ASSET PURCHASE AGREEMENT
dated as of October 14, 1996
by and between
IDS/▇▇▇▇▇ GROWTH PARTNERS 87-A, LTD.,
a Colorado limited partnership
and
ROSEVILLE CABLE COMPANY,
a California corporation
TABLE OF CONTENTS
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Page
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RECITAL .................................................................... 1
ARTICLE 1 DEFINITIONS ..................................................... 1
1.1 Affiliate ....................................................... 1
1.2 Assets .......................................................... 1
1.3 Assumed Contracts ............................................... 1
1.4 Authorities ..................................................... 2
1.5 Closing Date .................................................... 2
1.6 Code ............................................................ 2
1.7 Communications Act .............................................. 2
1.8 Contracts ....................................................... 2
1.9 Copyright Act ................................................... 2
1.10 Escrow Agreement ................................................ 2
1.11 Escrow Bank ..................................................... 2
1.12 FCC ............................................................. 2
1.13 Franchise Areas ................................................. 2
1.14 Franchises ...................................................... 2
1.15 Holdback Account ................................................ 3
1.17 Pay Units ....................................................... 3
1.18 Real Property ................................................... 3
1.19 Rules and Regulations ........................................... 3
1.20 Signals ......................................................... 4
1.21 Subscribers ..................................................... 4
1.22 System .......................................................... 5
1.23 Tangible Personal Property ...................................... 5
ARTICLE 2 PURCHASE AND SALE OF ASSETS ..................................... 5
2.1 Sale and Transfer of Assets ..................................... 5
2.2 Excluded Assets ................................................. 5
2.3 Assumption by Buyer of Certain Contracts and Liabilities ........ 6
ARTICLE 3 PURCHASE PRICE AND ADJUSTMENTS;
EXCISE AND PROPERTY TAXES; DEPOSIT .............................. 7
3.1 Purchase Price .................................................. 7
3.2 Excise and Property Taxes ....................................... 7
3.3 Subscriber and Revenue Adjustments .............................. 7
3.4 ▇▇▇▇▇▇▇ Money Deposit ........................................... 8
ARTICLE 4 HOLDBACK ACCOUNT ................................................ 10
4.1 Holdback Period ................................................. 10
4.2 Request for Payment ............................................. 10
4.3 Investments ..................................................... 10
4.4 Interest ........................................................ 11
4.5 Disbursement of Holdback Account ................................ 11
4.6 Remedies Cumulative ............................................. 11
ARTICLE 5 PRORATIONS ...................................................... 12
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5.1 Prorations ...................................................... 12
5.2 Advance Payments ................................................ 13
5.3 Adjustments ..................................................... 13
5.4 Preliminary and Final Settlement Statements ..................... 14
ARTICLE 6 REPRESENTATIONS AND WARRANTIES OF SELLER ........................ 15
6.1 Organization and Qualification .................................. 15
6.2 Authority ....................................................... 15
6.3 Investments ..................................................... 16
6.4 Enforceability .................................................. 16
6.5 Approvals ....................................................... 16
6.6 Compliance with Other Instruments ............................... 16
6.7 Complete System ................................................. 17
6.8 Title and Encumbrances .......................................... 17
6.9 Assets of the System ............................................ 18
6.10 System Installation ............................................. 20
6.11 Carriage of Signals and Rates ................................... 21
6.12 Physical Plant and Subscribers .................................. 22
6.13 FCC and Copyright ............................................... 22
6.14 Commitments ..................................................... 24
6.15 Financial Statements ............................................ 25
6.16 Tax Returns and Payments ........................................ 25
6.17 Absence of Material Changes ..................................... 26
6.18 Litigation ...................................................... 27
6.19 Insurance and Bonds ............................................. 28
6.20 Compliance with Laws ............................................ 28
6.21 Employees ....................................................... 28
6.22 Employee Benefits ............................................... 29
6.23 Commissions ..................................................... 29
6.24 Full Disclosure ................................................. 29
ARTICLE 7 REPRESENTATIONS AND WARRANTIES OF BUYER ......................... 29
7.1 Organization and Qualification .................................. 29
7.2 Authority ....................................................... 30
7.3 Enforceability .................................................. 30
7.4 Approvals ....................................................... 30
7.5 Compliance with Other Instruments ............................... 30
7.6 Commissions ..................................................... 31
7.7 Full Disclosure ................................................. 31
ARTICLE 8 SELLER'S COVENANTS .............................................. 31
8.1 Access to the System ............................................ 31
8.2 Conduct of Business.............................................. 32
8.3 Preservation of Business......................................... 32
8.4 Compliance with Contracts and Laws .............................. 32
8.5 Maintenance of Insurance ........................................ 33
8.6 Financial Statements ............................................ 33
8.7 Construction and Operation of the System ........................ 33
8.8 Employees and Compensation ...................................... 33
8.9 Additional Transactions ......................................... 34
8.10 Adverse Changes ................................................. 35
8.11 Cooperation ..................................................... 35
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8.12 Minimum Inventory ............................................... 35
ARTICLE 9 GOVERNMENTAL CONSENTS AND ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ ACT ................. 36
9.1 Franchise Consents .............................................. 36
9.2 ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Act............................................ 36
9.3 FCC Waiver ...................................................... 36
ARTICLE 10 CONDITIONS PRECEDENT TO BUYER'S PERFORMANCE ..................... 37
10.1 Conditions Precedent; Waiver .................................... 37
10.2 Compliance with Agreement, Representations and Warranties........ 37
10.3 Assignment of Franchises ........................................ 37
10.4 No Material Adverse Change....................................... 37
10.5 Approvals and Consents........................................... 37
ARTICLE 11 CONDITIONS PRECEDENT TO SELLER'S PERFORMANCE .................... 38
11.1 Conditions Precedent; Waiver .................................... 38
11.2 Compliance with Agreement, Representations and Warranties ....... 38
11.3 Approvals and Consents .......................................... 38
ARTICLE 12 THE CLOSING ..................................................... 39
12.1 Time and Place .................................................. 39
12.2 Seller's Obligations at Closing ................................. 39
12.3 Buyer's Obligations at Closing .................................. 40
ARTICLE 13 POST-CLOSING OBLIGATIONS ........................................ 41
13.1 Mutual Indemnity ................................................ 41
ARTICLE 14 TERMINATION ..................................................... 43
14.1 Non-Performance ................................................. 43
14.2 Risk of Loss .................................................... 44
14.3 Other Conditions Permitting Termination ......................... 44
ARTICLE 15 MISCELLANEOUS ................................................... 45
15.1 Further Assurances .............................................. 45
15.2 Survival ........................................................ 45
15.3 Notice .......................................................... 45
15.4 Waiver .......................................................... 46
15.5 Successors and Assigns .......................................... 47
15.6 Applicable Law .................................................. 47
15.7 Attorneys' Fees ................................................. 47
15.8 Severability .................................................... 47
15.9 Sections and Captions ........................................... 47
15.10 Amendment ....................................................... 47
15.11 Entire Agreement ................................................ 47
15.12 Expenses ........................................................ 47
15.13 Inspections by Buyer ............................................ 48
15.14 Statements Deemed ...............................................
Representations ................................................. 48
15.15 Business and Calendar Days ...................................... 48
15.16 Liberal Construction ............................................ 48
15.17 Noncompetition Covenant ......................................... 48
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15.18 Publicity ...................................................... 48
15.19 Commercially Reasonable Efforts................................. 49
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EXHIBITS
Exhibit 1.3 Assumed Contracts
Exhibit 1.4 Authorities
Exhibit 1.8 Contracts
Exhibit 1.10 Escrow Agreement
Exhibit 1.14 Franchises
Exhibit 1.18 Real Property
Exhibit 1.20 Signals
Exhibit 2.2(i) Excluded Assets
Exhibit 3.3(a) Adjustment Factors
Exhibit 6.5 Consents
Exhibit 6.7 Exceptions to Completeness of System
Exhibit 6.8 Liens and Encumbrances
Exhibit 6.9 Other Operators
Exhibit 6.11 Carriage of Signals and Rates
Exhibit 6.12(d) Subscribers and Pay Units
Exhibit 6.13(a)(5) FCC and Copyrights
Exhibit 6.14 Commitments
Exhibit 6.16 Taxes
Exhibit 6.17 Material Changes
Exhibit 6.18 Litigation
Exhibit 6.19 Bonds
Exhibit 6.21(a) Employees
Exhibit 6.22 Employee Benefits
Exhibit 10.5 Buyer's Consents
Exhibit 11.3 Seller's Consents
Exhibit 12.2(e) Opinion of ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
Exhibit 12.2(f) Opinion of ▇▇▇▇, Raywid & ▇▇▇▇▇▇▇▇▇
Exhibit 12.3(b) Opinion of ▇▇▇▇▇▇, White & ▇▇▇▇▇▇
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ASSET PURCHASE AGREEMENT
------------------------
This Asset Purchase Agreement ("Agreement") is made as of the 14th day
of October, 1996 by and between IDS/▇▇▇▇▇ Growth Partners 87-A, Ltd., a Colorado
limited partnership ("Seller") and Roseville Cable Company, a California
corporation ("Buyer").
RECITALS
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A. Seller owns and operates a cable television system (the "System")
providing various types of cable television services to subscribers located in
the city of Roseville, California and certain unincorporated areas of Placer
County, California.
B. Buyer desires to purchase, and Seller desires to sell, all of the
assets, properties, rights, privileges, interests and business owned, leased,
held or used by Seller in connection with the construction, operation and
maintenance of the System, except as provided in Section 2.2 and otherwise
subject to the terms and conditions of this Agreement.
NOW, THEREFORE, for and in consideration of the foregoing recitals and
the mutual covenants, agreements, representations and warranties contained in
this Agreement, the parties agree as follows:
ARTICLE 1
DEFINITIONS
The following terms shall have the following meanings:
1.1 Affiliate: With respect to any person or entity, any other person or
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entity controlling, controlled by or under common control with such person or
entity.
1.2 Assets: All of the assets, rights, privileges and interests,
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tangible, intangible, real, personal or mixed, and wherever located, now or
hereafter owned, leased, held or used in connection with construction, operation
and maintenance of the System, including without limitation the Tangible
Personal Property, Real Property, Franchises, Contracts, Authorities, subscriber
security deposits, lease and other deposits, accounts receivable, subscriber
lists, claims or rights relating to the Assets or System accruing after the
Closing Date, all warranties of manufacturers, sellers, suppliers, lessors or
dealers associated with any of the Assets and all books and records of the
System.
1.3 Assumed Contracts: All Contracts with subscribers to the cable
-----------------
television services of the System, and those Contracts,
1
specifically identified in Exhibit 1.3 as Contracts contemplated to be assumed
by Buyer pursuant to this Agreement.
1.4 Authorities: All material governmental licenses, permits, consents,
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certificates, authorities, agreements, arrangements and other governmental
rights, privileges and interests, other than the Franchises, Contracts and Real
Property, from any and all governmental authorities that are necessary to carry
on the business of the System as conducted on the date hereof, each of which is
set forth in Exhibit 1.4.
1.5 Closing Date: The date of the Closing of the transactions
------------
contemplated by this Agreement, as determined in accordance with the provisions
of Section 12.1.
1.6 Code: The Internal Revenue Code of 1986, as amended.
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1.7 Communications Act: Collectively, the Communications Act of 1934, as
------------------
amended, the Cable Communications Policy Act of 1984, as amended, the Cable
Television Consumer Protection Act of 1992, as amended, and the
Telecommunications Act of 1996, and the applicable rules and regulations
thereunder.
1.8 Contracts: All contracts, agreements, commitments and arrangements
---------
pertaining to the System (other than those which constitute the Authorities,
Franchises and Real Property), oral or written, including without limitation
those set forth in Exhibit 1.8.
1.9 Copyright Act: Section 111 of Title 17 of the United States Code, as
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amended, and all rules and regulations thereunder.
1.10 Escrow Agreement: The Escrow Agreement in the form of Exhibit 1.10,
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which is to be executed shortly after the execution of this Agreement.
1.11 Escrow Bank: The financial institution or escrow agent so designated
-----------
in the Escrow Agreement.
1.12 FCC: The Federal Communications Commission or any successor agency.
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1.13 Franchise Areas: The franchise areas in which Seller is authorized
---------------
to provide cable television service under the Franchises identified in
Exhibit 1.14.
1.14 Franchises: The cable television franchises granted by the City of
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Roseville and Placer County, California identified in Exhibit 1.14.
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1.15 Holdback Account: The account described in Section 3.4(b) of this
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Agreement.
1.16 Holdback Period: The period described in Section 4.1 of this
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Agreement.
1.17 Pay Units: An aggregate number of premium services received by
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Subscribers determined in the following manner:
(a) With respect to an individual residential customer or a resident
of a multiple dwelling unit who pays directly to Seller for cable television
services, the number of Pay Units attributed to such customers shall be the
aggregate number of premium services (identified in Exhibit 1.20) received by
such customers, with additional outlets of such customers receiving premium
services counted in addition to primary outlets. By way of example, an
individual residential customer who is billed for and receives HBO and Showtime
on Two (2) television sets (which equals Two (2) outlets) equals Four (4) Pay
Units;
(b) With respect to a bulk-billed multiple dwelling unit or commercial
customer, the number of Pay Units attributed to such customer shall be the
product of (i) the number of premium services received by such multiple dwelling
unit or commercial customer and (ii) the number of units in such multiple
dwelling or commercial location. By way of example, a multiple dwelling unit
with One Hundred Fifty (150) units, all of which are receiving HBO and Showtime,
equals Three Hundred (300) Pay Units.
(c) The number of Pay Units for the System shall be the combined sum
of Pay Units for (i) individual residential customers and residents of multiple
dwelling units who pay directly to Seller for cable television services as
determined in Section 1.17(a), and (ii) bulk-billed multiple dwelling units and
commercial customers as determined in Section 1.17(b).
1.18 Real Property: All real property owned, leased or used in connection
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with the System, including without limitation land, buildings, structures,
accessions, fixtures and other improvements, and all interests in real property,
including without limitation easements, licenses, rights-of-way and leases with
respect to headend facilities, satellite earth receiving stations, tower and
antenna sites, microwave transmission and receive sites, distribution system and
office facilities, including without limitation the Real Property set forth in
Exhibit 1.18.
1.19 Rules and Regulations: Rules and Regulations of the FCC, as from time
---------------------
to time amended.
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1.20 Signals: All the stations, frequencies or programming (whether
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broadcast television, satellite, radio or otherwise) carried by the System, all
as shown in Exhibit 1.20.
1.21 Subscribers: Only those customers of the System which at the date of
-----------
determination (which date shall be the last day of the month preceding either
the date of this Agreement or the Closing Date, whichever is relevant)
(a) are under oral or written contract with Seller,
(b) are connected to and receiving at least the basic cable television
services of the System as set forth in Exhibit 1.20 for such class of customer
within the Franchise Area,
(c) are currently being charged by and obligated to pay to Seller the
rates for such services as are provided by Seller,
(d) have paid for at least one month's basic cable television service
at the prevailing basic service rates for such class of customer within the
Franchise Area and
(e) have no service charges exceeding Ten Dollars ($10.00) remaining
outstanding with respect to cable television services received more than Sixty
(60) days preceding the date of determination shall be customers for purposes of
determining the number of Subscribers. The number of Subscribers shall be the
aggregate number of (x) individual residential customers and residents of
multiple dwelling units who pay directly to Seller for cable television
services, in both cases at the date of determination, (y) bulk-billed multiple
dwelling unit customers determined on an equivalency basis in the manner set
forth below and (z) commercial customers determined on an equivalency basis in
the manner set forth below. In the case of bulk-billed multiple dwelling unit
and commercial customers, such customers shall be deemed to be Subscribers on an
equivalency basis as follows: the System's aggregate charges for basic cable
television services to bulk-billed multiple dwelling unit and commercial
customers within the Franchise Areas for the calendar month ending on the date
of determination (which shall not include more than one month's billing for any
account and which shall exclude installation and other nonrecurring charges,
additional outlet and FM charges, tier and premium service revenue, converter
charges, remote control revenue and pass-through of copyright, franchise or
other governmental fees or charges) shall be divided by the basic cable
television service charge for such month to individual residential customers
within the Franchise Areas. Subscribers shall not include customers of the
System receiving service for which no charges are assessed, and shall not
include
4
any person, receiving or entitled to receive basic cable television service as a
customer of the System at a rate less than the rate then generally charged to
the same class of customers of the System in the Franchise Areas for basic cable
television service.
1.22 System: The cable television system operated by Seller in the City of
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Roseville and the County of Placer, California.
1.23 Tangible Personal Property: All tangible personal property, physical
--------------------------
assets and equipment of the System, including without limitation all leasehold
improvements, headend equipment and facilities, satellite earth receiving
stations and facilities, towers, antennas, transmitting equipment, transformers,
power supplies, amplifiers, microwave equipment, connectors, couplers, filters,
traps, modulators, cable, conduit, hookups, pole attachments, poles, anchors,
guys, vehicles, electronic apparatus, testing and monitoring equipment,
consoles, generators, converters, mobile radio equipment, studio facilities,
cameras, television sets, monitors, local origination and production equipment,
videotape, data processing equipment, office equipment, furniture, spare parts,
supplies and inventory.
ARTICLE 2
PURCHASE AND SALE OF ASSETS
2.1 Sale and Transfer of Assets. Subject to and in accordance with the
---------------------------
terms and conditions of this Agreement, on the Closing Date, Seller shall
convey, transfer, deliver and assign to Buyer, and Buyer shall accept from
Seller, all of the Assets, except as set forth in Section 2.2
2.2 Excluded Assets. The Assets to be transferred to Buyer by Seller
---------------
under this Agreement specifically exclude the following:
(a) Cash, bank deposits and bank accounts, letters of credit and any
stocks, bonds, certificates of deposit and similar investments;
(b) Intercompany receivables with respect to any Affiliate of Seller;
(c) Any and all claims by Seller with respect to transactions
occurring on or before the Closing Date, including claims for any refund of
taxes or franchise fees paid by or on behalf of Seller, or an Affiliate thereof,
to any federal, state or local governmental authority;
(d) All programming and billing-related Contracts to which Seller is
not a party, and any other Contracts that are not Assumed Contracts;
5
(e) Any bonus, pension, profit sharing, retirement, credit union,
deferred compensation, group health, major medical or life insurance plan or
other similar plan, contract or commitment providing benefits to the employees
of the System;
(f) Insurance policies and bonds maintained by or on behalf of Seller
with respect to the construction, operation and maintenance of the System;
(g) The logos, trademarks, tradenames and service marks relating to
Seller or the System (other than as necessary for transitional purposes for a
period of Ninety (90) days subsequent to the Closing Date with usage in each
instance conditioned upon the prior written consent of Seller);
(h) Copies of any books and records that Seller is required by law to
retain, subject to the right of Seller to have access to the originals thereof
for a reasonable period, not to exceed three years from the Closing Date, and
other books and records related to internal partnership matters and financial
relationships with Seller's lenders; and
(i) The assets, rights and properties listed on Exhibit 2.2(i).
2.3 Assumption by Buyer of Certain Contracts and Liabilities.
---------------------------------------------------------
(a) On the Closing Date, Buyer shall assume and agrees to pay, perform
and discharge the following effective the day after the Closing Date:
(1) all of the obligations, liabilities and commitments of Seller
accruing after the Closing Date under or with respect to each Franchise,
Authority, Real Property and Assumed Contract;
(2) deposit obligations for cable television services or equipment
advanced by customers of the System on or prior to the Closing Date; provided,
however, that Buyer shall be entitled to reimbursement on the Closing Date to
the extent of such liabilities so assumed; and
(3) all other expenses, liabilities, obligations and commitments,
contingent or otherwise, accruing after the Closing Date in connection with the
ownership, operation or management by Buyer of the System and/or the Assets.
(b) Buyer shall not assume or be bound by any duties,
responsibilities, obligations or liabilities of Seller or to which Seller or any
of the Assets or the System may be bound or affected, of whatever kind or
nature, whether known, unknown,
6
contingent or otherwise, other than those obligations and liabilities expressly
assumed by Buyer pursuant to this Section 2.3.
ARTICLE 3
PURCHASE PRICE AND ADJUSTMENTS;
EXCISE AND PROPERTY TAXES; DEPOSIT
3.1 Purchase Price. Subject to the adjustments described in Section 3.3
--------------
and Article 5 hereof, the aggregate purchase price to be paid by Buyer for the
Assets shall be Thirty-One Million Dollars ($31,000,000) (the "Purchase Price").
3.2 Excise and Property Taxes. Seller shall pay any and all sales, use,
-------------------------
excise, transfer and conveyance taxes payable or assessable in connection with
or as a result of the transfer of the Assets under the terms of this Agreement
and the transactions contemplated hereby. Buyer shall not be responsible for
any business, occupation, withholding, possessory interest or similar tax or
assessment or any other tax or fee (including franchise and copyright fees) of
any kind relating to any period on or prior to the Closing Date with respect to
Seller, the Assets or the construction, operation or maintenance of the System,
nor for any supplemental assessment or increase in any such tax, assessment or
fee relating to such period, all of which shall be the responsibility of Seller.
3.3 Subscriber and Revenue Adjustments.
----------------------------------
(a) The Purchase Price shall be reduced if (i) on the Closing Date,
the number of Subscribers is less than Sixteen Thousand Eight Hundred (16,800)
("Subscriber Threshold"), or (ii) the System's 1996 Annualized Gross Revenues
are less than Seven Million One Hundred Seventy-Five Thousand One Hundred Twenty
Dollars ($7,175,120) ("Revenues Threshold") (taking into effect any rate
rollbacks or adjustments to be effective after the Closing Date, but not
implemented as of the date thereof). The Purchase Price reduction shall be the
greater of (i) the product of One Thousand Eight Hundred Forty-Five Dollars
($1,845) multiplied by the number of Subscribers on the Closing Date less than
the Subscriber Threshold, or (ii) the "Revenue Adjustment Amount," which shall
be the product of 2.15 and the amount by which "Annualized Gross Revenues" are
less than the Revenue Threshold. Annualized Gross Revenues shall be determined
by dividing (i) the System's actual gross revenues from January 1, 1996 through
the earlier to occur of the last day of the month prior to the month in which
the Closing Date occurs or December 31, 1996, by (ii) the factor set forth in
Exhibit 3.3(a) determined with reference to the last day for which actual
revenues are utilized for computation. By way of example, if the Closing Date
were to occur October 31, 1996, Annualized Gross Revenues would be determined by
dividing (i) the System's gross
7
revenues from January 31, 1996 through September 30, 1996 by (ii) .7399.
(b) If either the number of Subscribers exceeds the Subscriber
Threshold, or the System's 1996 Annualized Gross Revenues exceeds the Revenues
Threshold, then the Purchase Price reduction required by Section 3.3(a) shall be
offset by the amount of the overage of the pertinent threshold, calculated in
the same manner as prescribed in Section 3.3(a), but such offset shall not be
greater than the amount of the Purchase Price reduction. In the event the
number of Subscribers and Annualized Gross Revenues as of the date of
determination both exceed the Subscriber Threshold and the Revenues Threshold,
respectively, then the Purchase Price shall be increased by the product of (i)
2.15 and (ii) the excess of Annualized Gross Revenues over the Revenues
Threshold, but in no event shall such increase in the Purchase Price be greater
than Two Million Dollars ($2,000,000).
3.4 ▇▇▇▇▇▇▇ Money Deposit.
---------------------
(a) One Million Five Hundred Fifty Thousand Dollars ($1,550,000) of
the consideration to be received by Seller (the "Deposit") shall be delivered by
Buyer to the Escrow Bank within five (5) days after the satisfaction of the
condition precedent in Section 10.5(c). The Deposit shall be held, invested and
applied in accordance with the terms of this Agreement and the Escrow Agreement.
The Deposit shall be invested in such interest bearing accounts, short-term
obligations of the United States, prime commercial paper, commercial acceptances
or bank certificates of deposit as from time to time directed by Buyer in its
sole discretion upon written instructions delivered by Buyer to the Escrow Bank,
provided that all such investments shall mature on or prior to the Closing Date
so that the funds represented thereby will be available on the Closing Date
without penalties for early withdrawals. All interest accrued on the Deposit
shall be for the account of Buyer. Interest accrued with respect to any
investment of the Deposit having a maturity date prior to the Closing Date shall
be added to the Deposit and reinvested as Buyer shall direct. The Deposit,
together with all interest accrued thereon to the Closing Date, shall be paid to
Buyer as Buyer and Seller shall direct by joint written instructions delivered
to the Escrow Bank if the transaction contemplated by this Agreement is not
consummated due to any reason other than the default of Buyer in performance of
its obligations under this Agreement, or such earlier date as Buyer and Seller
shall deliver to the Escrow Bank joint written instructions that this Agreement
has been validly terminated. If the transactions contemplated by this Agreement
are not consummated due solely to Buyer's failure or refusal to perform its
obligations set forth in Section 12.3 after all of the conditions specified in
Article 10 have been satisfied or waived,
8
and Seller has performed or stands ready to perform its obligations set forth in
Section 12.2, Seller shall, as its sole and exclusive remedy against Buyer,
immediately draw upon the Deposit hereunder as liquidated damages, which amount
the parties to this Agreement agree is reasonable and fair compensation for the
foreseeable losses that might result from such breach considering all of the
circumstances existing on the date of this Agreement, including the relationship
of the Deposit to the range of harm to Seller that can be reasonably
anticipated, and in recognition that proof of actual damages would be difficult,
costly or inconvenient. In such case, the Deposit shall be paid to Seller on
the Closing Date and all accrued interest thereon shall be paid to Buyer on the
same date. If the transactions contemplated by this Agreement are not
consummated due solely to Seller's failure or refusal to perform its obligations
set forth in Section 12.2 after all of the conditions specified in Article 11
have been satisfied or waived, and Buyer has performed or stands ready to
perform its obligations set forth in Section 12.3, Buyer shall, as its sole and
exclusive remedy against Seller, be entitled to receive (in addition to the
return of the Deposit together with accrued interest thereon) from Seller the
sum of One Million Five Hundred Fifty Thousand Dollars ($1,550,000), which
amount the parties to this Agreement agree is reasonable and fair compensation
for the losses that might result from such breach considering all of the
circumstances existing on the date of this Agreement, including the relationship
of such sum to the range of harm to Buyer that can be reasonably anticipated,
and in recognition that proof of actual damages would be difficult, costly or
inconvenient. Each party to this Agreement specifically confirms the accuracy
of the statements made above and the fact that each party is represented by
counsel who explained the consequences of this liquidated damages provision at
the time this Agreement was made.
(b) The balance of the Purchase Price shall be deposited by Buyer with
the Escrow Bank on or before the Closing Date and shall be paid or held on the
Closing Date by the Escrow Bank as follows:
(1) The Escrow Bank shall segregate and thereafter continue to
hold the sum of One Million Five Hundred Fifty Thousand Dollars ($1,550,000),
which shall be designated as a "Holdback Account" and shall be held, invested,
administered and distributed or paid as provided in Article 4. The retention of
the Holdback Account in escrow after the Closing Date shall not prevent the
closing of the transactions contemplated by this Agreement.
(2) The balance of the Purchase Price shall be paid on the Closing
Date by the Escrow Bank to Seller.
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ARTICLE 4
HOLDBACK ACCOUNT
4.1 Holdback Period. Subject to the provisions of Section 4.5, the
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Holdback Account shall be held by the Escrow Bank for a period of one (1) year
following the Closing Date (the "Holdback Period") as security for Seller's
agreement to indemnify Buyer under Article 13 of this Agreement.
4.2 Request for Payment. Subject to the satisfaction of Section 13.1(e),
-------------------
at any time and from time to time during the Holdback Period, Buyer may request
payment from the Escrow Bank of all or any part of the Holdback Account to
compensate Buyer for any amount in respect of which it is entitled to
indemnification pursuant to Section 13.1 or to reimburse Buyer for any payment
made by it pursuant to which it is entitled to indemnification under Section
13.1 including any reasonable legal fees or other expenses paid by Buyer in
defending itself against any claim or action against it in connection with any
matter for which it is entitled to indemnification hereunder, by giving written
notice to the Escrow Bank and Seller specifying the amount and reason for the
payment. If, within thirty (30) days after Buyer gives such notice, Seller does
not give notice to Buyer and the Escrow Bank of Seller's objections to the
payment requested by Buyer, the Escrow Bank shall pay to Buyer forthwith the
full amount requested by Buyer. If Seller gives such notice to Buyer and the
Escrow Bank stating Seller's objections to only a part of the payment requested
by Buyer, the Escrow Bank shall pay to Buyer forthwith that portion of the
amount requested by Buyer with respect to which the notice from Seller states no
objection. Any portion of the payment requested by Buyer with respect to which
the notice from Seller states objections shall remain in escrow (beyond the
Holdback Period if required pursuant to Section 4.5) pending resolution of the
dispute between Buyer and Seller with respect thereto or until the Escrow Bank
receives joint written instructions from Buyer and Seller with respect thereto.
Seller shall not state an objection to any payment requested by Buyer, except on
the basis of its good faith belief (i) that Seller has no obligation, either
directly or in accordance with its agreement to indemnify Buyer pursuant to
Section 13.1, in connection with the matter for which Buyer requests payment
from the Escrow Bank or (ii) that the amount requested by Buyer is unreasonable.
Buyer shall not request payment of any part of the Holdback Account except on
the basis of its good faith belief that (i) Seller is obligated to indemnify
Buyer pursuant to Section 13.1 with respect to the matter for which Buyer
requests payment from the Escrow Bank and (ii) the amount requested is
reasonable.
4.3 Investments. During the Holdback Period, the Escrow Bank shall hold
-----------
and invest the Holdback Account in such interest-bearing accounts, short-term
obligations of the United
10
States of America, prime commercial paper, commercial acceptances, bank
certificates of deposit, federally guaranteed tax-exempt securities and tax-
exempt municipal obligations having at least an AA rating by Moody's or Standard
& Poor's as Seller shall direct, provided that (i) all such investments shall
mature at or prior to the end of the Holdback Period and (ii) at all times
during the Holdback Period, the Holdback Account shall include at least Two
Hundred Fifty Thousand Dollars ($250,000) (or, if a lesser amount, the principal
balance of the Holdback Account) of authorized investments that will mature
within thirty (30) days. Except as necessary to comply with the foregoing
sentence, Seller shall not direct changes of the investments in the Holdback
Account with such frequency as would result in (i) the Holdback Account being
used for investment trading purposes or (ii) more than nominal aggregate fees,
commissions or transaction charges being incurred.
4.4 Interest. All interest earned on the Holdback Account shall accrue
--------
exclusively to Seller and shall be distributed quarterly by the Escrow Bank to
Seller, which shall report all such interest as income on its state and federal
income tax returns.
4.5 Disbursement of Holdback Account. Any sum (including interest
--------------------------------
thereon, if any) held by the Escrow Bank pursuant to the terms of this Agreement
and the Escrow Agreement and not set aside to satisfy any claim of Buyer shall
be paid to Seller at the end of the Holdback Period; provided, however, if at
the end of the Holdback Period, there is any unresolved matter in respect of
which Buyer has requested payment under Section 4.2 or any unresolved dispute
between Buyer and Seller arising from the giving of notice under Section 4.2,
the amount claimed due from Seller in such matter (or if no amount is specified,
an amount determined by Buyer and Seller in good faith) or the amount requested
by Buyer in accordance with Section 4.2 above with respect to any such dispute,
shall be retained in escrow pending resolution of such matter or dispute or
receipt of joint written instructions from Buyer and Seller with respect
thereto. At such time following the end of the Holdback Period as there are no
such matters or disputes with respect to which Seller may have an obligation to
Buyer under this Article 4, the balance of the Holdback Account shall be paid to
Seller in the manner described above.
4.6 Remedies Cumulative. Buyer's ability to request and receive payment
-------------------
from the Escrow Bank of all or any part of the Holdback Account shall be deemed
cumulative with and not exclusive of any other remedy conferred by this
Agreement or by law on Buyer (including without limitation Buyer's right to
indemnification pursuant to Article 13).
11
ARTICLE 5
PRORATIONS
5.1 Prorations. Income and expenses from the operation of the System
----------
through the Closing Date shall be for the account of Seller and after the
Closing Date for the account of Buyer. The following items of income, cost and
expense shall be prorated between Buyer and Seller as of the Closing Date (or
such other date or dates as the parties may hereafter agree upon in writing) in
the manner set forth below:
(a) Subscriber and other revenue shall be prorated on the basis of the
number of days of the time period to which such revenue relates elapsed through
the Closing Date, provided that subscriber and other revenue represented by
accounts receivable shall be for the account of Seller, only to the extent that
(i) such accounts receivable have been outstanding less than Sixty-One (61) days
as of the Closing Date based on a statement certified by authorized officers to
be true, correct and complete to the best of such officers' information,
knowledge and belief and (ii) the aggregate amount of such accounts receivable
is reduced by Five Percent (5%) of the amount thereof. For purposes of this
Section 5.1(a), an account receivable shall be deemed outstanding for the number
of days elapsed from the date of the statement giving rise to such account
receivable through and including the Closing Date;
(b) Copyright, pole attachment or other fees or charges, not
delinquent, arising under any of the Franchises, Authorities and Assumed
Contracts, or otherwise shall be prorated on the basis of the number of days of
the time period to which such fees or charges relate elapsed through the Closing
Date;
(c) All real and personal property taxes levied or assessed against
the Assets and all assessments and excise taxes payable with regard to cable
television services and related sales to Subscribers (excluding penalties and
interest and except such taxes as are referred to in Section 3.2) shall be
prorated on the basis of the number of days of the relevant tax year or period
elapsed through the Closing Date, based on the latest available information;
(d) Rents, utilities and similar recurring expenses shall be prorated
on the basis of the number of days of the time period to which such expenses
relate elapsed through the Closing Date; and
(e) Wages, salaries, payroll taxes (other than withholding taxes) and
fringe benefits of employees who continue in the employ of Buyer after the
Closing Date shall be prorated on the basis of the number of working days
(including paid holidays) during the payroll period through the Closing Date
12
relative to the total number of such days during that payroll period, provided
that any wages, salaries or other benefits payable to or for any employee on
account of that employee's termination of employment shall not be prorated but
shall be paid by the party which effects the termination of that employee's
employment;
(f) Accrued vacation shall be prorated separately on the basis of the
number of vacation days accrued through the Closing Date relative to the maximum
number of vacation days accruable under the established policies of Seller as
set forth in its Associate Policy Guide, a copy of which has been delivered to
Buyer; and
(g) Any income or expense under any Assumed Contract, to the extent
not expressly referred to above in this Section 5.1, shall be prorated on a
basis reasonably related to the basis upon which such income or expense is
determined.
5.2 Advance Payments. All advance payments to, or monies of, third
----------------
parties on deposit with Seller relating to the System including without
limitation advance payments and deposits by Subscribers for converters,
encoders, decoders, cable television services or related sales, shall be
retained by Seller and credited to the account of Buyer. All monies relating to
the System that are on deposit with third parties as of the Closing Date for the
account of Seller or as security for Seller's performance of its obligations
with respect to the System (other than deposits the full benefit of which will
not be available to Buyer after the Closing Date), including without limitation
deposits on real property and deposits for utilities, shall be credited to the
account of Seller in the full amount thereof and shall become the property of
Buyer.
5.3 Adjustments. The amount of each item of income prorated under Section
-----------
5.1 to a party which has not received, and under the terms of this Agreement
will not receive, such income shall be charged against the other party. The
amount of any item of cost or expense prorated under Section 5.1 to a party
which has not paid, and under the terms of this Agreement will not pay, such
cost or expense shall be charged against such party. Advance payments received
by a party to this Agreement from a third party shall be charged against such
party and advance payments made by a party to this Agreement to a third party
shall be credited to such party under this Agreement. The party having, in the
aggregate, the greatest charges against it shall pay to the other party an
amount equal to the difference between the aggregate charges against each party.
13
5.4 Preliminary and Final Settlement Statements.
-------------------------------------------
(a) A preliminary determination of the prorations and adjustments
under Sections 5.1, 5.2 and 5.3 shall be made by Seller in a preliminary
settlement statement (the "Preliminary Settlement Statement") delivered to Buyer
not later than Ten (10) days before the Closing Date, which Preliminary
Settlement Statement (i) shall contain all information necessary to determine
such prorations and adjustments, together with supporting documentation for each
determination contained in such statement where reasonably available to the
preparing party, and (ii) shall be certified by an authorized officer of Seller
to be true, correct and complete as of the date thereof. Buyer shall review the
Preliminary Settlement Statement and, if Buyer disapproves of any determination
contained in such Statement, it shall give Seller written notice stating its
objections thereto and identifying the reasons therefor within Five (5) days
after receipt of such statement. If the parties are unable to agree on any
determination to which Buyer objects on or before the Closing Date, such
determination shall be deferred until after the Closing Date and calculated in
the manner provided in Section 5.4(b). The payment required under the
Preliminary Settlement Statement, as adjusted in the manner provided in this
Section 5.4(a), shall be made on the Closing Date by the party responsible
therefor to the other party by certified or bank cashier's check or by wire
transfer. If Seller is obligated to make such payment, Buyer may offset against
and withhold from the Purchase Price payable to Seller under Section 3.1 an
amount equal to such payment.
(b) A final determination of the prorations and adjustments under
Sections 5.1, 5.2 and 5.3 shall be made by Buyer in a separate final settlement
statement (the "Final Settlement Statement") delivered to Seller not later than
One Hundred Eighty (180) days after the Closing Date, which Final Settlement
Statement shall (i) cover those prorations and adjustments (1) not determined as
of the Closing Date under the Preliminary Settlement Statement or (2) determined
under the Preliminary Settlement Statement which were incorrectly allocated and
which require subsequent adjustment, (ii) contain all information necessary to
determine such prorations and adjustments, together with supporting
documentation for each determination contained in such statement where
reasonably available to Buyer, and (iii) be certified by an authorized officer
of Buyer to be true, correct and complete as of the date thereof. Seller shall
review the Final Settlement Statement and, if Seller disapproves of any
determination contained in such statement it shall give Buyer written notice
stating its objections thereto and identifying the reasons therefor within
Fifteen (15) days after receipt of such statement. Buyer and Seller shall agree
on the amount of each determination to which Seller objects within Fifteen (15)
days after the Buyer's receipt
14
of Seller's objections thereto. If the parties are unable to so agree within
such 15-day period, any such determination upon which they cannot agree shall be
made within Thirty (30) days after the expiration of such 15-day period by one
partner with substantial cable television audit experience of Ernst & Young LLP,
independent certified public accountants, designated by the managing partner or
partners of such firm's San Francisco, California office mutually acceptable to
both Buyer and Seller, in accordance with the provisions of this Article 5,
which determination shall be final. The scope of review by the accountants
shall be limited to the working papers and any memoranda of Buyer or Seller or
their respective accountants, and the testimony of appropriate personnel of
Buyer or Seller or their respective accountants. Buyer and Seller shall bear
equally the expenses arising in connection with such determination. The payment
required under the Final Settlement Statement, as adjusted in the manner
provided in this Section 5.4(b), shall be made by the party responsible therefor
to the other party by certified or bank cashier's check or by wire transfer
within Five (5) days after final adjustment of the Final Settlement Statement.
If any item of income or expense described in Section 5.1 cannot be prorated or
adjusted as of the date of the Final Settlement Statement (including the
computation of copyright fees due for the semiannual period in which the Closing
Date occurs), then it shall be prorated and adjusted as soon as possible
thereafter with payment of an amount equal to the amount charged against either
party being paid by that party to the other by certified or bank cashier's check
or by wire transfer within Five (5) days after determination of the charge.
ARTICLE 6
REPRESENTATIONS AND WARRANTIES OF SELLER
As a material inducement to Buyer to enter into this Agreement, Seller
represents and warrants the following for the benefit of Buyer as of the date
hereof:
6.1 Organization and Qualification. Seller is duly organized, validly
------------------------------
existing and in good standing under the laws of the State of Colorado and is
authorized to transact business in the State of California. ▇▇▇▇▇ Cable
Corporation ("JCC") is the managing general partner of Seller, and is duly
organized, validly existing and in good standing under the laws of the State of
Colorado. Seller has all necessary power and authority to own, lease and
utilize its properties and assets and to engage in the business or businesses in
which it is presently engaged as and in the places where such property and
assets are now owned, leased or utilized or such businesses are now conducted.
6.2 Authority. Seller has the right, power, legal capacity and authority
---------
to enter into and perform its obligations under this Agreement and the
documents, instruments and certificates to
15
be executed and delivered by it pursuant to this Agreement. The execution,
delivery and performance of this Agreement by Seller and all documents,
instruments and certificates made or delivered by it pursuant to this Agreement,
and the transactions contemplated thereby, have been duly authorized by all
necessary action on the part of Seller, other than the approval of the limited
partners of Seller as required under Seller's partnership agreement or Colorado
law.
6.3 Investments. Seller neither directly nor indirectly owns or has made
-----------
any investment in any of the capital stock of, or has any other proprietary
interest in, any other person or entity.
6.4 Enforceability. The terms and provisions of this Agreement and all
--------------
documents, instruments and certificates made or delivered from time to time by
Seller hereunder and thereunder constitute valid and legally binding obligations
of Seller, enforceable against Seller in accordance with the terms hereof and
thereof.
6.5 Approvals. Except for the consents identified in Exhibit 6.5, the
---------
execution, delivery and performance of this Agreement by Seller do not and will
not require any registration with, consent or approval of, notice to, or any
action by any person or governmental authority.
6.6 Compliance with Other Instruments.
---------------------------------
(a) Except for the consents identified in Exhibit 6.5, the execution
and delivery of this Agreement and the consummation of the transactions
contemplated hereunder are not and will not result in a breach or violation of
any term or provision of, or result in the imposition of any lien, charge or
encumbrance upon the Assets or any properties of Seller pursuant to, or
constitute a breach or default (including any event that, with the passage of
time or giving of notice, or both, would become a breach or default) under,
Seller's partnership agreement, or any contract, agreement, franchise, license,
lease, indenture, mortgage, loan agreement, note, order, permit or judgment as
to which Seller is a party or by which Seller or any of its properties may be
affected the effect of which would impair the ability of Seller to perform its
obligations under this Agreement.
(b) Seller has complied with all material provisions of, and is not in
material breach or default the effect of which would impair its ability to
perform its obligations under this Agreement (including any event that, with the
passage of time or giving of notice, or both, would become a breach or default)
with respect to, its partnership agreement or organizational documents, any
franchise, license, lease, indenture, mortgage, loan agreement, note, contract,
agreement, commitment,
16
arrangement, order, permit, judgment, instrument or other authorization, right,
restriction or obligation to which it is a party or by which it or any of the
Assets may be bound or affected.
(c) Seller has complied with all material provisions of and is not in
material breach or default (including any event that, with the passage of time
or giving of notice, or both, would become a breach or default) under any
Assumed Contract, Real Property, Authority or Franchise, and, except as provided
in Exhibit 6.6, each constitutes a valid and binding obligation of the parties
thereto (subject to bankruptcy, insolvency, reorganization or other laws
relating to or affecting the enforcement of creditors' rights generally) and is
in full force and effect.
(d) Seller has not received a notice from any party to any Assumed
Contract, Real Property, Authority or Franchise that such party intends to
terminate or cancel the same and, to the best of Seller's knowledge after due
investigation, there are no offsets or specific defenses to the enforceability
of any thereof.
6.7 Complete System. Except as disclosed in Exhibit 6.7, as a result of
---------------
the transaction herein contemplated, Buyer shall receive possession of a fully
operational cable television system and business, complete as referred to in,
and in condition required by, this Agreement, with all assets, properties,
franchises, licenses, permits, consents, certificates, authorities, operating
rights, leases, contracts, agreements, commitments and arrangements necessary to
lawfully operate and maintain the same as operated and maintained on the date
hereof.
6.8 Title and Encumbrances. Except as specifically noted in Exhibit 6.8,
----------------------
Seller has title to the Tangible Personal Property, and in the case of leased
properties a valid leasehold interest therein, and owns and possesses all of the
Assets and interests in the Assets, whether tangible or intangible, real,
personal or mixed, free and clear of mortgages, liens, pledges, charges,
encumbrances, claims, easements, rights-of-way, covenants, conditions or
restrictions of any nature, whether accrued, absolute, contingent or otherwise
(except for the lien of current taxes not yet due and payable and matters that,
in the aggregate, are not substantial in amount and do not detract from or
interfere with the present use of any of the Assets, nor impair business
operations), pertaining to the System. All Tangible Personal Property and Real
Property constituting the Assets are in good operating condition and repair,
reasonable wear and tear excepted, and are suitable for the uses for which they
are being utilized. Seller has possession of all premises leased to it from
others, except to the extent Seller has subleased all or a portion of such
premises, as described in
17
Exhibit 1.18. There is no real or personal property necessary or appropriate,
or used or useful, in connection with the construction, operation and
maintenance of the System not owned by Seller or possessed by it pursuant to a
binding written or oral agreement therefor permitting the use of the property in
the manner utilized by Seller on the date hereof.
6.9 Assets of the System.
--------------------
(a) Real Property.
-------------
(1) Description. Exhibit 1.18 contains a complete and accurate
-----------
description of each parcel of real property currently owned by, leased to or
utilized by Seller, together with a description of the use to which such real
property is put in connection with the operation of the System.
(2) Zoning. The zoning of each parcel of real property described
------
in Exhibit 1.18 on which is situated an antenna or tower site, microwave
transmission and/or receive site, headend facility or satellite earth receiving
station permits the presently existing improvements and the continuation of the
business use now conducted on such parcel.
(3) Access and Utilities. The Real Property owned by, leased to
--------------------
or utilized by Seller has direct and unobstructed access for purposes of ingress
and egress to public roads or streets or to private roads over which Seller has
a valid right-of-way. All such Real Property is served by utilities and
services necessary for the continuation of the business use now conducted on
such Real Property.
(4) Easements. Except where the failure to so possess would not
---------
have a material adverse effect on the System, Seller possesses all easements or
rights-of-way, whether public or private, necessary for the construction,
operation, maintenance, repair or replacement of any cables, lines, towers,
equipment and other facilities which are used by Seller or the System.
(5) Environmental Matters. With respect to the Real Property,
---------------------
Seller is in full compliance with all federal, state and local health and safety
and environmental laws, rules and regulations ("environmental laws") except
insofar as any noncompliance could not be expected to give rise to any material
liability. During Seller's operation of the Real Property, all activities
undertaken on or affecting the Real Property by Seller have been in compliance
with all health, safety and environmental laws. During Seller's occupation of
the Real Property there have been no abatement, removal, remedial or other
response actions for hazardous substances at the Real Property.
18
(i) Seller is aware of no instances, prior to Seller's
operations on the Real Property, of noncompliance of the Real Property by any
person or any activities thereon with any environmental laws. Seller is aware of
no aspects of the Real Property or any operations thereon which reasonably might
give rise to any civil, criminal, administrative or other proceeding or notice
thereof under any environmental law (an "environmental claim").
(ii) No environmental claim has been asserted in the past,
currently exists or, to the best of Seller's knowledge, is threatened or
contemplated against Seller, or, against any other person or entity, which
relates to the Real Property or any operations thereon.
(iii) During Seller's operations on the Real Property, the
Real Property has not been and is not now, subject to any investigation,
assessment, or study by any person or government agency related to potential or
actual enforcement of any health and safety and environmental law.
(iv) No hazardous substances (which includes without
limitation: (i) any "hazardous substance" or "pollutant or contaminant" as
defined in Sections 101(14) and (33) of CERCLA, 42 U.S.C. (S)(S) 9601(14) and
(33); (ii) any "hazardous material" as defined in Section 1802(2) of the
Hazardous Materials Transportation Act, 49 U.S.C. (S)(S) 1801, et seq.; (iii)
-- ---
any "oil" or "hazardous substance" as defined in Sections 311(a)(1) and (14) of
the Federal Clean Water Act, 33 U.S.C. (S)(S) 1321(a)(1) and (14); (iv) any
"pesticide" as defined in the Federal Insecticide, Fungicide, and Rodenticide
Act, at 7 U.S.C. (S) 136(u); (v) any "byproduct," "source" or "special nuclear"
material as defined in the Atomic Energy Act of 1954, 42 U.S.C. (S)(S) 2014(e),
(z) and (aa); (vi) any chemical, compound, material, mixture or substance
defined, listed, or classified under any environmental law as dangerous,
hazardous, extremely hazardous, infectious, or toxic; (vii) any substance
regulated under any environmental law due to its polluting or dangerous
properties such as ignitability, corrosivity, reactivity, carcinogenicity,
toxicity, or reproductive effects; and (viii) petroleum and petroleum products,
asbestos and asbestos-containing materials, and polychlorinated biphenyls
("PCBs")) have been or are being released to, from, or under the Real Property
by Seller or, to the best of Seller's knowledge, by any other person or entity.
(v) No underground storage tanks, surface impoundments, solid
waste management units, tank systems, waste piles, land treatment areas,
landfills or incinerators have been installed or placed by Seller nor, to the
best of Seller's knowledge, by any other person. None of the Real Property has
been used at any time as a gasoline service station or any other
19
station or facility for storing, pumping, dispensing or producing gasoline or
any other petroleum product, byproduct or waste by Seller nor, to the best of
Seller's knowledge, by any other person.
(vi) To the best of Seller's knowledge, there are no "PCB
Items," as that term is defined in 40 C.F.R. (S) 761.3, located on the Real
Property.
(vii) Any and all permits, licenses, and other authorizations
or approvals required under environmental laws for Seller's operations on the
Real Property have been secured by the Seller. To the best of Seller's
knowledge, no building or other structure on the Real Property contains
asbestos.
(b) Franchises. Exhibit 1.14 lists all Franchises required in
----------
connection with the construction, operation or maintenance of the System.
Seller is the valid holder and duly authorized grantee of each of the
Franchises. Each Franchise is for the period specified in Exhibit 1.14. All of
the Franchises were duly authorized and entered into, and validly issued and
obtained by or transferred to and accepted by Seller, in accordance with and as
required by the terms thereof and by applicable law. No other franchise is
required by law in connection with the construction, operation and maintenance
of the System. As of the date of this Agreement, to the best of Seller's
knowledge, except as set forth in Exhibit 6.9(b), no other person or entity
currently holds any franchise, license, permit, consent, certificate, authority,
agreement, arrangement or operating right entitling such person or entity to
construct, operate or maintain a cable television system in the Franchise Areas.
(c) Authorities. Seller has all Authorities, including without
-----------
limitation governmental authorities and authorizations from the FCC for business
radio licenses, satellite earth receiving facilities and CARS microwave
facilities, that are necessary or appropriate to carry on the business of the
System as conducted on the date hereof, each of which is set forth in Exhibit
1.4, is in full force and effect and has not been revoked, cancelled, encumbered
or adversely affected in any manner, and with respect to which Seller is in
material compliance.
6.10 System Installation.
-------------------
(a) The System has been constructed, installed and maintained in a
good and workmanlike manner in all material respects consistent with accepted
industry standards and is, in light of its age and the use to which it has been
put, free from defects, reasonable wear and tear excepted, and satisfies in all
20
material respects the requirements of the Franchises, applicable technical
standards and federal, state and local laws, rules, regulations and orders
including without limitation the Rules and Regulations.
(b) All Tangible Personal Property, wherever placed or located, is
placed and maintained pursuant to valid Authorities, Contracts, Franchises, Real
Property or other such authorizations identified in Exhibits 1.4, 1.8, 1.14 and
1.18, or the absence of such Authorities, Contracts, Franchises, Real Property
or such other authorizations would not have a material adverse effect on the
System. Each authorization is in full force and effect authorizing such
placement and the continued maintenance thereof in the manner presently placed
and maintained by Seller. None of the Tangible Personal Property requires or
may require, because of incorrect, improper or unlawful construction,
installation or location, or due to the requirements of any authorizations
pursuant to which it has been installed or otherwise due to directives of or
claims by the person or entity giving such authorization or any other person,
any rearrangement, relocation, rehabilitation, reinstallation or removal in any
material respect or any material expenditure for any additional or different
equipment or facilities, or facilities or labor in connection therewith.
(c) No material restoration, repair or other work is required with
respect to (i) the Assets or the System except as required in the usual and
ordinary course of business, or (ii) any structure, street, sidewalk, easement,
right-of-way or other property, including without limitation adjacent or
abutting property, due to the construction, operation or maintenance of the
System or is required by any federal, state or local laws, rules, regulations,
ordinances codes or orders or by any of the Franchises, Authorities or
Contracts.
6.11 Carriage of Signals and Rates. Seller has the legal right and
-----------------------------
authority, including without limitation all necessary authority from the FCC and
the requisite compulsory copyright license under Section 111 of the Copyright
Act, to carry and use in the conduct of the business of the System all of the
Signals. No oral or written notices have been received from the FCC, the United
States Copyright Office, any local or other television station or system or from
any other person or entity, station or governmental authority claiming to have a
right of objection challenging or questioning the right of Seller or the System
to carry or furnish, or not to carry or furnish, any of the Signals or any other
station or service to any Subscriber. Exhibit 6.11 sets forth the rates charged
by Seller in connection with the System for every service, level of service,
package of services, installations, or other services, equipment or items for
which Seller has an established charge as of the date of this Agreement.
21
6.12 Physical Plant and Subscribers.
------------------------------
(a) Strand Miles. The System has approximately Two Hundred Ninety-
------------
Three (293) fully completed and operational strand and conduit miles of cable
system and lines, of which approximately One Hundred One (101) miles are aerial
and approximately One Hundred Ninety-Four (194) miles are installed underground.
For purposes of this Agreement, a "strand" or "conduit" mile is considered to be
one mile measured along any continuous single line of aerial or underground
cable installation, irrespective of the total number of cables on or in such
installation.
(b) Homes Passed. There are approximately Twenty-One Thousand Five
------------
Hundred (21,500) homes passed by cables comprising the System. For purposes of
this Agreement, homes means free standing single family residential dwelling
units and individual dwelling units within apartment buildings, condominiums and
townhouses within the Franchise Areas (excluding commercial structures), and
homes passed means homes existing as of the date of this Agreement within the
Franchise Areas and permitting service by the System without any expense to
Buyer for extension or modification of the System other than installation of a
standard drop or tap.
(c) Channel Capacity. The System has the capacity of carrying Fifty-
----------------
Four (54) Six (6) MHz downstream channels over 100% of the System. The System
provides reception on all such channels in compliance with the requirements of
the Franchises, in full compliance with the Rules and Regulations, and meets all
the material technical standards of (S) 76.605 of the Rules and Regulations
which are legally required to be met by the System. The System is authorized to
utilize all frequencies currently used in the frequency bands 108-136 and 225-
400 MHz in the manner currently used.
(d) Subscribers. The approximate number of Subscribers and Pay Units
-----------
as of August 31, 1996 is set forth on Exhibit 6.12.
6.13 FCC and Copyright.
-----------------
(a) Communications Act.
------------------
(1) Seller has timely and properly made all filings, applications,
reports and other submissions (including without limitation registration
statements, Aeronautical notifications and annual employment reports (FCC Form
395-A)) required under the Communications Act and the Rules and Regulations, in
each case relevant to the conduct and operation of its business and the System.
Seller and the System are in all respects in compliance with the Communications
Act and the Rules
22
and Regulations except insofar as any noncompliance could not be expected to
give rise to any material liability. Seller holds all Authorities, including
without limitation all requisite FCC licenses for business radio licenses,
satellite earth receiving facilities and CARS microwave facilities; and all
consents, certificates of compliance, EEO certifications, clearances or other
authorizations necessary to the conduct and operation of the System, each of
which is set forth in Exhibit 1.4 and is in full force and effect.
(2) Seller has with respect to the System filed with the
appropriate governmental authorities all appropriate requests for renewal under
the Communications Act within thirty to thirty-six months prior to the
expiration of each Franchise.
(3) Other than requests for network non-duplication, syndicated
exclusivity protection and sports blackout requirements, Seller has not received
any written requests, notices or demands from the FCC, any other governmental
authority or any other person, challenging or questioning the legal rights of
Seller to operate the System or carry any broadcast television signal or
requesting signal carriage pursuant to the FCC's "must-carry" rules, other than
any such request, notice or demand that has since been resolved. All of the
local broadcast television signals carried by the System are carried either
pursuant to the must-carry requirements or pursuant to executed retransmission
consent agreements. Seller has not received with respect to the System any
notification of any petition or submission that is currently pending before the
FCC to modify any television market or for a waiver of any rules of the Rules
and Regulations as they apply to the System.
(4) Seller has made available to Buyer true and complete copies of
all reports and filings for the past three years made or filed by Seller with
the FCC pursuant to the Communications Act with respect to the business of the
System.
(5) Seller has made available to Buyer true and complete copies of
(i) the final versions of all FCC Forms 393, 1200, 1205, 1210, 1220 and 1225
that have been prepared with respect to the System and filed with any
governmental authority and the most recent draft of any such Form that has been
prepared with respect to the System in which no version of such Form was filed
with any governmental authority (ii) all material correspondence with any
governmental body relating to rate regulation under the Communications Act,
(iii) any complaints on FCC Form 329 filed with the FCC and received by Seller
with respect to any rates charged to Subscribers of the System and any
correspondence from Seller to any Subscriber with respect to any such complaint.
Exhibit 6.13(a) sets forth as of the date of this Agreement a list of (i) all
rate complaints on FCC Form 329 filed pursuant to the Communications Act and
received by Seller
23
that have not been deemed invalid, (ii) those franchising authorities that have
been certified upon filing FCC Form 328 or have filed FCC Form 328 with the FCC
for certification under the Communications Act to regulate the System's rates
and (iii) a list of all letters of inquiry from the FCC received by Seller since
September 1, 1993 with regard to rate regulation.
(b) Copyright Act.
-------------
(1) Seller has, in a timely manner, recorded or deposited with the
United States Copyright Office and the Register of Copyrights all statements of
account, supplemental statements of account and other documents and instruments,
and paid all royalties, supplemental royalties, fees and other sums to the
United States Copyright Office required under the Copyright Act with respect to
the business and operations of the System and as required for Seller to obtain,
hold and maintain the compulsory copyright license for cable television systems
prescribed in Section 111 of the Copyright Act.
(2) Seller and the System are in all material respects in
compliance with the Copyright Act, except as to potential copyright liability
arising from the transmission of any music on the System. Seller and the System
are entitled to hold and do now hold the compulsory copyright license described
in Section 111 of the Copyright Act, which compulsory copyright license is in
full force and effect and has not been revoked, cancelled, encumbered or
adversely affected in any manner except as to matters impacting the cable
television industry generally.
(3) Seller is not liable to any person or entity for, and the
Assets and the System are not subject to or encumbered by, any copyright
infringement under the Copyright Act or otherwise or the infringement of the
proprietary right of any other person or entity as a result of the business and
operations of Seller or the System, and there are no violations of the rights of
any legal or beneficial copyright owner for or by reason of any secondary or
other transmission (other than music) by or through any of the Assets or the
System or any other act which is an infringement under or pursuant to any of the
provisions of any applicable copyright laws, including without limitation the
Copyright Act.
6.14 Commitments. Exhibit 6.14 identifies (i) all unfulfilled promises or
-----------
commitments (excluding commitments made in the ordinary course of Seller's
business in respect of which Seller will incur only minimal expense), if any,
including without limitation those for capital improvements and obligations
under the Franchises, whether or not legally binding, which have been made or
offered in connection with the Assets or the System and (ii) all construction
and improvement programs in progress and the status and contemplated completion
dates thereof.
24
6.15 Financial Statements. Seller has furnished Buyer with financial
--------------------
statements for the System for the fiscal years ended December 31, 1995 and
December 31, 1994, and related statements of income, retained earnings and
changes in financial position for the fiscal years ended on each date. The
financial data contained in such statements have been prepared in accordance
with generally accepted accounting principles consistently applied throughout
the periods in question. The balance sheets referred to above fairly present
the condition of the Seller as at the dates indicated and, together with the
notes thereto, reflect all known liabilities, contingent or other, as at the
dates thereof, and the statements of income referred to above fairly present the
results of the operations of the System for the periods indicated in accordance
with generally accepted accounting principles. Seller has also furnished Buyer
its balance sheet as of June 30, 1996 and related statements of income, retained
earnings and changes in financial position for the six (6) month period then
ended. The financial data contained in such statements have been prepared in
accordance with generally accepted accounting principles consistently applied
throughout the six (6) month period ended on such date. The balance sheet dated
such date fairly presents the condition of the System as at said date and the
statement of income for the six (6) month period ended on said date fairly
presents the results of the operations of the System for the six (6) month
period ended on such date. The System does not have any indebtedness, liability
or obligation of a type required by generally accepted accounting principles to
be reflected on a balance sheet that is not reflected or reserved against in the
balance sheet dated December 31, 1995, other than liabilities, obligations and
contingencies that (i) were incurred after December 31, 1995 in the ordinary
course of business, or (ii) would not individually or in the aggregate have a
materially adverse effect on the financial condition, results of operations,
liabilities, Assets, or business of the System.
6.16 Tax Returns and Payments. All tax returns and reports of Seller
------------------------
required by law to be filed have been duly filed, and all taxes, assessments,
fees and other governmental charges upon Seller, the Assets or the System
required to be paid prior to the date hereof, including without limitation
income, franchise, excise, sales and use taxes, have been paid. Except as
described in Exhibit 6.16, there are no audits pending with respect to any
federal, state or local tax return for any period with respect to Seller, the
Assets or the System. The Internal Revenue Service and the California Franchise
Tax Board have audited and settled or the statute of limitations has run on all
federal and California income, franchise, sales and use tax returns of Seller
for all fiscal years through the fiscal year ended May 31, 1992, in respect of
such federal returns and May 31, 1991 in respect of such California returns, and
the results of such audits are duly reflected in the financial
25
statements referred to in Section 6.15. The charges, accruals and reserves on
the books of Seller with respect to federal and state taxes are adequate for all
periods in respect of which the statute of limitations has not yet run. There
are no determined tax deficiencies or proposed tax assessments against Seller,
the System or the Assets, nor is there any basis therefor known to Seller.
Seller has never filed any consent under Section 341(f) of the Internal Revenue
Code.
6.17 Absence of Material Changes. Except as described in Exhibit 6.17
---------------------------
hereto or in the financial statements of Seller of December 31, 1995, since
December 31, 1995, there has not been any:
(a) Contract, commitment or transaction by Seller or the System except
in the ordinary course of business as conducted on that date;
(b) Material adverse change in the financial condition, liabilities,
assets, or business of Seller or the System;
(c) Destruction, damage to or loss of any asset of Seller or the
System (whether or not covered by insurance) that materially and adversely
affects the financial condition or business of Seller or the System;
(d) Labor difficulty or other event or condition of any character
materially and adversely affecting the financial condition or business of Seller
or the System;
(e) Change in accounting methods or practices (including, without
limitation, any change in depreciation or amortization policies or rates) by
Seller or the System;
(f) Revaluation by Seller or the System of any assets;
(g) Declaration, setting aside, or payment of a dividend or other
distribution in respect to, or any direct or indirect redemption, purchase, or
other acquisition by Seller or the System of, any of its securities;
(h) Increase in the salary or other compensation payable or to become
payable by Seller or the System to any of its employees, or the declaration,
payment, commitment or obligation of any kind for the payment by Seller or the
System of a bonus or other additional salary or compensation to any such person,
other than general increases which may be granted in the ordinary course of
business and paid to employees in accordance with customary practices, and other
than any arrangement or plan disclosed by Seller to Buyer to incent employees of
the System to remain employees of the System through the Closing Date;
26
(i) Sale or transfer of any asset of Seller or the System, except in
the ordinary course of business;
(j) Amendment or termination of any Assumed Contract or Authority,
except in the ordinary course of business;
(k) Borrowing of any funds or mortgage, pledge or other encumbrance of
any asset of Seller or the System except trade credit obtained in the ordinary
course of business from vendors from which Seller has received goods or services
on a regular basis prior to the date of this Agreement;
(l) Waiver, release or compromise of any right or claim of Seller or
the System or cancellation, without full payment, of any note, loan or other
obligation owing to it, except in the ordinary course of business;
(m) Any event or condition of any character (including, without
limitation, any event or condition of a kind described or referred to above in
this Section 6.17) that has or might reasonably have a material and adverse
effect on the financial condition, liabilities, assets or business of Seller or
the System; or
(n) Agreement by Seller or the System to do any of the things
described in the preceding clauses (a) through (m) of this Section 6.17.
6.18 Litigation.
----------
(a) Except as set forth in Exhibit 6.18, there is no claim or
controversy, or legal, administrative or other proceeding or governmental
investigation, hearing, complaint, appeal, show cause or special relief
proceeding pending or, to the best of Seller's knowledge after due
investigation, threatened or any unasserted claim or assessment probable of
assertion against Seller or affecting any of the Assets or the System and its
current and future operations, or which would impair the ability or capacity of
Seller to perform its obligations under this Agreement. Except as set forth in
Exhibit 6.18, neither Seller, the Assets nor the System are subject to any
order, writ, injunction, judgment or decree of any federal, state or local
court, department, agency or instrumentality, nor has Seller received, within
the two-year period preceding the date of this Agreement, any written inquiry
from any federal, state or local governmental agency concerning the operation of
the System which remains unresolved on the date of this Agreement.
(b) Except as set forth in Exhibit 6.18 and for matters affecting the
cable industry generally in California, there are no proceedings, including
without limitation
27
investigations or inspections, pending against Seller or, to the best knowledge
of Seller after due investigation, threatened against Seller nor are there any
pending negotiations or demands involving Seller, any of the Assets or the
System, by any federal, state or local governmental agency, or a broadcasting
station or any telephone company or any public or other utility, pole landlord,
lessor or any other person or entity to currently or hereafter terminate,
suspend, modify, restrict or materially and adversely change any of the terms,
provisions or conditions of the rights of Seller or the System, or which might
result in any material obligation with regard to the Assets, the System or
Buyer.
6.19 Insurance and Bonds. Seller has in full force and effect (i) casualty
-------------------
and liability insurance covering and insuring against risks customarily insured
against in the cable television industry, subject to reasonable deductibles,
including without limitation (x) fire and extended coverage insurance and (y)
broad form liability coverage and (ii), as described in Exhibit 6.19 with
respect to amounts and beneficiaries, all performance, surety and other bonds
required under the Franchises and the Assumed Contracts, except as the same may
have been waived by the grantor or other party to any such Franchise or Assumed
Contract.
6.20 Compliance with Laws. Seller is in compliance in all material
--------------------
respects with all applicable laws, rules or regulations of the United States of
America or of any state, county, municipality or other political subdivision or
any agency of any of the foregoing having jurisdiction over Seller, the Assets
or the System, or of any jurisdiction in which the System is being operated or
conducted or has at any time been operated or conducted.
6.21 Employees.
---------
(a) Exhibit 6.21(a) constitutes a true and complete list of all
individuals employed by Seller, the date of hire of each such individual, the
wage rates or salary and other compensation paid or payable to each of such
individuals, the number of days of accrued vacation and accrued sick leave, the
date of last wage increase and the amount of such increase. Except as provided
in Exhibit 6.21(a), Seller is not a party to any written employment contract,
agreement, commitment or arrangement with any individual identified in Exhibit
6.21(a).
(b) Seller is not a party to or subject to any labor, union or
collective bargaining agreement or arrangement and Seller has not recognized,
nor is it required to recognize nor has it received any demand for recognition
by any collective bargaining representative with respect to employees of Seller.
There have been no labor or employment disputes and Seller has no knowledge,
after due investigation, of any union organization
28
activity involving Seller or its business, including without limitation the
System.
6.22 Employee Benefits. Except as described in Exhibit 6.22, neither
-----------------
Seller nor any Employee Benefit Plan or Multiemployer Plan (as those terms are
defined in ERISA) maintained by Seller or its Affiliates or to which Seller or
its Affiliates has or has had the obligation to contribute in respect of any
employees that render services in connection with the System, is in violation of
the provisions of ERISA or the Internal Revenue Code; no reportable event,
within the meaning of ERISA, has occurred and is continuing with respect to any
such Employee Benefit Plan or Multiemployer Plan; no prohibited transaction,
within the meaning of Title I of ERISA, has occurred with respect to any such
Employee Benefit Plan or Multiemployer Plan; Seller has not failed to make any
contribution or payment required by Seller in respect of any such Employee
Benefit Plan or Multiemployer Plan so as to cause Buyer to have responsibility
or liability for such amount; and Seller has complied with all COBRA
requirements relating to continuation of health care coverage for Seller's
employees (and dependents) rendering services in connection with the System.
6.23 Commissions. Seller has retained The ▇▇▇▇▇ Group, Ltd. (the "Group")
-----------
as its sole broker and finder in connection with this Agreement and the
transactions contemplated hereby, and Seller has agreed to pay the entire
commission of the Group.
6.24 Full Disclosure. No representation, warranty or statement by Seller
---------------
contained in this Agreement, any Exhibit or any document, instrument or
certificate furnished by or on behalf of either of them pursuant to this
Agreement contains any untrue, incorrect, incomplete or misleading statement of
material fact, or knowingly omits to state a material fact necessary to make the
statements contained therein not misleading except that no representation or
warranty is made with respect to matters impacting the cable television industry
generally.
ARTICLE 7
REPRESENTATIONS AND WARRANTIES OF BUYER
As a material inducement to Seller to enter into this Agreement, Buyer
represents and warrants to Seller the following for their benefit as of the date
hereof:
7.1 Organization and Qualification. Buyer is a corporation duly
------------------------------
organized, validly existing and in good standing under the laws of the State of
California. Buyer has all necessary power and authority to own, lease and
utilize its properties and assets and to engage in the business or businesses in
which it is presently engaged as and in the places where such property and
29
assets are now owned, leased or utilized or such business is now conducted.
7.2 Authority. Buyer has the right, power, legal capacity and authority
---------
to enter into and perform its obligations under this Agreement and the
documents, instruments and certificates to be executed and delivered by Buyer
pursuant to this Agreement. The execution, delivery and performance of this
Agreement by Buyer and all documents, instruments and certificates made or
delivered by Buyer pursuant to this Agreement, and the transactions contemplated
hereby, have been duly authorized by all necessary corporate action on the part
of Buyer other than the approval of the Board of Directors of Roseville
Communications Company, the sole shareholder of Buyer.
7.3 Enforceability. The terms and provisions of this Agreement and all
--------------
documents, instruments and certificates made or delivered from time to time by
Buyer hereunder and thereunder constitute valid and legally binding obligations
of Buyer enforceable as against Buyer in accordance with the terms hereof and
each thereof.
7.4 Approvals. Except for the consents identified in Exhibit 10.5, the
---------
execution, delivery and performance of this Agreement by Buyer do not and will
not require any registration with, consent or approval of, notice to, or any
action by any person or governmental authority.
7.5 Compliance with Other Instruments.
---------------------------------
(a) The execution and delivery of this Agreement and the consummation
of the transactions contemplated hereunder are not and will not result in a
breach or violation of any term or provision of, or result in the imposition of
any lien, charge or encumbrance upon the assets or any properties of Buyer
pursuant to, or constitute a breach or default (including any event that, with
the passage of time or giving of notice, or both, would become a breach or
default) under, Buyer's articles of incorporation or bylaws, or any contract,
agreement, franchise, license, lease, indenture, mortgage, loan agreement, note,
order, permit or judgment as to which Buyer or any Affiliate thereof is a party
or by which Buyer or any of its properties or any Affiliate thereof may be
affected the effect of which would impair the ability of Buyer to perform its
obligations under this Agreement.
(b) Buyer has complied with all material provisions of, and is not in
material breach or default the effect of which would impair the ability of Buyer
to perform its obligations under this Agreement (including any event that, with
the passage of time or giving of notice, or both, would become a breach or
default) with respect to, its articles of incorporation or
30
bylaws, any franchise, license, lease, indenture, mortgage, loan agreement,
note, contract, agreement, commitment, arrangement, order, permit, judgment,
instrument or other authorization, right, restriction or obligation to which
Buyer is a party or by which Buyer or any of the its assets may be bound or
affected.
7.6 Commissions. Buyer has not entered into any agreement, commitment or
-----------
obligation with regard to any brokerage commission or finder's fee arising out
of the execution, delivery or performance of this Agreement or the transactions
contemplated thereby.
7.7 Full Disclosure. No representation, warranty or statement by Buyer
---------------
contained in this Agreement, any Exhibit or any document, instrument or
certificate furnished by or on behalf of Buyer pursuant to this Agreement
contains any untrue, incorrect, incomplete or misleading statement of material
fact, or knowingly omits to state a material fact necessary to make the
statements contained therein not misleading.
ARTICLE 8
SELLER'S COVENANTS
From the date hereof to and including the Closing Date, Seller
covenants to and agrees with Buyer as follows:
8.1 Access to the System.
--------------------
(a) Seller shall give Buyer's employees and representatives full and
free access, during normal business hours and with reasonable prior notice, to
all of the properties, books, accounts, records, contracts, agreements,
commitments, arrangements and documents of or relating to Seller, the Assets or
the System, and shall permit the making of copies or extracts thereof. Seller
shall furnish to Buyer and its representatives such information and data
concerning the business, operations and properties of Seller, the Assets or the
System as Buyer or any such representative shall reasonably request.
(b) Buyer shall keep confidential all information contained in the
financial statements or other information and materials delivered to it by
Seller under this Agreement, provided that the provisions of this Section 8.1(b)
shall not apply with respect to such information as is or was (i) disclosed by
Buyer to its employees, representatives and agents in connection with the
transactions contemplated by this Agreement provided that Buyer shall advise all
such employees, representatives and agents of the confidential nature of the
information and the requirement of this Section 8.1(b), (ii) known to Buyer
before October 17, 1995, (iii) independently developed by Buyer, (iv) publicly
known or available other than through disclosure by Buyer, (v) rightfully
received by Buyer
31
from a third person or (vi) required to be disclosed to any lender or
governmental authority. In the event that the transactions herein contemplated
are not consummated, Buyer shall return to Seller all financial statements and
other information and materials (including all copies thereof) previously
delivered.
8.2 Conduct of Business. Seller shall conduct the business and activities
-------------------
of the System diligently and in the usual and ordinary course of business and in
substantially the same manner as carried out prior to the date of this
Agreement, and shall not make or institute any unusual or novel methods of
operation that will vary materially from those methods used by Seller as of the
date of this Agreement, including without limitation the reduction of or
institution of any unusual or novel marketing and sales programs, the
institution of any promotional activities to induce any persons to subscribe to
or receive any cable television services offered by Seller other than in the
usual and ordinary course of business or the acceleration of usual collection
efforts. Seller shall repair, maintain and replace the Tangible Personal
Property in accordance with the usual and customary standards of the cable
television industry and standards applied by Seller before the date of this
Agreement.
8.3 Preservation of Business. Seller agrees to use commercially
------------------------
reasonable efforts to preserve its business organization and that of the System
and to preserve its existing relationships with customers, suppliers and others
having business relationships with Seller by reason of the System and, to the
best of Seller's abilities and except as agreed upon with Buyer, keep available
to Buyer the services of present management personnel and employees of the
System.
8.4 Compliance with Contracts and Laws.
----------------------------------
(a) Seller shall keep in full force and effect (except to the extent
that actions are effected by third parties beyond the reasonable control of
Seller) and comply in all material respects with all existing Franchises,
Authorities, Real Property and Assumed Contracts. Seller shall fulfill all
outstanding commitments under Franchises identified in Exhibit 6.14 which are
required to be fulfilled on or prior to the Closing Date.
(b) Seller shall comply in all material respects with applicable
federal, state and local laws, rules, regulations, ordinances, codes and orders,
including without limitation the Communications Act, the Rules and Regulations
and the Copyright Act, and timely make all filings and submissions and pay all
fees, assessments and costs arising in connection with the construction,
operation and maintenance of the System, including without limitation franchise
and copyright fees.
32
8.5 Maintenance of Insurance. Seller shall continue to carry and maintain
------------------------
in full force and effect the existing casualty and liability insurance as
described in Section 6.19 and, except with the prior written approval of Buyer
or as otherwise provided in Article 14, promptly apply any insurance or
condemnation proceeds arising from the loss, destruction or taking of the Assets
to the restoration, repair or replacement of such Assets.
8.6 Financial Statements. Seller shall furnish to Buyer (i) within Ten
--------------------
(10) days after preparation thereof copies of all operating and financial
statements prepared for internal purposes in the ordinary course of business
since the date of this Agreement and (ii) such other data and information
regarding Seller (to the extent available) and the Assets and the finances and
business of the System as Buyer may, from time to time, reasonably request.
8.7 Construction and Operation of the System. Seller shall continue to
----------------------------------------
make capital expenditures in connection with the operation of the System in
accordance with its usual and customary practice and consistent with its budget,
as well as capital expenditures set forth in Exhibit 6.14 that are required to
be made prior to the Closing Date. Seller will continue to operate the System
in accordance with its usual and customary practices including extension of the
System in areas of new development.
8.8 Employees and Compensation.
--------------------------
(a) Seller shall not (i) grant any increase in compensation payable to
or to become payable by it to any employee in connection with the conduct of the
business of the System, other than usual and ordinary compensation increases in
accordance with historical practices or provided under any collective bargaining
agreement identified in Exhibit 6.22(b), or to incent employees of the System to
remain employees of the System through the Closing Date, or (ii) enter into any
collective bargaining agreement.
(b) Seller acknowledges that Buyer may, but shall have no obligation
to, hire any of the employees of the System; provided, however, that Buyer shall
give Seller notice at least 30 days prior to the Closing Date of the name of any
employees of the System to whom Buyer does not plan to offer employment on and
after the Closing Date. Seller shall remain solely responsible for, and shall
indemnify and hold harmless Buyer from and against, all costs, expenses,
liabilities and damages arising with respect to, and all salaries, severance,
vacation, sick, holiday and other benefits to which employees of Seller may be
entitled as a result of, the consummation of the transactions contemplated by
this Agreement or otherwise.
33
8.9 Additional Transactions. Seller shall not do or agree to do any of
-----------------------
the following, except with the prior consent of Buyer:
(a) Enter into any lease, contract, agreement, commitment, arrangement
or transaction, whether or not in the usual and ordinary course of business
except with respect to the capital expenditures identified in its budget and the
commitments identified in Exhibit 6.14, involving any amount exceeding Ten
Thousand Dollars ($10,000), individually, or Fifty Thousand Dollars ($50,000) in
the aggregate, other than those which may be terminated upon thirty days' notice
or less without penalty and retransmission consent agreements not more onerous
than either those (i) currently in effect for the System, or (ii) executed by
the broadcasters with other cable television operators.
(b) Sell, lease, assign or otherwise transfer or dispose of any of the
Assets (except cash), other than in the usual and ordinary course of business,
or suffer or permit the creation of any lien, encumbrance, mortgage, charge,
tax, claim, pledge, liability, easement, right-of-way or covenant, condition and
restriction with respect to any of the Assets, other than as provided in Exhibit
6.8 (and except for the lien of current taxes not yet due and payable and
matters that, in the aggregate, are not substantial in nature and do not detract
from or interfere with the present use of any of the Assets, nor impair business
operations), provided that the foregoing shall not apply to the replacement of
existing Assets pursuant to Section 8.5 or to the replacement of existing Assets
which are expended, rendered obsolete or retired if replaced with assets of
comparable or better quality;
(c) Modify, amend, cancel, terminate, forfeit, renew, assign or
encumber in any material manner any existing Franchise, Real Property, Authority
or the Contract, or agree to do the same, except as otherwise contemplated by
this Agreement or for actions which do not materially adversely affect the
Assets or the System nor impair business operations;
(d) Take, cause to be taken or, to the extent reasonably within its
control, permit or suffer to be taken any action which would cause or tend to
cause the conditions upon the obligations of either party to consummate the
transactions contemplated by this Agreement not to be fulfilled or fail to take
or cease to be taken any action necessary to the fulfillment of such conditions;
(e) Change accounting methods or practices; or
(f) Change the programming (including the Signals) provided for or the
rates charged to Subscribers, except in the
34
ordinary course of business or pursuant to a legal requirement, rule, regulation
or governmental order.
8.10 Adverse Changes. Seller shall promptly notify Buyer in writing of any
---------------
materially adverse developments affecting the business of Seller or the System
which become known to Seller, including without limitation (i) any material
adverse change in the condition, financial or otherwise, or business of Seller
or the System, (ii) any damage, destruction or loss (whether or not covered by
insurance) materially and adversely affecting any of the Assets or the System,
(iii) any notice of violation, forfeiture or complaint under any of the
Franchises or (iv) anything which, if not corrected prior to the Closing Date,
will prevent Seller from fulfilling any condition precedent described in Article
10.
8.11 Cooperation. Seller shall promptly use commercially reasonable
-----------
efforts to obtain all approvals and consents required in order to consummate the
transactions contemplated by this Agreement and shall fully cooperate with Buyer
for this purpose, including in connection with such approvals or consents as are
required from the City of Roseville and the County of Placer for the assignment
of the Franchises (including the cure by Seller of any defaults thereunder).
Buyer shall reasonably cooperate with Seller to secure such approvals and
consents, including providing such information with respect to Buyer as may
reasonably be required and posting any bond or other security that may be
reasonably required. Seller and Buyer shall be responsible for their respective
out-of-pocket expenses in connection with the foregoing.
8.12 Minimum Inventory. Seller shall maintain an inventory of supplies,
-----------------
parts and materials for the construction, operation and maintenance of the
System consistent with past practice in the ordinary course of business,
including sufficient supplies, parts and materials on the Closing Date for
operation and maintenance of the System by Buyer thereafter as if Seller had
remained the operator of the System on and after the Closing Date.
8.13 Transitional Billing. Seller shall provide to Buyer, upon request and
--------------------
for a period of up to 90 days following the Closing Date, reasonable assistance
and cooperation with respect to billing customers for services provided by the
System ("Transitional Billing Services"). Buyer shall notify Seller at least 10
days prior to the Closing Date as to whether it desires Transitional Billing
Services. Transitional Billing Services, if any, that are requested by Buyer
shall be provided on terms and conditions reasonably satisfactory to Seller;
provided, however, that the amount to be paid by Buyer for such Transitional
Billing Services shall not exceed the reasonable direct cost to Seller of
providing such Transitional Billing Services.
35
8.14 Supplements to Exhibits. Seller shall, from time to time prior to
-----------------------
the closing of the transactions contemplated by this Agreement, supplement the
Exhibits to this Agreement with additional information that, if existing or
known to it on the date of this Agreement, would have been required to be
included in one or more of the Exhibits to this Agreement. For purposes of
determining the satisfaction of any of the conditions to the obligations of
Buyer in Article 10 and the liability of Seller following the Closing Date for
breaches of its representations and warranties under this Agreement, the
Exhibits to this Agreement shall be deemed to include only the information
contained therein on the date of this Agreement and any information added to the
Exhibits by written supplements that are delivered to, and accepted by, Buyer in
writing prior to the Closing Date.
ARTICLE 9
GOVERNMENTAL CONSENTS AND ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ ACT
9.1 Franchise Consents. The obligations of Buyer and Seller to consummate
------------------
the transactions contemplated by this Agreement are conditional upon the
approval by the City of Roseville and the County of Placer to the transfer to
Buyer of the respective Franchise granted by such governmental entity to Buyer.
As soon as possible, but in no event later than Thirty (30) days from the date
hereof, the parties shall prepare and file all necessary applications with each
of the governmental entities that is a party to a Franchise and whose consent is
required to consummate the transactions herein contemplated. Each of the parties
shall bear its own legal fees and other costs incurred in the filing and
prosecution of applications to such governmental entity.
9.2 ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Act. Within Thirty (30) days after the date of this
---------------------
Agreement, each of the parties shall make such filings and comply with any
applicable requirements of the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act of
▇▇▇▇ (▇▇▇ "▇▇▇ ▇▇▇") and the rules and regulations thereunder and thereafter
furnish such information as may be requested by the Federal Trade Commission and
the Antitrust Division of the Department of Justice. The obligations of Seller
and Buyer to consummate the transactions contemplated by this Agreement are
conditional upon the waiting period specified in the HSR Act having expired
without action taken to prevent such consummation.
9.3 FCC Waiver. Within thirty (30) days after the date of this Agreement,
----------
the parties shall make application to the FCC requesting a waiver of the
relevant provisions of the Communication Act, and the Rules and Regulations, to
the extent necessary to permit Buyer or an Affiliate to consummate the
transaction herein contemplated.
36
ARTICLE 10
CONDITIONS PRECEDENT TO BUYER'S PERFORMANCE
10.1 Conditions Precedent; Waiver. The obligations of Buyer to consummate
----------------------------
the transactions contemplated under this Agreement are subject to the
satisfaction, on or before the Closing Date, of all the conditions set forth in
this Article 10. Buyer may waive any or all of such conditions in whole or in
part, provided that no such waiver of a condition shall constitute a waiver by
Buyer of any of its other rights or remedies under this Agreement or otherwise
at law or in equity if Seller should be in default of any of its covenants,
agreements, representations or warranties under this Agreement.
10.2 Compliance with Agreement, Representations and Warranties. Seller
---------------------------------------------------------
shall have performed and complied in all respects with all covenants, conditions
and obligations required by this Agreement to be performed or complied with by
it on or before the Closing Date. All representations and warranties of Seller,
including without limitation those made to the knowledge of Seller, contained in
this Agreement, the Exhibits or in any document, instrument or certificate that
shall be delivered by Seller to Buyer under this Agreement shall be true,
correct and complete in all material respects at and as of the Closing Date as
though made on such date.
10.3 Assignment of Franchises. The Franchises shall be assigned to Buyer
------------------------
and, except to the extent waived by Buyer, shall contain terms no more
burdensome or less favorable than those currently afforded Seller under the
Franchises as in force and effect on the date hereof.
10.4 No Material Adverse Change. During the period from the date of this
--------------------------
Agreement through and including the Closing Date, there shall not have occurred
any material adverse change in the System or its financial condition, taken as a
whole, other than change arising out of matters of a general economic nature or
matters (including, without limitation, competition caused by or arising from
multichannel multipoint distribution service and/or direct broadcast satellite,
and legislation, rulemaking or regulation) affecting the cable industry
(national or regional) generally, and Seller shall not have sustained any loss
or damage to the Assets or System, whether or not insured, that materially
affects its ability to conduct the business of the System.
10.5 Approvals and Consents.
----------------------
(a) The consents and approvals set forth in Exhibit 10.5 shall have
been received in form and substance reasonably satisfactory to Buyer and its
counsel. Such approvals or consents shall be on terms no less favorable or more
burdensome than those currently afforded to Seller.
37
(b) No action or proceeding shall be completed or pending against
Seller or Buyer that has or is likely to result in a judgment, decree or order
that would prevent or make unlawful the consummation of the transactions under
this Agreement and there shall be in effect no order restraining or prohibiting
the consummation of the transactions contemplated by this Agreement nor any
proceedings pending with respect thereto.
(c) The Boards of Directors of Buyer and Roseville Communications
Company shall not later than November 29, 1996 ratify, confirm and approve the
execution and delivery of this Agreement; provided, however, the failure to
ratify, confirm and approve this Agreement shall not be deemed a breach hereof,
and in such event Buyer and Seller shall have no further obligation to the
other.
ARTICLE 11
CONDITIONS PRECEDENT TO SELLER'S PERFORMANCE
11.1 Conditions Precedent; Waiver. The obligations of Seller to consummate
----------------------------
the transactions contemplated under this Agreement are subject to the
satisfaction, on or before the Closing Date, of all the conditions set forth in
this Article 11. Seller may waive any or all of such conditions in whole or in
part, provided that no such waiver of a condition shall constitute a waiver by
Seller of any of their other rights or remedies under this Agreement or
otherwise at law or in equity if Buyer should be in default of any of the
covenants, agreements, representations or warranties made by Buyer under this
Agreement.
11.2 Compliance with Agreement, Representations and Warranties. Buyer
---------------------------------------------------------
shall have performed and complied in all respects with all covenants, conditions
and obligations required by this Agreement to be performed or complied with by
Buyer on or before the Closing Date. All representations and warranties made by
Buyer, including without limitation those made to the knowledge of Buyer,
contained in this Agreement, the Exhibits or in any document, instrument or
certificate that shall be delivered by Buyer to Seller under this Agreement
shall be true, correct and complete in all material respects at and as of the
Closing Date as though made on such date.
11.3 Approvals and Consents.
----------------------
(a) The consents and approvals set forth in Exhibit 11.3 shall have
been received in form and substance reasonably satisfactory to Seller and its
counsel.
(b) No action or proceeding shall be completed or pending against
Seller or Buyer that has or is likely to result in a judgment, decree or order
that would prevent or make unlawful the consummation of the transactions under
this
38
Agreement and there shall be in effect no order restraining or prohibiting the
consummation of the transactions contemplated by this Agreement or any
proceedings pending with respect thereto.
11.4 Purchase Price Adjustment. Seller shall have the right, but shall not
-------------------------
have any obligation, to consummate the transactions contemplated by this
Agreement if the adjustment effected in accordance with Section 3.3 would result
in a Purchase Price of less than Twenty-Nine Million Four Hundred Fifty Thousand
Dollars ($29,450,000).
ARTICLE 12
THE CLOSING
12.1 Time and Place.
--------------
(a) The closing of the transactions contemplated by this Agreement
shall take place on the first occurrence of the last business day of a calendar
month prior to which all required consents have been obtained and conditions
precedent satisfied, or on such other date as Buyer and Seller shall mutually
agree, at the offices of ▇▇▇▇▇▇, White & ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, or such other location as the parties hereto may mutually
agree. At the closing, the opinions, certificates, documents and other
consideration required by this Agreement shall be executed and exchanged or
placed in escrow with the Escrow Bank for subsequent release.
(b) Nothing contained in this Section 12.1 shall relieve Seller or
Buyer of their obligations under this Agreement to use their best efforts to
obtain all consents and approvals required to consummate the transactions
contemplated by this Agreement and to satisfy all other conditions precedent to
this Agreement.
12.2 Seller's Obligations at Closing. On the Closing Date, Seller shall
-------------------------------
deliver or cause to be delivered to Buyer the following:
(a) an executed deed or deeds in a form customary in real estate
transactions in California (which in any event shall be quitclaim deeds with
respect to easements, rights-of-way and licenses), and assignment or assignments
of leases from Seller to Buyer conveying all of Seller's right, title and
interest in and to the Real Property;
(b) an executed ▇▇▇▇ of sale and other instruments of transfer and
conveyance in form and substance satisfactory to Buyer and its counsel for the
full and complete transfer, conveyance, assignment and delivery to Buyer on the
Closing Date of all of Seller's right, title and interest in and to all the
Assets, accompanied by the relevant third-party consents set
39
forth in Exhibit 10.5 and by written evidence of the release of all liens and
encumbrances;
(c) an executed assignment or transfer of the Assumed Contracts and
Authorities accompanied by the relevant third-party consents set forth in
Exhibit 10.5 with respect thereto;
(d) a certificate executed by an officer of Seller's Managing General
Partner, dated as of the Closing Date, certifying that each of the
representations and warranties made pursuant to this Agreement by Seller is
true, correct and complete in all material respects at and as of the Closing
Date as though made at and as of that date;
(e) an opinion of ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, counsel to Seller, dated as of the
Closing Date and addressed to Buyer, substantially in the form of Exhibit
12.2(e);
(f) an opinion of ▇▇▇▇, Raywid & ▇▇▇▇▇▇▇▇▇, FCC counsel to Seller,
dated as of the Closing Date and addressed to Buyer, substantially in the form
of Exhibit 12.2(f);
(g) all Assumed Contracts, Authorities, books and records, filings and
submissions by Seller under the Communications Act and the Copyright Act
relative to the System, all files, charts of accounts, logs, blueprints,
schematics, drawings, diagrams, engineering and technical data, maps, plans and
specifications and other documents of like character pertaining to the Assets or
the System, and all other documents or instruments or things pertaining to any
of the Assets or the System;
(h) the amount of any insurance proceeds or condemnation award, if
any, required under Section 14.2;
(i) such other documents, instruments and certificates as Buyer or its
counsel may reasonably request to effect the transfers contemplated by this
Agreement;
(j) the amount of the payment, if any, required to be made by Seller
under the Preliminary Settlement Statement; and
(k) the amount of any other cash adjustments required to be paid to
Buyer in accordance with the terms and conditions of this Agreement.
12.3 Buyer's Obligations at Closing. On the Closing Date, Buyer shall
------------------------------
deliver or cause to be delivered to Seller the following:
(a) a certificate executed by an officer of Buyer, dated as of the
Closing Date, certifying that each of the
40
representations and warranties made by Buyer is true, correct and complete in
all material respects;
(b) an opinion of ▇▇▇▇▇▇, White & ▇▇▇▇▇▇, counsel to Buyer, dated as
of the Closing Date and addressed to Seller, substantially in the form of
Exhibit 12.3(b);
(c) executed assumption documents in form and substance reasonable
satisfactory to Seller pursuant to which Buyer shall assume the Assumed
Contracts and other liabilities of Seller, as specified in Section 2.3;
(d) such other documents, instruments and certificates as Seller or
its counsel may reasonably request to consummate the transactions contemplated
by this Agreement;
(e) the amount of the payment, if any, required to be made by Buyer
under the Preliminary Settlement Statement, if any; and
(f) the amount of cash equal to the Purchase Price less the amount of
the Holdback Account.
ARTICLE 13
POST-CLOSING OBLIGATIONS
13.1 Mutual Indemnity.
----------------
(a) Seller and Buyer, each for themselves and their successors and
assigns (referred to in this Section 13.1 individually as an "Indemnitor" and
collectively as "Indemnitors"), covenants and agrees to defend, indemnify and
hold harmless the other, its Affiliates, and their respective officers,
directors and employees, and the successors and assigns of each (referred to in
this Section 13.1 individually as an "Indemnitee" and collectively as
"Indemnitees") from and against any and all liabilities and obligations asserted
or other claims, actions, judgments, assessments, taxes (including without
limitation federal, state and local income taxes and property taxes), charges,
fines, penalties, debts, damages, costs or expenses of any kind (including
without limitation legal fees and costs) suffered, incurred or accrued by any of
the Indemnitees (individually, an "Obligation") by reason of or arising from the
following:
(1) the breach of any representation or warranty (and assuming for
the purposes of the Obligations hereunder that the representations and
warranties in Sections 6.9(a)(5), 6.13(a)(1) and 6.18 were made without any
materiality limitations) as of the date made by the Indemnitors under this
Agreement, any Exhibit or any document, instrument or certificate
41
delivered by the Indemnitors pursuant to this Agreement including the falsity,
inaccuracy or incompleteness thereof;
(2) breach or default by the Indemnitors in the observance or
performance of any of the Indemnitors' other obligations under this Agreement;
(3) only as to Seller as Indemnitor and Buyer as Indemnitee, the
ownership or operation of the Assets or the System on or prior to the Closing
Date, including without limitation the occurrence of any event after the Closing
Date attributable to the acts or omissions of Seller or their predecessors in
interest on or prior to the Closing Date and including any liability for
federal, state or local income and property (real and personal) taxes, including
penalties and interest, with respect to the period through the Closing Date
(including taxes resulting from the sale of the Assets from Seller to Buyer) and
the matters described in Exhibits 6.16 and 6.18; or
(4) only as to Buyer as Indemnitor and Seller as Indemnitee, the
ownership or operation of the Assets or the System after the Closing Date.
(b) Upon the occurrence of any event which may give rise to an
Obligation for which the Indemnitors are or may be liable under this Section
13.1 (any such event, a "claim"), the Indemnitees shall promptly notify the
Indemnitors in writing specifying the nature of the claim and give the
Indemnitors a reasonable opportunity to attempt to defend or settle such claim,
including to employ counsel reasonably satisfactory to the Indemnitees and its
counsel to defend or settle any such claim, provided that the Indemnitors shall
not settle any claim, except with respect to monetary damage awards (for which
the Indemnitee has received, as an unconditional term of such settlement, an
unconditional release by claimant or plaintiff from all liability in connection
with the claim), without the Indemnitees' prior written consent, which consent
shall not be unreasonably withheld. Any Indemnitee may, at its election and
expense, participate in any attempt by the Indemnitors to settle or defend any
such claim. An Indemnitor may elect to defend or settle a claim while reserving
its right to contribution from the Indemnitee (by giving notice to the
Indemnitee of its reservation of rights) provided, however, that the Indemnitor
shall have no right, without the Indemnitee's consent, to settle any such claims
and provided further that with respect to income tax matters, the Indemnitee
shall have the right to defend or settle claims after providing the Indemnitor
with an opportunity to submit positions which the Indemnitee will advance if
such positions do not otherwise have an adverse effect on the Indemnitee. With
respect to any claim which is ultimately determined to be an obligation for
which the Indemnitors are
42
obligated to indemnify the Indemnitees, in the event that the Indemnitors fail
to defend the Indemnitees or to employ counsel for the Indemnitees for such
purpose, then the Indemnitee may defend against such claim in such manner as it
may deem appropriate and the Indemnitee may settle such claim on such terms as
it may deem appropriate. The Indemnitor shall promptly reimburse the Indemnitee
for the amount of all settlement payments and expenses, legal and otherwise,
incurred by the Indemnitee in connection with the defense or settlement of such
claim. If no settlement of such claim is made, then the Indemnitor shall
satisfy any judgment rendered with respect to such claim before the Indemnitee
is required to do so, and pay all expenses, legal or otherwise, incurred by the
Indemnitee in the defense against such claim. Except as set forth above, the
Indemnitee shall not have the right to settle any claim without the approval of
the Indemnitor, provided that if the Indemnitor disapproves such settlement,
then it must assume the defense of such claim and reimburse the Indemnitee for
all expenses of the Indemnitee to the date of assumption. The failure of the
Indemnitor to assume such defense and to pay such reimbursement shall give the
Indemnitee the right to settle such claim.
(c) Every expense of any attempt to settle or defend a claim,
including without limitation expenses for proceedings, negotiations,
investigations, settlements or suits, shall be borne solely by the Indemnitors.
Notwithstanding any such attempt or the outcome thereof, the obligations of the
Indemnitors to the Indemnitees under this Section 13.1 shall not be relieved,
reduced or otherwise affected.
(d) No claim under this Section 13.1 may be commenced against an
Indemnitor after the date eighteen (18) months following the Closing Date,
except with respect to matters relating to Section 15.17 which may be commenced
until the fourth anniversary of the Closing Date and matters concerning taxes,
employee benefits, copyright fees and franchise fees which may be commenced
until the expiration of the applicable statute of limitations (as such statute
of limitations may be extended by Buyer at the request of a governmental
authority).
(e) No claim may be brought under this Section 13.1 unless and until
the aggregate amount of all claims of Indemnitee is at least $10,000 whereupon
all claims (including the first $10,000 of such claims) of such Indemnitee may
be commenced.
ARTICLE 14
TERMINATION
14.1 Non-Performance. Seller or Buyer shall have the right to terminate
---------------
this Agreement on or prior to the Closing Date in the event that the other shall
default in the observance or performance of any of its material obligations to
be observed or
43
performed hereunder, or should any warranty or representation made by the other
party in this Agreement, any Exhibit or any document, instrument or certificate
delivered by such other party pursuant to this Agreement prove to be false,
incorrect or incomplete in any material sense as and when made, provided that
the defaulting party has not remedied the alleged default by the earlier to
occur of (i) the Closing Date or (ii) within Thirty (30) days after being given
written notice thereof by the other.
14.2 Risk of Loss. Any loss or damage on or prior to the Closing Date due
------------
to fire, explosion, earthquake, windstorm, accident, flood, act of God, war,
seizure or any other casualty, whether similar or dissimilar, occurring to any
of the Assets or the System shall, whether or not covered by insurance, be the
responsibility of Seller. If such loss or damage is sufficiently substantial to
preclude the resumption of normal operations or a substantially complete
restoration of any substantial part of the System within the earlier to occur of
(i) the Closing Date or (ii) Thirty (30) days following the occurrence of the
event or casualty, or if such loss or damage materially and adversely affects
the value of the Assets or the System, Seller shall immediately notify Buyer in
writing, and Buyer, at any time within Fifteen (15) days after receipt of such
notice or such shorter period prior to the Closing Date, may elect to either (x)
accept the proceeds of any insurance coverage and consummate the transactions
contemplated by this Agreement, provided that any sums owing to Seller shall be
reduced by the amount of such loss or damage not compensated to Buyer by
insurance proceeds on or before the Closing Date, or (y) terminate this
Agreement upon delivery of written notice to Seller, and in the latter event all
parties shall stand fully released and discharged of any and all obligations
under this Agreement.
14.3 Other Conditions Permitting Termination.
---------------------------------------
(a) Any party may terminate this Agreement (provided such party is not
then in material breach of this Agreement) by giving written notice to the other
party in the event of any of the following circumstances:
(1) the consummation of the transactions contemplated by this
Agreement, including without limitation as set forth in Article 12 hereof, does
not occur on or before June 30, 1997; or
(2) any of the conditions precedent to the parties' obligation as
set forth in Article 10 or Article 11 has not been met due to circumstances or
events beyond the control of the appropriate party by the date required by this
Agreement.
(b) In the event of a termination of this Agreement under the
provisions of this Section 14.3, a party not then in
44
material breach of this Agreement shall stand fully released and discharged of
any and all obligations under this Agreement, and any amounts theretofore paid
by either party to the other in connection this Agreement shall be returned to
the original transferring party within Five (5) business days thereafter.
ARTICLE 15
MISCELLANEOUS
15.1 Further Assurances. From time to time following the Closing Date,
------------------
each party and its Affiliates shall, if requested by another party, make,
execute and deliver to the requesting party any such additional instruments,
documents and agreements as may be necessary or appropriate to consummate the
transactions herein contemplated.
15.2 Survival. All covenants, agreements, representations and warranties
--------
made by Seller and Buyer under this Agreement, any Exhibit or in any document,
instrument or certificate contemplated hereby shall be deemed and construed to
be continuing covenants, agreements, representations and warranties which shall,
subject to indemnity limitations set forth in Section 13.1(d), survive the
Closing Date until the date eighteen (18) months following the Closing Date
except with respect to matters concerning taxes, employee benefits, copyright
fees or franchise fees in respect of which such covenants, agreements,
representations and warranties shall survive until the expiration of the
applicable statute of limitations (as such statute of limitations may be
extended by Buyer at the request of a governmental entity).
15.3 Notice. Except as otherwise provided in this Agreement, any notice,
------
approval, consent, waiver or other communication required or permitted to be
given or to be served upon any person in connection with this Agreement shall be
in writing given or served by a party or its counsel. Such notice shall be
personally served, sent by telegram, telecopy, overnight messenger, tested telex
or cable, or sent prepaid by registered or certified mail with return receipt
requested and shall be deemed given, (i) if personally served or sent by
telegram, when delivered to the person to whom such notice is addressed, (ii) if
given by telecopy, telex or cable, when sent, or (iii) if given by mail, Five
(5) business days following deposit in the United States mail. Any notice given
by telegram, telecopy, telex or cable shall be confirmed in writing within
Forty-Eight (48) hours after sent. Such notices shall be addressed to the party
to whom such notice is to be given at the party's address set forth below or as
such party shall otherwise direct.
45
To Seller:
IDS/▇▇▇▇▇ Growth Partners 87-A, Ltd.
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
With a copy to:
▇▇▇▇▇ Intercable, Inc.
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇.
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: General Counsel
To Buyer:
Roseville Cable Company
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇
With a copy to:
▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
▇▇▇▇▇▇, White & ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
15.4 Waiver. No waiver by a party of any default or breach by another
------
party of any covenant, condition, representation or warranty contained in this
Agreement, any Exhibit or any document, instrument or certificate contemplated
hereby shall be deemed to be a waiver of any subsequent default or breach by
such party of the same or any other covenant, condition, representation or
warranty. No act, delay, omission or course of dealing on the part of a party in
exercising any right, power or remedy under this Agreement or at law or in
equity shall operate as a waiver thereof or otherwise prejudice any of such
party's rights, powers and remedies. All remedies, whether at law or in equity,
shall be cumulative and the election of any one or more shall not constitute a
waiver of the right to pursue other available remedies.
46
15.5 Successors and Assigns. Seller or Buyer may assign its rights under
----------------------
this Agreement to any Affiliate thereof, but may not delegate and shall not, by
any such assignment of rights hereunder, be relieved of any of its obligations
under this Agreement. The obligations of any party hereunder shall be assignable
only with the written consent of the other party, which will not be unreasonably
withheld. Subject to the foregoing, this Agreement shall inure to the benefit
of, and be binding upon, the parties hereto and their respective successors and
assigns.
15.6 Applicable Law. This Agreement shall be governed in all respects by
--------------
the laws of the State of California applicable to agreements negotiated,
executed and performed there.
15.7 Attorneys' Fees. If any proceeding is brought between any of the
---------------
parties arising out of or relating to this Agreement or its breach, the
successful or prevailing party in any judgment or award shall be entitled to the
full amount of its reasonable expenses, including all court costs and attorneys'
fees paid or incurred in good faith, in addition to such other relief as such
party shall be entitled.
15.8 Severability. If any provision of this Agreement or the application
------------
thereof to any party or circumstance is, to any extent, invalid or
unenforceable, the remaining provisions of this Agreement, or the application of
such provision to the parties or circumstances other than those to which it is
held invalid or unenforceable, shall not be affected thereby.
15.9 Sections and Captions. The captions or headings of articles,
---------------------
sections, paragraphs and exhibits of this Agreement are provided for convenience
only, and shall not be of any force or effect in construing any provision of
this Agreement.
15.10 Amendment. Neither this Agreement nor any provision hereof may be
---------
waived, modified, amended, discharged, or terminated except by an instrument in
writing signed by the party against which the enforcement of such writing is
sought, and then only to the extent set forth in such writing.
15.11 Entire Agreement. This Agreement, including the Exhibits hereto
----------------
which are incorporated in this Agreement by reference, constitute the entire
understanding between the parties with respect to the matters set forth herein
and or therein and supersede all prior or contemporaneous understandings or
agreements between the parties with respect to the subject matter hereof,
whether oral or written.
15.12 Expenses. Except as otherwise provided in this Agreement, each party
--------
shall bear its own costs and expenses in
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connection with the negotiation and performance of the terms, conditions and
provisions of this Agreement.
15.13 Inspections by Buyer. No inspections, investigations, information or
--------------------
data received by or available to Buyer, its employees, agents, Affiliates or
representatives with respect to Seller, the Assets or the System shall be deemed
to be a waiver by Buyer of the obligation of Seller that its representations and
warranties contained in this Agreement, in any Exhibit or in any document,
instrument or certificate made or delivered or caused to be made or delivered
under this Agreement by or on behalf of Seller be true and correct in all
respects on and as of the date hereof and on and as of the Closing Date or shall
be deemed to be a waiver of any other obligation, agreement or covenant of
Seller under this Agreement.
15.14 Statements Deemed Representations. All statements contained in this
---------------------------------
Agreement, any Exhibit or any document, instrument or certificate delivered by
or on behalf of one party to the other party pursuant to this Agreement, shall
be deemed representations and warranties of the party making such statement.
15.15 Business and Calendar Days. Whenever reference is made in this
--------------------------
Agreement to a number of days without qualification as to business or calendar
days, it shall mean calendar days.
15.16 Liberal Construction. This Agreement constitutes a fully negotiated
--------------------
agreement between commercially sophisticated parties, each assisted by tax and
legal counsel, and shall not be construed and interpreted for or against any
party hereto. The parties hereby agree that California Civil Code Section 1654
shall not apply to the terms of this Agreement.
15.17 Noncompetition Covenant. Ancillary to this Agreement, Seller agrees
-----------------------
that, for a period of four (4) years from and after the Closing Date, neither it
nor any Affiliate will on its own or with any other person, directly or
indirectly, engage in the business of providing (i) cable television services,
or (ii) other multichannel video distribution services, in each instance to
subscribers in Placer County; provided that nothing herein shall prohibit Seller
or any Affiliate from (A) owning securities of any company of which Seller and
its Affiliates, in the aggregate, do not own more than Five Percent (5%) of the
issued and outstanding securities, (B) providing programming and programming-
related services to video distributors, or (C) engaging or participating in any
telephony, satellite or wireless business that has multi-state distribution
capabilities.
15.18 Publicity. No public announcement or disclosure, whether oral or
---------
written, concerning the execution and delivery of
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this Agreement or with respect to the transactions contemplated by this
Agreement shall be made by either party without the prior written consent of the
other, except as may be required by any governmental authority having
jurisdiction over Seller or Buyer, provided that the amount of cash transferred
to Seller shall not be disclosed if not required by such governmental authority.
Each party shall furnish to the other for review and approval copies of any
announcement or release which it proposes to make public in advance of the
delivery thereof to any third party.
15.19 Commercially Reasonable Efforts. As used in this Agreement, the
-------------------------------
phrase "commercially reasonable efforts" shall not be deemed to require a party
to undertake extraordinary measures, including the initiation or prosecution of
legal proceedings or the payment of amounts in excess of normal and usual filing
and processing fees, if any.
IN WITNESS WHEREOF, the parties have caused their duly authorized
representatives to execute this Agreement at Roseville, California as of the
date first written.
ROSEVILLE CABLE COMPANY,
a California corporation
By: [SIGNATURE APPEARS HERE]
--------------------------------------
IDS/▇▇▇▇▇ GROWTH PARTNERS 87-A, LTD.,
a Colorado limited partnership
By: ▇▇▇▇▇ CABLE CORPORATION, a Colorado
corporation, its Managing General Partner
By: /s/ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
---------------------------------
In consideration of the execution and delivery by Buyer of the
foregoing Agreement, ▇▇▇▇▇ Intercable, Inc., a Colorado
49