumbrance under, any instrument or other agreement to which Buyer is a party
or by which Buyer or any of its assets is bound or affected, except for purposes
of this clause (d) such violations, conflicts, breaches, defaults, terminations,
suspensions, modifications and accelerations as would not, individually or in
the aggregate, have a material adverse effect on the
22
validity, binding effect or enforceability of this Agreement or on the ability
of Buyer to perform its obligations under this Agreement or the Transaction
Documents to which it is a party.
6.4 Finders and Brokers. Buyer has not employed any financial advisor,
-------------------
broker or finder or incurred any liability for any financial advisory,
brokerage, finder's or similar fee or commission in connection with the
transactions contemplated by this Agreement for which Seller could be liable.
6.5 Legal Proceedings. There are no claims, actions, suits, proceedings
-----------------
or investigations pending or, to Buyer's Knowledge, threatened, by or before any
Governmental Authority, or any arbitrator, by or against or affecting or
relating to Buyer which, if adversely determined, would restrain or enjoin the
consummation of the transactions contemplated by this Agreement or declare
unlawful the transactions or events contemplated by this Agreement or cause any
of such transactions to be rescinded.
SECTION 7. ADDITIONAL COVENANTS.
7.1 Access to Premises and Records. Between the date of this Agreement
------------------------------
and the Closing Date, Seller will give Buyer and its counsel, accountants and
other representatives full access during normal business hours upon reasonable
notice to all the premises and books and records of the Business and to all the
Assets and to the System personnel and will furnish to Buyer and such
representatives all such documents, financial information, and other information
regarding the Business and the Assets as Buyer from time to time reasonably may
request; provided that no such investigation will affect or limit the scope of
any of Seller's representations, warranties, covenants and indemnities in this
Agreement or any Transaction Document or limit liability for any breach of any
of the foregoing.
7.2 Continuity and Maintenance of Operations; Financial Statements.
--------------------------------------------------------------
Except as Buyer may otherwise consent in writing, between the date of this
Agreement and the Closing:
7.2.1 Seller will conduct the Business and operate the Systems only
in the usual, regular and ordinary course consistent with past practices
(including making budgeted capital expenditures and fulfilling installation
requests) and will use commercially reasonable efforts to (a) preserve its
current business intact, including preserving existing relationships with
franchising authorities, suppliers, customers and others having business
dealings with Seller relating to the Business unless Buyer requests otherwise,
(b) keep available the services of its employees and agents providing services
in connection with the Business and (c) continue making marketing, advertising
and promotional expenditures with respect to the Business consistent with past
practices.
23
7.2.2 Seller will maintain the Assets in good repair, order and
condition (ordinary wear and tear excepted), will maintain equipment and
inventory at historical levels consistent with past practices, will maintain in
full force and effect, policies of insurance with respect to the Business in
such amounts and with respect to such risks as customarily maintained by
operators of cable television systems of the size and geographic location as the
Systems and will maintain its books, records and accounts in the usual, regular
and ordinary manner on a basis consistent with past practices. Seller will not
itself, and will not permit any of its officers, directors, shareholders, agents
or employees to, pay any of Seller's subscriber accounts receivable (other than
for their own residences) prior to the Closing Date. Seller will continue to
implement its procedures for disconnection and discontinuance of service to
subscribers whose accounts are delinquent in accordance with those in effect on
the date of this Agreement.
7.2.3 Without the prior approval of Buyer, Seller will not (a) change
the rate charged for Basic Service, Expanded Basic Service or Pay TV or add,
delete, retier or repackage any programming services except to the extent
required under the 1992 Cable Act or any other Legal Requirement, provided
however if Seller changes such rates in order to so comply, Seller will provide
Buyer with copies of any FCC forms (even if not filed with any Governmental
Authority) that Seller used to determine that the new rates were allowable, (b)
sell, transfer or assign any portion of the Assets other than sales in the
ordinary course of business or permit the creation of any Encumbrance on any
Asset other than a Permitted Encumbrance or any Encumbrance which will be
released at or prior to Closing, (c) modify in any material respect, terminate,
suspend or abrogate any Governmental Permits, Seller Contracts or any other
contract or agreement (other than those constituting Excluded Assets), (d) enter
into any contract or commitment or incur any indebtedness or other liability or
obligation of any kind relating to any System or the Business involving an
expenditure in excess of $25,000, other than contracts or commitments which are
cancelable on 30 days' notice or less without penalty, (e) take or omit to take
any action that would result in any of its representations or warranties in this
Agreement or in any Transaction Document not being true and correct when made or
as of the Closing, (f) engage in any marketing, subscriber installation or
collection practices that are inconsistent with past practices, or (g) enter
into any agreement with or commitment to any competitive access providers with
respect to the Systems
7.2.4 Seller promptly will deliver to Buyer true and complete copies
of monthly and quarterly financial statements and operating reports and any
reports with respect to the combined operations of the Business and the
▇▇▇▇▇▇▇▇▇▇▇ System and the Vicksburg System, prepared by or for Seller at any
time between the date of this Agreement and the Closing Date. All financial
statements so delivered will be prepared in accordance with GAAP on a basis
consistent with the Financial Statements.
24
7.2.5 Seller will give or cause to be given to Buyer as soon as
reasonably possible but in any event no later than 5 Business Days prior to the
date of submission to the appropriate Governmental Authority, copies of all Rate
Regulation Documents prepared with respect to any of the Systems, including any
Cost of Service Elections other than those described on SCHEDULE 5.9, and Seller
will make a good faith effort to address any specific concerns raised by Buyer
with respect to such documents.
7.2.6 Seller will duly and timely file a valid notice of renewal
under Section 626 of the Cable Communications Policy Act of 1984 with the
appropriate Governmental Authority with respect to all cable television
franchises of the Business that will expire within 36 months after any date
between the date of this Agreement and the Closing Date.
7.2.7 Seller will use reasonable efforts to extend any cable
television franchises of the Business that expire on or prior to December 31,
1999 for at least 3 years from December 31, 1999.
7.2.8 Seller will promptly notify Buyer of any fact, circumstance,
event or action by it or otherwise (a) which, if known at the date of this
Agreement, would have been required to be disclosed in or pursuant to this
Agreement or (b) the existence, occurrence or taking of which would result in
any of Seller's representations and warranties in this Agreement or any
Transaction Document not being true, complete and correct when made or at the
Closing, and, with respect to clause (b) use its best efforts to remedy the
same.
7.3 Employee Matters.
----------------
7.3.1 Buyer will have no obligation to employ or offer employment to
any of the employees of Seller. As of the Closing Date, Seller will terminate
the employment of all its employees who were employed incidental to the conduct
of the Business whose employment will not continue with Seller after the Closing
and will promptly pay to all such employees all compensation, including
salaries, commissions, bonuses, deferred compensation, severance, insurance,
pensions, profit sharing, vacation (except for accrued vacation included in the
adjustments pursuant to SECTION 3.2), sick pay and other compensation or
benefits to which they are entitled for periods prior to the Closing, including
all amounts, if any, payable on account of the termination of their employment.
Seller agrees to cooperate in all reasonable respects with Buyer to allow Buyer
to evaluate and interview employees of the Business to make hiring decisions.
Such cooperation will include but not be limited to allowing Buyer to contact
employees during work time and, with the consent of the employee, making
personnel records available. Buyer will give Seller written notice on or before
60 days after the date hereof of the name of all employees of the System to whom
Buyer desires to offer employment on and after the Closing Date (subject to
satisfaction of Buyer's conditions for employment). Seller will not, without
the prior written consent of
25
Buyer, change the compensation or benefits of any employees of the Business
except in accordance with past practice.
7.3.2 All claims and obligations under, pursuant to or in connection
with any welfare, medical, insurance, disability or other employee benefit plans
of Seller or arising under any Legal Requirement affecting employees of Seller
incurred on or before the Closing Date or resulting or arising from events or
occurrences occurring or commencing on or before the Closing Date will remain
the responsibility of Seller, whether or not such employees are hired by Buyer
after the Closing.
7.3.3 Seller will remain solely responsible for, and will indemnify
and hold harmless Buyer from and against all Losses arising from or with respect
to, all salaries and all severance, vacation (except for accrued vacation
included in the adjustments pursuant to SECTION 3.2), medical, sick, holiday,
continuation coverage and other compensation or benefits to which Seller's
employees (whether or not hired by Buyer) may be entitled as a result of their
employment by Seller prior to the Closing, the termination of their employment
prior to the Closing, the consummation of the transactions contemplated hereby
or pursuant to any applicable Legal Requirement (including without limitation
WARN) or otherwise relating to their employment prior to the Closing.
7.3.4 Nothing in this Agreement will require Buyer to assume any
collective bargaining agreement between Seller and any labor organization.
7.4 Leased Vehicles; Other Capital Leases. Seller will pay the remaining
-------------------------------------
balances on any leases for vehicles or capital leases included in the Equipment
and will deliver title to such vehicles and other Equipment free and clear of
all Encumbrances (other than Permitted Encumbrances) to Buyer at the Closing.
7.5 Required Consents; Estoppel Certificates.
----------------------------------------
7.5.1 Seller will use commercially reasonable efforts to obtain in
writing, as promptly as possible and at its expense, all the Required Consents
and any other consent, authorization or approval required to be obtained by
Seller in connection with the transactions contemplated by this Agreement, in
form and substance reasonably satisfactory to Buyer and deliver to Buyer copies
of such Required Consents and such other consents, authorizations or approvals
promptly after they are obtained by Seller. Such Required Consents will be
proposed in a form that provides confirmation from the third party of the
continued existence of and the absence of defaults under the applicable Seller
Contract or Governmental Permit. Buyer will cooperate with Seller to obtain all
Required Consents, but Buyer will not be required to accept or agree or accede
to any modifications or amendments to, or changes in, or the imposition of any
condition to the transfer to Buyer of (in each case other than inconsequential
matters with no adverse effect on Buyer), any Seller Contract or
26
Governmental Permit that are not acceptable to Buyer in its sole discretion.
Notwithstanding the foregoing, the parties will deliver to the appropriate
Governmental Authority requests for the necessary consents to transfer the
Governmental Permits, and will complete, execute and deliver to the appropriate
Governmental Authority, the FCC Forms 394 prepared by Buyer with respect to each
Governmental Permit as to which the parties agree that such Form 394 should be
delivered, and failing an agreement between the parties, to any Governmental
Authority requested by Seller. In addition, to the extent the parties agree not
to submit a Form 394 to any Governmental Authority, if such Governmental
Authority has not acted on a request of the parties to consent to the transfer
of the relevant Governmental Permit within 75 days after such request has been
made, either party may, upon notice to the other, require that a Form 394 be
submitted to such Governmental Authority, and the parties will cooperate to
submit such Form 394 within five Business Days after such notice has been given.
7.5.2 Seller will use commercially reasonable efforts to obtain for
each lease that has not been recorded in the public records, execution of a
document suitable for recording in the public records and sufficient after
recording to constitute a memorandum of lease.
7.6 Title Commitments and Surveys.
-----------------------------
7.6.1 After the execution of this Agreement, Buyer will order at
Seller's expense (a) commitments for owner's title insurance policies on all
Real Property owned by Seller and on easements which provide access to each such
parcel of real property, (b) commitments for lessee's title insurance policies
for all Real Property leased by Seller which is used for headend or tower sites
and on easements which provide access to each such site and (c) an ALTA survey
(including such items on Table A of the Minimum Standard Detail Requirements and
Classifications thereto that Buyer in its reasonable judgment determines are
desirable or necessary) on each parcel of Real Property for which a title
insurance policy is to be obtained. The title commitments will evidence a
commitment to issue an ALTA title insurance policy insuring good, marketable and
indefeasible fee simple title or leasehold interest, in the case of Leased Real
Property, if applicable) to each parcel of such Real Property, subject only to
Permitted Encumbrances, for such amount as Buyer directs and will contain no
exceptions except for items which in Buyer's reasonable opinion do not adversely
affect (other than in an immaterial way as to any individual parcel) the good,
marketable and indefeasible title to or Buyer's access or quiet use or enjoyment
of such Real Property in the manner the Real Property is presently used or in
the normal conduct of the Business. At the Closing, Seller will cause Buyer to
receive, at Seller's expense, title commitments redated to the date and time of
Closing. In the event Seller has not eliminated or caused to be eliminated all
unacceptable exceptions from such policies or commitments prior to Closing, and
Buyer elects to proceed with the Closing, Buyer will be entitled to
indemnification with respect to such exceptions as provided in SECTION 11.2.
27
7.6.2 Title insurance policies on all Real Property in such amounts
as Buyer directs will be delivered to Buyer at Seller's expense within 30 days
after the Closing Date evidencing title to the Real Property vested in Buyer
consistent with the commitments delivered at the Closing pursuant to SECTION
7.6.1.
7.7 HSR Notification. As soon as practicable after the execution of this
----------------
Agreement, but in any event no later than 30 days after such execution, Seller
and Buyer will each complete and file, or cause to be completed and filed, any
notification and report required to be filed under the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇
Antitrust Improvements Act of 1976, as amended (the "HSR Act"); and each such
filing will request early termination of the waiting period imposed by the HSR
Act. The parties will use their reasonable best efforts to respond as promptly
as reasonably practicable to any inquiries received from the Federal Trade
Commission (the "FTC") and the Antitrust Division of the Department of Justice
(the "Antitrust Division") for additional information or documentation and to
respond as promptly as reasonably practicable to all inquiries and requests
received from any other Governmental Authority in connection with antitrust
matters. The parties will use their respective reasonable best efforts to
overcome any objections which may be raised by the FTC, the Antitrust Division
or any other Governmental Authority having jurisdiction over antitrust matters.
Notwithstanding the foregoing, Buyer will not be required to make any
significant change in the operations or activities of the business (or any
material assets employed therein) of Buyer or any of its Affiliates, if Buyer
determines in good faith that such change would be materially adverse to the
operations or activities of the business (or any material assets employed
therein) of Buyer or any of its Affiliates having significant assets, net worth,
or revenue. Notwithstanding anything to the contrary in this Agreement, if
Buyer or Seller, in its sole opinion, considers a request from a governmental
agency for additional data and information in connection with the HSR Act to be
unduly burdensome, such party may terminate this Agreement by giving written
notice to the other. Within 10 days after receipt of a statement therefor,
Seller will reimburse Buyer for one-half of the filing fees payable by Buyer in
connection with Buyer's filing under the HSR Act.
7.8 No Shopping. None of Seller, its partners or any agent or
-----------
representative of any of them will, during the period commencing on the date of
this Agreement and ending with the earlier to occur of the Closing or the
termination of this Agreement, directly or indirectly (a) solicit or initiate
the submission of proposals or offers from any Person for, (b) participate in
any discussions pertaining to or (c) furnish any information to any Person other
than Buyer relating to, any direct or indirect acquisition or purchase of all or
any portion of the Assets.
7.9 Lien and Judgment Searches. Not more than 20 nor fewer than 10 days
--------------------------
prior to the expected Closing Date, Seller, at its expense, will provide Buyer
with (a) the results of a lien search conducted by a professional search company
of records
28
in the offices of the secretaries of state in each state and county clerks in
each county where there exist tangible Assets, and in the state and county where
Seller's principal offices are located, including copies of all financing
statements or similar notices or filings (and any continuation statements)
discovered by such search company and (b) the results of a search of the dockets
of the clerk of each federal and state court sitting in the city, county or
other applicable political subdivision where the principal office or any
material assets of Seller may be located, with respect to judgments, orders,
writs or decrees against or affecting Seller or any of the Assets.
7.10 Transfer Taxes. Any state sales Taxes imposed by any Governmental
--------------
Authority arising from or payable by reason of the transfer of any of the Assets
pursuant to this Agreement will be paid by Seller. Any local sales, or state or
local use, transfer, Taxes or fees or any other charge (including filing fees)
imposed by any Governmental Authority arising from or payable by reason of the
transfer of any of the Assets pursuant to this Agreement will be paid by one-
half by Buyer (but in no event will Buyer's share exceed an aggregate of
$250,000), with the balance to be paid by Seller.
7.11 Distant Broadcast Signals. Unless otherwise restricted or prohibited
-------------------------
by any Governmental Authority or applicable Legal Requirement, if requested by
Buyer, Seller will delete prior to the Closing Date any distant broadcast
signals which Buyer determines will result in unacceptable liability on the part
of Buyer for copyright payments with respect to continued carriage of such
signals after the Closing.
7.12 Guaranty. At the Closing, Seller will cause Intercable to sign and
--------
deliver to Buyer, a Guaranty in the form of EXHIBIT D.
7.13 Letter to Programmers. On or before the Closing Date, Seller will
---------------------
transmit a letter in the form of EXHIBIT E to all programmers from which Seller
purchases programming for the Systems and provide Buyer with a copy of each such
letter.
7.14 Updated Schedules. Not later than ten Business Days prior to the
-----------------
expected Closing Date, Seller will deliver to Buyer revised copies of all
Schedules to this Agreement which will have been updated and marked to show any
changes occurring between the date of this Agreement and the date of delivery;
provided, however, that for purposes of Seller's representations and warranties
and covenants in this Agreement, all references to the Schedules will mean the
version of the Schedules attached to this Agreement on the date of signing, and
provided further that if the effect of any such updates to Schedules is to
disclose any one or more additional properties, privileges, rights, interests or
claims as Assets, Buyer, at or before Closing, will have the right (to be
exercised by written notice to Seller) to cause any one or more of such items to
be designated as and deemed to constitute Excluded Assets for all purposes under
this Agreement.
29
7.15 Use of Names and Logos. For a period of 90 days after the Closing
----------------------
Date, Buyer will be entitled to use all trademarks, trade names, service marks,
service names, logos and similar proprietary rights of Seller and all
derivations and abbreviations of such name and related marks to the extent
incorporated in or on the Assets transferred to it at the Closing.
Notwithstanding the foregoing, Buyer will not be required to remove or
discontinue using any such trade name or ▇▇▇▇ that is affixed to converters or
other items in or to be used in subscriber homes or properties, or as are used
in a similar fashion making such removal or discontinuation impracticable for
Buyer.
7.16 Subscriber Billing Services. Seller will provide to Buyer, upon
---------------------------
request, on terms and conditions reasonably satisfactory to each party, access
to and the right to use its billing system computers, software and related fixed
assets in connection with the Systems acquired by Buyer for a period of up to 90
days following the Closing to allow for conversion of existing billing
arrangements ("Transitional Billing Services"); provided however that Buyer will
not be required to pay Seller more than Seller's actual cost of providing such
service. Buyer will notify Seller at least 10 days prior to the expected
Closing Date as to whether it desires Transitional Billing Services from Seller.
7.17 Satisfaction of Conditions. Each party will use its best efforts to
--------------------------
satisfy, or to cause to be satisfied, the conditions to the obligations of the
other party to consummate the transactions contemplated by this Agreement, as
set forth in SECTION 8, provided that Buyer will not be required to agree to any
increase in the amount payable with respect to, or any modification that makes
more burdensome in any material respect, any of the Assumed Liabilities.
7.18 Confidentiality and Publicity. Neither party will issue any press
-----------------------------
release or make any other public announcement or any oral or written statements
to Seller's employees concerning this Agreement or the transactions contemplated
hereby except as required by applicable Legal Requirements, without the prior
written consent of the other party. Each party will hold, and will cause its
employees, consultants, advisors and agents to hold the terms of this Agreement
in confidence; provided that (a) such party may use and disclose such
information once it has become publicly disclosed (other than by such party in
breach of its obligations under this Section) or which rightfully has come into
the possession of such party (other than from the other party) and (b) to the
extent that such party may be compelled by Legal Requirements to disclose any of
such information, but the party proposing to disclose such information will
first notify and consult with the other party concerning the proposed
disclosure, to the extent reasonably feasible. Each party also may disclose
such information to employees, consultants, advisors, agents and actual or
potential lenders whose knowledge is necessary to facilitate the consummation of
the transactions contemplated by this Agreement. The obligation by either party
to hold information in confidence
30
pursuant to this Section will be satisfied if such party exercises the same care
with respect to such information as it would exercise to preserve the
confidentiality of its own similar information.
7.19 Bulk Transfers. Buyer waives compliance by Seller with Legal
--------------
Requirements relating to bulk transfers applicable to the transactions
contemplated hereby.
7.20 Environmental Reports. Within 60 days after the execution of this
---------------------
Agreement, Seller will, at its expense, obtain and deliver to Buyer for each
parcel of Real Property owned or leased by Seller a current Phase I
Environmental Site Assessment ("Environmental Report") prepared by a nationally
known environmental engineering firm reasonably satisfactory to Buyer in
accordance with ASTM Standard E 1527-93 and certified to Buyer. Each
Environmental Report will include, in addition to the process described in E
1527-93, such soil and groundwater sampling and other testing as will enable the
environmental engineers to determine if Hazardous Substances are detected and to
provide an estimate of the cost to remove and dispose of the Hazardous
Substances or otherwise remediate the property in accordance with all applicable
Environmental Laws.
7.21 Board Approvals. On or before the Approval Deadline, the Board of
---------------
Directors of Buyer and the Board of Directors of Intercable will have been
presented with resolutions for the approval of the transactions contemplated
hereby on behalf of Buyer and Seller, and will have approved or disapproved the
same.
7.22 Section 1031. The parties shall cooperate with each other in order
------------
that the transactions contemplated under this Agreement may be accomplished as
part of a deferred exchange pursuant to Section 1031 of the Code and applicable
Treasury Regulations and to executed such agreements and other documents as may
be necessary to complete and otherwise effectuate a tax-deferred exchange;
provided, however, that Seller shall not be obligated to incur any costs,
-----------------
expenses or other liabilities in cooperating with Buyer hereunder. Buyer shall
be permitted to assign any or all of its rights and obligations under this
Agreement to a qualified intermediary without Seller's consent for purposes of
qualifying the transactions hereunder as a tax-deferred exchange; provided,
---------
however, that the fees of such qualified intermediary shall be paid by Buyer,
-------
and provided further, however, that nothing in this Section shall be deemed to
-------------------------
relieve Buyer any of its obligations under this Agreement, including, without
limitation, its obligations to close the transactions contemplated by this
Agreement if the exchange described herein has not occurred prior to August 1,
1998 and the conditions to Closing described in Sections 8.1 and 8.2 have been
met or waived, subject to the rights of either party to terminate the Agreement
pursuant to Section 10.1.3.
SECTION 8. CONDITIONS PRECEDENT
31
8.1 Conditions to the Obligations of Buyer and Seller. The obligations of
-------------------------------------------------
each party to consummate the transactions contemplated by this Agreement are
subject to the satisfaction, at or before the Closing, of the following, which
may be waived by the parties to the extent permitted by applicable Legal
Requirements:
8.1.1 HSR Act Filings. All filings required under the HSR Act have
---------------
been made and the applicable waiting period has expired or been earlier
terminated without the receipt of any objection or the commencement or threat of
any litigation by a Governmental Authority of competent jurisdiction to restrain
the consummation of the transactions contemplated by this Agreement.
8.1.2 Absence of Litigation. No action, suit or proceeding is
---------------------
pending or threatened by or before any Governmental Authority and no Legal
Requirement has been enacted, promulgated or issued or become or deemed
applicable to any of the transactions contemplated by this Agreement by any
Governmental Authority, which would (a) prohibit Buyer's ownership or operation
of all or a material portion of any System, the Business or the Assets, (b)
compel Buyer to dispose of or hold separate all or a material portion of any
System, the Business or the Assets as a result of any of the transactions
contemplated by this Agreement, (c) if determined adversely to Buyer's interest,
materially impair the ability of Buyer to realize the benefits of the
transactions contemplated by this Agreement (excluding the ability to acquire
the Systems pursuant to a like-kind exchange under Section 1031 of the Code) or
have a material adverse effect on the right of Buyer to exercise full rights of
ownership of the Systems or (d) prevent or make illegal the consummation of any
transactions contemplated by this Agreement.
8.2 Conditions to the Obligations of Buyer. The obligations of Buyer to
--------------------------------------
consummate the transactions contemplated by this Agreement are subject to the
satisfaction, at or before the Closing, of the following conditions, which may
be waived by Buyer to the extent permitted by applicable Legal Requirements:
8.2.1 Representations and Warranties. All representations and
------------------------------
warranties of Seller in this Agreement and any Transaction Document are, if
specifically qualified by materiality, true and correct in all respects and, if
not so qualified, are true and correct in all material respects, in each case on
and as of the Closing Date with the same effect as if made at and as of the
Closing Date, except for changes permitted or contemplated by this Agreement.
8.2.2 Performance of Agreements. Seller has performed in all
-------------------------
material respects all obligations and agreements and complied in all material
respects with all covenants and conditions in this Agreement and any Transaction
Document to be performed or complied with by Seller at or before the Closing.
32
8.2.3 Deliveries. Seller has delivered the items and documents
----------
required to be delivered by it pursuant to this Agreement, including those
required under SECTION 9.2.
8.2.4 Consents. Seller has delivered to Buyer evidence, in form and
--------
substance satisfactory to Buyer, that all of the Required Consents marked with
an asterisk on SCHEDULE 5.3 have been obtained or given (or deemed to have been
given) and are in full force and effect.
8.2.5 Environmental Matters. The Environmental Reports delivered to
---------------------
Buyer pursuant to SECTION 7.20 and any other environmental audits or assessments
conducted with respect to the Assets do not indicate the existence of any
conditions that could reasonably be expected to give rise to a material risk of
liability.
8.2.6 No Material Adverse Change. There has not been any material
--------------------------
adverse change in the Business, the Assets or the Systems since the date of this
Agreement other than any change arising out of general economic conditions in
the United States or any change affecting the United States cable television
industry as a whole, including any change arising from (a) legislation,
litigation, rulemaking or regulation or (b) competition caused by or arising
from other multiple channel distribution services.
8.2.7 EBS. As of the Closing Date, the Business, combined with the
---
EBS's of the ▇▇▇▇▇▇▇▇▇▇▇ System and the Vicksburg System, has no fewer than
16,530 EBS's; provided, that if such aggregate number of EBS's is less than
16,530, Buyer may elect not to close, or if Buyer elects to close, the extent of
the adjustment pursuant to SECTION 3.2.1 shall be as if the applicable number of
EBS's (a) of the Business were 14,420, (b) in the ▇▇▇▇▇▇▇▇▇▇▇ System were 1437
and (c) in the Vicksburg System were 673.
8.2.8 1031 Exchange. The closing of Buyer's sale of certain systems
-------------
to ▇▇▇▇▇▇ Group, Inc., shall have occurred (the "▇▇▇▇▇▇ Transaction"); provided,
however, if the ▇▇▇▇▇▇ Transaction shall not have occurred by August 1, 1998,
the closing of the ▇▇▇▇▇▇ Transaction shall no longer be a condition to the
obligations of Buyer to consummate the transactions hereunder.
8.2.9 Other Closings. The closings of the Vicksburg Transaction and
--------------
the ▇▇▇▇▇▇▇▇▇▇▇ Transaction shall occur simultaneously with the closing
hereunder, unless the failure of the Vicksburg Transaction to close is due to a
breach of the Vicksburg Purchase Agreement by Seller, or the failure of the
▇▇▇▇▇▇▇▇▇▇▇ Transaction to close is due to a breach of the ▇▇▇▇▇▇▇▇▇▇▇ Purchase
Agreement by Seller.
8.3 Conditions to Obligations of Seller. The obligations of Seller to
-----------------------------------
consummate the transactions contemplated by this Agreement are subject to the
33
satisfaction by Seller at or before the Closing, of the following, which may be
waived by Seller, to the extent permitted by applicable Legal Requirements:
8.3.1 Representations and Warranties. All representations and
------------------------------
warranties of Buyer contained in this Agreement and any Transaction Document
are, if specifically qualified by materiality, true and correct in all respects
and, if not so qualified, are true and correct in all material respects, in each
case on and as of the Closing Date with the same effect as if made on and as of
the Closing Date, except for changes permitted or contemplated by this
Agreement.
8.3.2 Performance of Agreements. Buyer has performed in all material
-------------------------
respects all obligations and agreements, and complied in all material respects
with all covenants and conditions in this Agreement and any Transaction Document
to be performed or complied with by Buyer at or before the Closing.
8.3.3 Deliveries. Buyer has delivered the items and documents
----------
required to be delivered by it pursuant to this Agreement, including those
required under SECTION 9.3.
8.3.4 EBS. As of the Closing Date, either (a) the Business, combined
---
with the EBS's of the ▇▇▇▇▇▇▇▇▇▇▇ System and the Vicksburg System, has no fewer
than 16,530 EBSs or (b) Buyer has waived its right to an adjustment pursuant to
SECTION 3.2.1 except to the extent of the adjustment applicable if the number of
EBS's (i) of the Business were 14,420, (ii) in the ▇▇▇▇▇▇▇▇▇▇▇ System were 1437
and (iii) in the Vicksburg System were 673.
8.3.5 Other Closings. The closings of the Vicksburg Transaction and
--------------
the ▇▇▇▇▇▇▇▇▇▇▇ Transaction shall occur simultaneously with the closing
hereunder, unless the failure of the Vicksburg Transaction to close is due to a
breach of the Vicksburg Purchase Agreement by Buyer, or the failure of the
▇▇▇▇▇▇▇▇▇▇▇ Transaction to close is due to a breach of the ▇▇▇▇▇▇▇▇▇▇▇ Purchase
Agreement by Buyer.
8.4 Waiver of Conditions. Any party may waive in writing any or all of
--------------------
the conditions to its obligations under this Agreement.
SECTION 9. CLOSING
9.1 The Closing; Time and Place. The Closing will be held simultaneously
---------------------------
with the closings of the ▇▇▇▇▇▇▇▇▇▇▇ Transaction and the Vicksburg Transaction
on a date specified by Buyer (upon three Business Days prior notice to Seller)
that is within 15 days after all conditions to the Closing contained in this
Agreement (other than those based on acts to be performed at the Closing) have
been satisfied or waived. The Closing will be held at 10:00 a.m. local time at
Seller's office located at ▇▇▇▇ ▇▇▇▇
▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, or at such place and time as Buyer
and Seller may agree.
9.2 Seller's Delivery Obligations. At the Closing, Seller will deliver
-----------------------------
(or cause to be delivered) to Buyer the following:
(a) a ▇▇▇▇ of Sale in the form attached as EXHIBIT A;
(b) a special warranty deed in a form reasonably acceptable to Buyer
(and complying with applicable state laws) with respect to each parcel of
owned Real Property, duly executed and acknowledged and in recordable form,
warranting to defend title to such Real Property against all persons
claiming by, through or under Seller, subject only to Permitted
Encumbrances, and in form sufficient to permit the title company to issue
the title policy described in SECTION 7.6.1 to Buyer with respect to such
Real Property;
(c) an Assignment and Assumption of Contracts in the form attached as
EXHIBIT B;
(d) one or more Assignments of Leases in the form attached as EXHIBIT
C and, if requested by Buyer, short forms or memoranda of such Assignments
in recordable form;
(e) any memorandum of lease obtained by Seller pursuant to SECTION
7.5(B);
(f) a Guaranty signed by Intercable in the form attached as EXHIBIT
D;
(g) an affidavit of Seller, under penalty of perjury, that Seller is
not a "foreign person" (as defined in the Foreign Investment in Real
Property Tax Act and applicable regulations) and that Buyer is not required
to withhold any portion of the consideration payable under this Agreement
under the provisions of such Act in the form attached as EXHIBIT F;
(h) motor vehicle title certificates and such other transfer
instruments as Buyer may deem necessary or advisable to transfer the Assets
to Buyer and to perfect Buyer's rights in the Assets;
(i) the opinion of ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, Esq., counsel for Seller, dated
the Closing Date, in the form set forth in EXHIBIT G;
35
(j) evidence satisfactory to Buyer that all Encumbrances affecting any
of the Assets (other than Permitted Encumbrances) have been terminated and
released;
(k) the title insurance commitments described in SECTION 7.6.1;
(l) a certificate, dated the Closing Date, signed by the President or
any Vice President of Intercable, stating that to his or her knowledge, the
conditions set forth in SECTIONS 8.2.1, 8.2.2 and 8.2.8 are satisfied;
(m) for each multiple dwelling complex or trailer park served by the
System which is not covered by a current written agreement with the owner
of such complex or park, a cable television multiple-unit agreement in a
form reasonably satisfactory to Buyer, executed by the owner of such
complex or park; and
(n) such other documents as Buyer may reasonably request in connection
with the transactions contemplated by this Agreement.
9.3 Buyer's Delivery Obligations. At the Closing, Buyer will deliver (or
----------------------------
cause to be delivered) to Seller the following:
(a) the Base Purchase Price required to be paid at the Closing, as
adjusted in accordance with this Agreement;
(b) a ▇▇▇▇ of Sale in the form attached as EXHIBIT A;
(c) an Assignment and Assumption of Contracts in the form attached as
EXHIBIT B;
(d) a certificate, dated the Closing Date, signed by an executive
officer of Buyer, stating that to his or her knowledge, the conditions set
forth in SECTIONS 8.3.1 and 8.3.2, are satisfied;
(e) an opinion of ▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq., counsel to Buyer, dated the
Closing Date, in the form set forth in EXHIBIT H; and
(f) such other documents as Seller may reasonably request in
connection with the transactions contemplated by this Agreement.
36
SECTION 10. TERMINATION
10.1 Termination Events. This Agreement may be terminated and the
------------------
transactions contemplated by this Agreement may be abandoned:
10.1.1 At any time by the mutual written agreement of Buyer and
Seller;
10.1.2 By either party at any time, if the other is in material
breach or default of any of its covenants, agreements or other obligations in
this Agreement or in any Transaction Document, or if any of its representations
in this Agreement or in any Transaction Document is not true in all material
respects when made or when otherwise required by this Agreement or any
Transaction Document to be true and such breach or default or failure to be true
is not cured or waived prior to Closing;
10.1.3 By either party upon written notice to the other, if Closing
has not occurred on or before August 31, 1998, for any reason other than a
material breach or default by such party of its respective covenants, agreements
or other obligations under this Agreement, or any of its representations this
Agreement not being true and accurate in all material respects when made or when
otherwise required by this Agreement to be true and accurate in all material
respects;
10.1.4 By Buyer, within 45 days after the date hereof (the
"Approval Deadline"), if all board of director approvals are not obtained by
Buyer (for any reason) on or before the Approval Deadline;
10.1.5 By Seller, on or before the Approval Deadline, if Intercable
has not approved the transactions contemplated by this Agreement (for any
reason) on or before such date; or
10.1.6 As otherwise provided in this Agreement.
10.2 Effect of Termination. If this Agreement is terminated pursuant to
---------------------
SECTION 10.1, all obligations of the parties under this Agreement will
terminate, except for the obligations set forth in SECTIONS 7.18 and 12.16.
Termination of this Agreement pursuant to SECTIONS 10.1.2 OR 10.1.3 will not
limit or impair any remedies that any party may have with respect to a breach or
default by the other of its covenants, agreements or obligations under this
Agreement. Buyer will have no liability in any event upon exercise of its right
to terminate pursuant to SECTION 10.1.4. Seller will have no liability in any
event upon exercise of its right to terminate pursuant to SECTION 10.1.5.
SECTION 11. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION
37
11.1 Survival of Representations and Warranties. The representations and
------------------------------------------
warranties of Seller in this Agreement and in the Transaction Documents to be
delivered by Seller pursuant to this Agreement will survive until the first
anniversary of the Closing Date, except that (a) all such representations and
warranties with respect to any federal, state or local Taxes, rates,
Environmental Law, ERISA, employment matters or copyright matters will survive
until 60 days after the expiration of the applicable statute of limitations
(including any extensions) for such federal, state or local Taxes, rates,
Environmental Law, ERISA, employment matters or copyright matters, respectively
and (b) the representations and warranties as to ownership of the Assets in
SECTION 5.4, SECTION 5.7.1 and in the deed or deeds delivered with respect to
Real Property will survive the Closing and the delivery of such deeds and will
continue in full force and effect without limitation. The representations and
warranties of Buyer in this Agreement and in the Transaction Documents to be
delivered by Buyer pursuant to this Agreement will survive until the first
anniversary of the Closing Date. The periods of survival of the representations
and warranties prescribed by this SECTION 11.1 are referred to as the "Survival
Period." The liabilities of the parties under their respective representations
and warranties will expire as of the expiration of the applicable Survival
Period; provided, however, that such expiration will not include, extend or
apply to any representation or warranty, the breach of which has been asserted
by Buyer in a written notice to Seller before such expiration or about which
Seller has given Buyer written notice before such expiration indicating that
facts or conditions exist that, with the passage of time or otherwise, can
reasonably be expected to result in a breach (and describing such potential
breach in reasonable detail). The covenants and agreements of the parties in
this Agreement (that are by their terms intended to be performed after Closing)
and in the Transaction Documents to be delivered by Seller or Buyer pursuant to
this Agreement, will survive the Closing and will continue in full force and
effect without limitation.
11.2 Indemnification by Seller. Seller will indemnify and hold harmless
-------------------------
Buyer and its shareholders and its and their respective Affiliates, and the
shareholders, directors, officers, employees, agents, successors and assigns and
any Person claiming by or through any of them, as the case may be, from and
against:
(a) all Losses resulting from or arising out of (i) any breach of any
representation or warranty made by Seller in this Agreement or in the
Transactions Documents delivered by Seller, (ii) any breach of any covenant,
agreement or obligation of Seller contained in this Agreement or in the
Transaction Documents delivered by Seller, (iii) any act or omission of Seller
with respect to, or any event or circumstance related to, the ownership or
operation of the Assets or the conduct of the Business, which act, omission,
event or circumstance occurred or existed prior to or at the Closing Date,
without regard to whether a claim with respect to such matter is asserted before
or after the Closing Date, including any matter described on SCHEDULE 5.13, (iv)
any liability or obligation not included in the Assumed Liabilities, (v) any
title defect Seller fails to eliminate as an exception from a title insurance
commitment
38
referred to in SECTION 7.7.1, (vi) any claim that the transactions contemplated
by this Agreement violates WARN, or any similar state or local law or any bulk
transfer or fraudulent conveyance laws of any jurisdiction, (vii) the presence,
generation, removal or transportation of a Hazardous Substance on or from any of
the Real Property prior to the Closing Date, including the costs of removal or
clean-up of such Hazardous Substance and other compliance with the provisions of
any Environmental Laws (whether before or after Closing), or (viii) any rate
refund ordered by any Governmental Authority for periods prior to the Closing
Date; and
(b) all claims, actions, suits, proceedings, demands, judgments,
assessments, fines, interest, penalties, costs and expenses (including
settlement costs and reasonable legal, accounting, experts' and other fees,
costs and expenses) incident or relating to or resulting from any of the
foregoing.
In the event that an indemnified item arises under both clause (a)(i) and under
one or more of clauses (a)(ii) through (a)(viii) of this SECTION 11.2, Buyer's
rights to pursue its claim under clauses (a)(ii) through (a)(viii), as
applicable, will exist notwithstanding the expiration of the Survival Period
applicable to such claim under clause (a)(i).
11.3 Indemnification by Buyer. Buyer will indemnify and hold harmless
------------------------
Seller and Seller's shareholders, directors, officers, employees, agents,
successors and assigns, and any Person claiming by or through any of them, as
the case may be, from and against:
(a) all Losses resulting from or arising out of (i) any breach of any
representation or warranty made by Buyer in this Agreement or in the Transaction
Documents delivered by Buyer, (ii) any breach of any covenant, agreement or
obligation of Buyer contained in this Agreement or in the Transaction Documents
delivered by Buyer or (iii) the failure by Buyer to perform any of its
obligations in respect of the Assumed Liabilities; and
(b) all claims, actions, suits, proceedings, demands, judgments,
assessments, fines, interest, penalties, costs and expenses (including
settlement costs and reasonable legal, accounting, experts' and other fees,
costs and expenses) incident or relating to or resulting from any of the
foregoing.
In the event that an indemnified item arises under both clause (a)(i) and under
one or more of clauses (a)(ii) or (a)(iii) of this SECTION 11.3, Seller's rights
to pursue its claim under clauses (a)(ii) or (a)(iii), as applicable, will exist
notwithstanding the expiration of the Survival Period applicable to such claim
under clause (a)(i).
11.4 Third Party Claims. Promptly after the receipt by any party of notice
------------------
of any claim, action, suit or proceeding by any Person who is not a party to
this Agreement (collectively, an "Action"), which Action is subject to
indemnification
39
under this Agreement, such party (the "Indemnified Party") will give reasonable
written notice to the party from whom indemnification is claimed (the
"Indemnifying Party"). The Indemnified Party will be entitled, at the sole
expense and liability of the Indemnifying Party, to exercise full control of the
defense, compromise or settlement of any such Action unless the Indemnifying
Party, within a reasonable time after the giving of such notice by the
Indemnified Party, (a) admits in writing to the Indemnified Party the
Indemnifying Party's liability to the Indemnified Party for such Action under
the terms of this SECTION 11, (b) notifies the Indemnified Party in writing of
the Indemnifying Party's intention to assume such defense, (c) provides evidence
reasonably satisfactory to the Indemnified Party of the Indemnifying Party's
ability to pay the amount, if any, for which the Indemnified Party may be liable
as a result of such Action and (d) retains legal counsel reasonably satisfactory
to the Indemnified Party to conduct the defense of such Action. The other party
will cooperate with the party assuming the defense, compromise or settlement of
any such Action in accordance with this Agreement in any manner that such party
reasonably may request. If the Indemnifying Party so assumes the defense of any
such Action, the Indemnified Party will have the right to employ separate
counsel and to participate in (but not control) the defense, compromise or
settlement of the Action, but the fees and expenses of such counsel will be at
the expense of the Indemnified Party unless (i) the Indemnifying Party has
agreed to pay such fees and expenses, (ii) any relief other than the payment of
money damages is sought against the Indemnified Party or (iii) the Indemnified
Party will have been advised by its counsel that there may be one or more
defenses available to it which are different from or additional to those
available to the Indemnifying Party, and in any such case that portion of the
fees and expenses of such separate counsel that are reasonably related to
matters covered by the indemnity provided in this SECTION 11 will be paid by the
Indemnifying Party. No Indemnified Party will settle or compromise any such
Action for which it is entitled to indemnification under this Agreement without
the prior written consent of the Indemnifying Party, unless the Indemnifying
Party has failed, after reasonable notice, to undertake control of such Action
in the manner provided in this SECTION 11.4. No Indemnifying Party will settle
or compromise any such Action (A) in which any relief other than the payment of
money damages is sought against any Indemnified Party or (B) in the case of any
Action relating to the Indemnified Party's liability for any Tax, if the effect
of such settlement would be an increase in the liability of the Indemnified
Party for the payment of any Tax for any period beginning after the Closing
Date, unless the Indemnified Party consents in writing to such compromise or
settlement.
11.5 Limitations on Indemnification - Seller. Seller will not be liable
---------------------------------------
for indemnification arising solely under SECTION 11.2(A)(I) for (a) any Losses
of or to Buyer or any other person entitled to indemnification from Seller or
(b) any claims, actions, suits, proceedings, demands, judgments, assessments,
fines, interest, penalties, costs and expenses (including settlement costs and
reasonable legal, accounting, experts' and other fees, costs and expenses)
incidental or relating to or resulting from any of the foregoing (the items
described in clauses (a) and (b) collectively being
40
referred to for purposes of this SECTION 11.5 as "Buyer Damages") unless the
amount of Buyer Damages for which Seller would, but for the provisions of this
SECTION 11.5, be liable exceeds, on an aggregate basis, $218,800 (the "Threshold
Amount"), in which case Seller will be liable for all such Buyer Damages, which
will be due and payable within 15 days after Seller's receipt of a statement
therefor; provided, however, that Seller shall be liable for all rate refunds
ordered by any Governmental Authority for periods prior to the Closing Date
regardless of whether such refunds equal or exceed the Threshold Amount.
11.6 Limitations on Indemnification - Buyer. Buyer will not be liable for
--------------------------------------
indemnification arising solely under SECTION 11.3(A)(I) for (a) any Losses of or
to Seller or any other person entitled to indemnification from Buyer or (b) any
claims, actions, suits, proceedings, demands, judgments, assessments, fines,
interest, penalties, costs and expenses (including settlement costs and
reasonable legal, accounting, experts' and other fees, costs and expenses)
incidental or relating to or resulting from any of the foregoing the items
described in clauses (a) and (b) collectively being referred to for purposes of
this SECTION 11.6 as "Seller Damages") unless the amount of Seller Damages for
which Buyer would, but for the provisions of this SECTION 11.6, be liable
exceeds, on an aggregate basis, the Threshold Amount, in which case Buyer will
be liable for all such Seller Damages, which will be due and payable within 15
days after Buyer's receipt of a statement therefor.
SECTION 12. MISCELLANEOUS
12.1 Parties Obligated and Benefited. Subject to the limitations set forth
-------------------------------
below, this Agreement will be binding upon the parties and their respective
assigns and successors in interest and will inure solely to the benefit of the
parties and their respective assigns and successors in interest, and no other
Person will be entitled to any of the benefits conferred by this Agreement.
Without the prior written consent of the other party, neither party may assign
any of its rights under this Agreement or delegate any of its duties under this
Agreement.
12.2 Notices. Any notice, request, demand, waiver or other communication
-------
required or permitted to be given under this Agreement will be in writing and
will be deemed to have been duly given only if delivered in person or by first
class, prepaid, registered or certified mail, or sent by courier or, if receipt
is confirmed, by telecopier:
To Buyer at:
c/o Tele-Communications, Inc.
▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
41
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy similarly addressed to the attention of Legal Department.
To Seller at:
c/▇ ▇▇▇▇▇ Intercable, Inc.
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: President
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy similarly addressed to the attention of Legal Department.
Any party may change the address to which notices are required to be sent by
giving notice of such change in the manner provided in this SECTION 12.2. All
notices will be deemed to have been received on the date of delivery, which in
the case of deliveries by telecopier will be the date of the sender's
confirmation, or on the third Business Day after mailing in accordance with this
Section, except that any notice of a change of address will be effective only
upon actual receipt.
12.3 Attorneys' Fees. In the event of any action or suit based upon or
---------------
arising out of any alleged breach by any party of any representation, warranty,
covenant or agreement contained in this Agreement, the prevailing party will be
entitled to recover reasonable attorneys' fees and other costs of such action or
suit from the other party.
12.4 Waiver. This Agreement or any of its provisions may not be waived
------
except in writing. The failure of any party to enforce any right arising under
this Agreement on one or more occasions will not operate as a waiver of that or
any other right on that or any other occasion.
12.5 Captions. The captions of this Agreement are for convenience only and
--------
do not constitute a part of this Agreement.
12.6 Choice of Law. THIS AGREEMENT AND THE RIGHTS OF THE PARTIES UNDER IT
-------------
WILL BE GOVERNED BY AND CONSTRUED IN ALL RESPECTS IN ACCORDANCE WITH THE LAWS OF
THE STATE OF COLORADO, WITHOUT REGARD TO THE CONFLICTS OF LAWS RULES OF
COLORADO.
12.7 Terms. Terms used with initial capital letters will have the meanings
-----
specified, applicable to both singular and plural forms, for all purposes of
this
42
Agreement. The word "include" and derivatives of that word are used in this
Agreement in an illustrative sense rather than limiting sense.
12.8 Rights Cumulative. All rights and remedies of each of the parties
-----------------
under this Agreement will be cumulative, and the exercise of one or more rights
or remedies will not preclude the exercise of any other right or remedy
available under this Agreement or applicable law.
12.9 Further Actions. Seller and Buyer will execute and deliver to the
---------------
other, from time to time at or after the Closing, for no additional
consideration and at no additional cost to the requesting party, such further
assignments, certificates, instruments, records, or other documents, assurances
or things as may be reasonably necessary to give full effect to this Agreement
and to allow each party fully to enjoy and exercise the rights accorded and
acquired by it under this Agreement.
12.10 Time. Time is of the essence under this Agreement. If the last day
----
permitted for the giving of any notice or the performance of any act required or
permitted under this Agreement falls on a day which is not a Business Day, the
time for the giving of such notice or the performance of such act will be
extended to the next succeeding Business Day.
12.11 Late Payments. If either party fails to pay the other any amounts
-------------
when due under this Agreement, the amounts due will bear interest from the due
date to the date of payment at the annual rate publicly announced from time to
time by The Bank of New York as its prime rate (the "Prime Rate") plus 2%,
adjusted as and when changes in the Prime Rate are made.
12.12 Counterparts. This Agreement may be executed in counterparts, each
------------
of which will be deemed an original.
12.13 Entire Agreement. This Agreement (including the Schedules and
----------------
Exhibits referred to in this Agreement, which are incorporated in and constitute
a part of this Agreement) and the Transaction Documents contain the entire
agreement of the parties and supersedes all prior oral or written agreements and
understandings with respect to the subject matter. This Agreement may not be
amended or modified except by a writing signed by the parties.
12.14 Severability. Any term or provision of this Agreement which is
------------
invalid or unenforceable will be ineffective to the extent of such invalidity or
unenforceability without rendering invalid or unenforceable the remaining rights
of the Person intended to be benefited by such provision or any other provisions
of this Agreement.
12.15 Construction. This Agreement has been negotiated by Buyer and
------------
Seller and their respective legal counsel, and legal or equitable principles
that might require the construction of this Agreement or any provision of this
Agreement against the party
43
drafting this Agreement will not apply in any construction or interpretation of
this Agreement.
12.16 Expenses. Except as otherwise expressly provided in this Agreement,
--------
each party will pay all of its expenses, including attorneys' and accountants'
fees, in connection with the negotiation of this Agreement, the performance of
its obligations and the consummation of the transactions contemplated by this
Agreement.
12.17 Risk of Loss; Condemnation.
--------------------------
12.17.1 Seller will bear the risk of any loss or damage to the Assets
resulting from fire, theft or other casualty (except reasonable wear and tear)
at all times prior to the Closing. If any such loss or damage is sufficiently
substantial so as to preclude or prevent resumption of normal operations of any
material portion of a System or the replacement or restoration of the lost or
damaged property within 30 days from the occurrence of the event resulting in
such loss or damage, Seller will immediately notify Buyer in writing of that
fact and Buyer, at any time within 10 days after receipt of such notice, may
elect by written notice to Seller either (a) to waive such defect and proceed
toward consummation of the transaction in accordance with terms of this
Agreement or (b) terminate this Agreement. If Buyer elects to so terminate this
Agreement, Buyer and Seller will stand fully released and discharged of any and
all obligations under this Agreement. If Buyer elects to consummate the
transactions contemplated by this Agreement notwithstanding such loss or damage
and does so, there will be no adjustment in the consideration payable to Seller
on account of such loss or damage but all insurance proceeds payable as a result
of the occurrence of the event resulting in such loss or damage (to the extent
not used to replace or restore such lost or damaged property) will be delivered
by Seller to Buyer, or the rights to such proceeds will be assigned by Seller to
Buyer if not yet paid over to Seller.
12.17.2 If, prior to the Closing, any part of or interest in the
Assets is taken or condemned as a result of the exercise of the power of eminent
domain, or if a Governmental Authority having such power informs Seller or Buyer
that it intends to condemn all or any part of or interest in the Assets (such
event being called, in either case, a "Taking"), and such Taking involves a
material part of or interest in the Assets, then Buyer may terminate this
Agreement. If Buyer does not elect or have the right to terminate this
Agreement, then (a) Buyer will have the sole right, in the name of Seller, if
Buyer so elects, to negotiate for, claim, contest and receive all damages with
respect to the Taking, (b) Seller will be relieved of its obligation to convey
to Buyer the Assets or interests that are the subject of the Taking, (c) at the
Closing Seller will assign to Buyer all of Seller's rights to all damages
payable with respect to such Taking and will pay to Buyer all damages previously
paid to Seller with respect to the Taking and (d) following the Closing, Seller
will give Buyer such further assurances of such rights and assignment with
respect to the taking as Buyer may from time to time reasonably request.
44
The parties have executed this Agreement as of the day and year first above
written.
SELLER:
▇▇▇▇▇ CABLE INCOME FUND
1-B/C VENTURE
By: ▇▇▇▇▇ Cable Income Fund
1-B, Ltd., and ▇▇▇▇▇ Cable
Income Fund 1-C, Ltd.,
its general partners
By: /s/ ▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-----------------------
Name: ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
---------------------
Title: Vice President
--------------------
BUYER:
TCI CABLEVISION OF TEXAS, INC.
By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
-----------------------------
Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
--------------------------
Title: Vice President
-------------------------
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