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EXHIBIT 2.1
ASSET PURCHASE AGREEMENT
BETWEEN
CABLE ALABAMA CORPORATION
an Alabama corporation
AND
KNOLOGY OF HUNTSVILLE, INC.
a Delaware corporation
DATED AS OF
October 19, 1998
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TABLE OF CONTENTS
Page
----
1. CERTAIN DEFINITIONS............................................................................................1
2. PURCHASE AND SALE OF THE ASSETS...............................................................................10
2.1. Agreement to Purchase and Sell...........................................................................10
2.2. Excluded Assets..........................................................................................11
2.3. Purchase Price...........................................................................................12
2.4. Subscriber Adjustment....................................................................................12
2.5. Current Items Amount.....................................................................................12
2.6. Calculations of Adjustments..............................................................................13
2.7. Certain Additional Financial Arrangements................................................................14
2.8. Assumption of Liabilities................................................................................15
2.9. Allocation...............................................................................................16
2.10. Transfer Taxes and Fees.................................................................................16
2.11. Allocation of Franchise Settlement Payment..............................................................16
2.12. Audited Financial Statement Expenses....................................................................16
2.13. Franchise Settlement Payments...........................................................................16
3. SELLER'S REPRESENTATIONS......................................................................................17
3.1. Organization and Qualification...........................................................................17
3.2. Authorization............................................................................................17
3.3. System Information.......................................................................................17
3.4. Title and Condition of Personal Property.................................................................18
3.5. Franchises, Licenses, and Contracts......................................................................18
3.6. No Conflicts; Consents...................................................................................19
3.7. Litigation and Judgments.................................................................................20
3.8. Employment Matters.......................................................................................20
3.9. Taxes....................................................................................................22
3.10. Financial Statements....................................................................................22
3.11. No Adverse Change.......................................................................................22
3.12. Compliance with Legal Requirements......................................................................23
3.13. Environmental Laws and Regulations......................................................................25
3.14. Real Property...........................................................................................27
3.15. Commitments.............................................................................................29
3.16. Non-Infringement........................................................................................29
3.17. Books and Records.......................................................................................29
3.18. Accounts Receivable.....................................................................................29
3.19. Bonds...................................................................................................29
3.20. Sufficiency of Assets...................................................................................30
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3.21. Disclosure..............................................................................................30
3.22. Affiliates..............................................................................................30
4. BUYER'S REPRESENTATIONS.......................................................................................30
4.1. Organization.............................................................................................30
4.2. Authorization............................................................................................30
4.3. No Conflicts; Consents...................................................................................31
4.4. Litigation...............................................................................................31
4.5. Disclosure...............................................................................................31
5. COVENANTS.....................................................................................................31
5.1. Certain Affirmative Covenants of Seller..................................................................31
5.2. Certain Negative Covenants of Seller.....................................................................34
5.3. Certain Affirmative Covenants of Buyer...................................................................34
5.4. HSR Act Compliance.......................................................................................35
5.5. Employees of Seller......................................................................................35
5.6. Employee Retention Program...............................................................................36
5.7. Forms 394................................................................................................36
5.8. Programming..............................................................................................36
5.9. Satisfaction of Closing Conditions.......................................................................36
5.10. Notice of Developments..................................................................................36
5.11. Transitional Services...................................................................................36
5.12. Environmental Audits....................................................................................36
5.13. Termination of Leases...................................................................................37
6. CONDITIONS PRECEDENT..........................................................................................37
6.1. Conditions Precedent to Buyer's Obligations..............................................................37
6.2. Conditions Precedent to Seller's Obligations.............................................................39
7. CLOSING.......................................................................................................41
7.1. Time and Place...........................................................................................41
7.2. Seller's Deliveries......................................................................................41
7.3. Buyer's Obligations......................................................................................42
8. TERMINATION...................................................................................................42
8.1. Termination Events.......................................................................................42
8.2. Effect of Termination....................................................................................43
9. SURVIVAL OF REPRESENTATIONS AND INDEMNITY.....................................................................44
9.1. Survival of Representations and Warranties...............................................................44
9.2. Seller's Indemnity.......................................................................................44
9.3. Buyer's Indemnity........................................................................................45
9.4. Procedure for Indemnified Third Party Claim..............................................................46
10. RISK OF LOSS.................................................................................................47
11. CONFIDENTIALITY AND PRESS RELEASES...........................................................................47
11.1. Confidentiality.........................................................................................47
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11.2. Press Releases..........................................................................................48
12. BROKERAGE FEES...............................................................................................49
13. MISCELLANEOUS................................................................................................49
13.1. Further Assurances......................................................................................49
13.2. Notices.................................................................................................49
13.3. Assignment; Binding Effect..............................................................................50
13.4. Expenses................................................................................................50
13.5. Collection of Accounts..................................................................................51
13.6. Entire Agreement; Amendments; and Waivers...............................................................51
13.7. Counterparts............................................................................................51
13.8. Severability............................................................................................51
13.9. Schedules and Exhibits, Headings........................................................................51
13.10. Governing Law..........................................................................................51
13.11. Third Parties; Joint Ventures..........................................................................52
13.12. Construction...........................................................................................52
13.13. Commercially Reasonable Efforts........................................................................52
EXHIBIT A.......................................................................................................A-1
EXHIBIT B.......................................................................................................B-1
EXHIBIT C.......................................................................................................C-1
EXHIBIT D.......................................................................................................D-1
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EXHIBITS TO THE AGREEMENT
-------------------------
Exhibit A Form of Xxxxx Noncompetition Agreement
Exhibit B Form of Seller Noncompetition Agreement
Exhibit C Form of Indemnity Escrow Agreement
Exhibit D Form of Xxxx of Sale, Assignment and Assumption Agreement
SCHEDULES TO THE AGREEMENT
--------------------------
Schedule 2.2 Excluded Rights, Assets and Properties
Schedule 2.8 Additional Assumed Liabilities
Schedule 2.9 Allocation
Schedule 3.3 System Information
Schedule 3.4 Personal Property
Schedule 3.5 Franchises, Licenses and Contracts
Schedule 3.6 Conflicts; Consents
Schedule 3.7 Litigation and Other Proceedings
Schedule 3.8 ERISA
Schedule 3.9 Taxes
Schedule 3.11 No Adverse Change
Schedule 3.12 Compliance with Cable Act; Current Proceedings
Schedule 3.14 Real Property
Schedule 3.15 Persons Entitled to Free Service
Schedule 3.19 Bonds
Schedule 3.22 Affiliated Transactions
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ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT ("Agreement") is made as of the 19th day
of October, 1998, by and between KNOLOGY OF HUNTSVILLE, INC., a Delaware
corporation ("Buyer") and CABLE ALABAMA CORPORATION, an Alabama corporation
("Seller").
RECITALS
A. Seller owns and operates a cable television system operating in
and around Madison County, Alabama and Limestone County, Alabama (the
"System").
B. Seller desires to sell, and Buyer desires to purchase,
substantially all of Seller's assets comprising the System on the terms and
conditions set forth in this Agreement.
C. CableAmerica Corporation, Seller's parent ("Seller's Parent"), has
entered into the Seller's Guaranty dated the date hereof ("Seller's Guaranty").
D. Knology Holdings, Inc., Buyer's parent ("Buyer's Parent"), has
entered into the Buyer's Guaranty dated the date hereof ("Buyer's Guaranty").
AGREEMENTS
In consideration of the mutual promises and covenants hereinafter set
forth, Buyer and Seller hereby agree as follows:
1. CERTAIN DEFINITIONS.
As used in this Agreement, the following terms, whether in singular or
plural form, shall have the following meanings:
1.1. "ACCOUNTS RECEIVABLE" means the rights of Seller as of a
specified date to payment for services rendered by Seller prior to such date in
connection with the operation of the System as reflected on the billing records
of Seller, provided, however, the term "Accounts Receivable" shall not include
any Advertising Accounts Receivable.
1.2 "ACCOUNTS RECEIVABLE AMOUNT" means an amount equal to the sum of
(i) 100% of the face amount of all Accounts Receivable that were not more than
30 days past due as of the Balance Sheet Date, plus (ii) 90% of the face amount
of all Accounts Receivable that were from 31 to 90 days past due as of the
Balance Sheet Date.
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1.3. "ADVERTISING ACCOUNTS RECEIVABLE" means the rights of Seller as
of the Closing to payment for sales of advertising availabilities on the System
prior to the Closing Date as reflected on the billing records of Seller.
1.4. "AFFILIATE" shall mean a Person that directly or indirectly,
through one or more intermediaries, controls, is controlled by, or is under
common control with, the first mentioned Person.
1.5. "ASSUMED CONTRACTS" means (i) all Contracts listed in SCHEDULE
3.5; (ii) any Contracts entered into by Seller in the ordinary course of
business and which are permitted by this Agreement between the date hereof and
the Closing Date; and (iii) all subscription agreements with subscribers for
the cable services provided by the System.
1.6. "BENEFIT PLAN" means all of Seller's or any of its Affiliate's
compensation or benefit plans, policies, practices, arrangements and agreements
covering any employee or former employee of Seller or its Affiliates or the
beneficiaries or dependents of such employee or former employee which are or
have been established or maintained and are currently in effect, or to which
contributions are being made by Seller or by any other Person which is or has
been treated as a single employer together with Seller under Section 414 of the
Code (such Persons, "Related Persons") or to which Seller or any Related Person
is obligated to contribute, including, but not limited to, "employee benefit
plans" within the meaning of Section 3(3) of ERISA, employment, retention,
change of control, severance, stock option or other equity based, bonus,
incentive compensation, deferred compensation, retirement fringe benefit and
welfare plans.
1.7. "CABLE ACT" means Title VI of the Communications Act of 1934, as
amended, and all other provisions of the Cable Communications Policy Act of
1984, the Cable Television Consumer Protection and Competition Act of 1992, and
the provisions of the Telecommunications Act of 1996 amending Title VI of the
Communications Act, as such statutes may be amended from time to time, and the
rules and regulations promulgated thereunder.
1.8. "CODE" means the Internal Revenue Code of 1986, as amended, and
all Legal Requirements promulgated pursuant thereto.
1.9. "CONSENTS" means all of the consents, permits or approvals
required to be obtained by Seller from any Governmental Authority or other
Person for (i) Seller to transfer the Assets to Buyer or otherwise to lawfully
consummate the transaction contemplated hereby;
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and (ii) Buyer to conduct the business of the System substantially in the
manner in which the business of the System is conducted as of the date of this
Agreement.
1.10. "CONTRACTS" means all leases, contracts and other agreements,
written or oral (including any amendments and other modifications thereto) to
which Seller is a party and which relate to the Assets or the business or
operations of the System.
1.11. "XXXXX NONCOMPETITION AGREEMENT" means the Noncompetition
Agreement to be executed by Xxxxxxxxxxx X. Xxxxx and the Buyer at Closing in
the form attached hereto as Exhibit A.
1.12. "ENVIRONMENTAL LAWS" means any federal, state or local law
(including the common law), rule, requirement or regulation relating to
pollution, the environment (including, without limitation, ambient air, surface
water, groundwater, land surface or subsurface strata) or protection of human
health as it relates to the environment including, without limitation, laws and
regulations relating to releases of Hazardous Substances, or otherwise relating
to the manufacture, generation, processing, distribution, use, treatment,
storage, disposal, transport or handling of Hazardous Substances or relating to
management of asbestos in buildings.
1.13. "ENVIRONMENTAL PERMITS" means any permits, licenses,
certificates or approvals required under Environmental Laws.
1.14 "EPA" means the Environmental Protection Agency and any
successor Governmental Authority thereto.
1.15. "EQUIVALENT BASIC SUBSCRIBER" or "EBS" shall mean with respect
to the System, an active customer for basic service either in a single
household, a commercial establishment or in a multi-unit dwelling (including a
hotel unit); provided, however, that the number of customers in a multi-unit
dwelling or commercial establishment that obtain service on a "bulk-rate" basis
will be determined by dividing the gross bulk-rate xxxxxxxx for basic service
(excluding any installation or non-recurring revenue) attributable to such
multi-unit dwelling or commercial establishment during the most recent billing
period ended prior to the date of the calculation by the applicable expanded
basic rate for non-bulk subscribers. For purposes of this definition, an
"ACTIVE CUSTOMER" will mean any Person, commercial establishment or multi-unit
dwelling at any given time that is paying for and receiving basic service from
the System who has an account that is not more than 90 days past due (except
for past due amounts of $5.00 or less, provided such account is otherwise
current). For purposes of this definition, an "active customer" does not
include any Person, commercial establishment or multi-unit dwelling that (i) as
of the date of calculation has not paid in full the charges for at
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least one month of the services ordered; (ii) any subscriber whose service is
pending disconnection for any reason; or (iii) any subscriber of the System
which was obtained since July 1, 1998 through extraordinary marketing or
promotional programs or marketing or promotional programs not consistent with
the past practices of the System.
1.16. "ERISA" means the Employee Retirement Income Security Act of
1974, as amended, and rules and regulations promulgated thereunder and
published interpretations with respect thereto.
1.17. "FCC" means the Federal Communications Commission.
1.18. "FRANCHISES" means all municipal, county, and state franchises
and franchise applications (if any), and any material authorizations,
ordinances, permits, resolutions and agreements relating to the System, other
than the Licenses, together with all amendments thereto.
1.19. "FRANCHISE SETTLEMENT PAYMENTS" means all amounts payable to
Seller and its assigns by the City of Huntsville pursuant to Paragraphs 4 and 7
of the Huntsville Resolution.
1.20. "GOVERNMENTAL AUTHORITY" means the United States of America, any
state, commonwealth, territory, or possession thereof and any political
subdivision or quasi-governmental authority of any of the same, including but
not limited to courts, tribunals, departments, commissions, boards, bureaus,
agencies, counties, municipalities, provinces, parishes and other
instrumentalities.
1.21. "HAZARDOUS SUBSTANCES" means (i) any "hazardous waste" or "solid
waste" as defined by the Resources Conservation and Recovery Act of 1976, as
amended, 42 U.S.C. ss. 6901 et seq. ("RCRA"); (ii) any "hazardous substance,
pollutant or contaminant" as defined by or listed pursuant to the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended, 42
U.S.C. ss. 9601 et seq. ("CERCLA"); (iii) any substance regulated by the Toxic
Substances Control Act, 15 U.S.C. ss. 2601 et seq. ("TSCA"); (iv) asbestos or
asbestos containing materials; (v) polychlorinated biphenyls ("PCBs"); (vi) any
petroleum or petroleum products (including, without limitation, crude oil or
any fraction thereof) and any substances regulated under the provisions of
Subtitle I of RCRA relating to underground storage tanks; (vii) any substance
the presence, use, treatment, storage or disposal of which on the Real Property
is regulated or prohibited by any Legal Requirements; and (viii) any other
substance which by virtue of any Legal Requirements require special handling,
reporting or notification of any Governmental Authority in its collection,
storage, use, treatment, or disposal.
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1.22. "HSR ACT" means the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act
of 1976, as amended.
1.23. "HUNTSVILLE RESOLUTION" means that certain Resolution No. 91-519
dated August 22, 1991, adopted by the City Council of the City of Huntsville
and approved by the Mayor of the City of Huntsville.
1.24. "JUDGMENT" means any judgment, writ, order, injunction, award or
decree of any court, judge, justice or magistrate and any similar order of any
Governmental Authority.
1.25. "KNOWLEDGE" of any Person of or with respect to any matter means
that such Person (if a natural person) or, in the case of Seller, any of
Xxxxxxx X. Xxxxxxx, Xxxxxxx X. Xxxxx and Xxxxxxxxxxx X. Xxxxx has actual
awareness or knowledge of such matter.
1.26. "LEGAL REQUIREMENTS" means any applicable common law and any
statute, ordinance, law, rule, regulation or order of, any Governmental
Authority, including Judgments.
1.27. "LICENSES" means all domestic satellite, business radio, CARS,
microwave and other licenses, authorizations and permits relating to the System
granted to Seller by any Governmental Authority, except the Franchises or any
public easements or rights-of-way related thereto.
1.28. "LIEN" means any conditional sale or other title retention
agreement, any lease, consignment or bailment given for purposes of security,
any lien, security interest, mortgage, indenture, pledge, or other similar
encumbrance, provided, however, the term "Lien" shall not include any Permitted
Lien.
1.29. "LITIGATION" means any claim, action, suit, proceeding,
arbitration, investigation, hearing or other legal procedure by or before any
Governmental Authority.
1.30. "LOSSES" means any demands, claims, losses, liabilities,
damages, Liens, assessments, penalties, costs, and expenses, including, without
limitation, expenses of investigation, reasonable fees and disbursements of
counsel and other experts.
1.31. "MATERIAL ADVERSE EFFECT" means any material adverse effect,
individually or in the aggregate, on the Assets or the business, financial
condition or results of operations of Seller or the System.
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1.32. "OSHA" means the Occupational Safety and Health Administration
and any successor Governmental Authority thereto.
1.33. "OWNERS" means, collectively, Xxxxxxx X. Xxxxxxx and Xxxxxx X.
Xxxxxxx.
1.34. "PERMITTED LIENS" means (a) Liens for Taxes not yet due and
payable; (b) zoning and subdivision laws and ordinances; (c) rights reserved to
any Governmental Authority to regulate the affected property; (d) statutory or
common law liens to secure landlords, lessors or renters under leases or rental
agreements to the extent that no payment or performance under any such lease or
rental agreement is in arrears; (e) deposits or pledges made in connection
with, or to secure payment of, worker's compensation, unemployment insurance,
old age pension programs mandated under applicable laws or other social
security regulations and that are listed and described on SCHEDULE 3.4; and (f)
statutory or common law liens in favor of carriers, warehousemen, mechanics and
materialmen, statutory or common law liens to secure claims for labor,
materials or suppliers and other like liens, which secure obligations to the
extent that payment thereof is not in arrears.
1.35. "PERSON" means any natural person, Governmental Authority,
corporation, limited liability company, general or limited partnership, joint
venture, trust, association or unincorporated entity of any kind.
1.36. "PERSONAL PROPERTY" means all of the equipment, plant,
inventory, vehicles, spare parts, supplies and other tangible personal property
which are owned, leased or licensed by Seller and used, useful or held for use
in the conduct of the business or operations of the System, including, without
limitation, any of Seller's towers, tower equipment, antennas, aboveground and
underground cable, distribution systems, head end amplifiers, line amplifiers,
earth satellite receive stations and related equipment, microwave equipment,
testing equipment, motor vehicles, office equipment, furniture and fixtures,
supplies, inventory and other physical assets, plus such additions thereto and
deletions therefrom arising in the ordinary course of business and permitted by
this Agreement between the date of this Agreement and the Closing Date.
1.37. "RATE REGULATORY MATTERS" shall mean any matter or any effect on
the Seller or the System or the operations thereof, arising out of or related
to the Cable Act, or any other federal, state or local law or regulation,
dealing with, limiting or affecting the rates which can be charged by cable
television systems to their subscribers.
1.38. "RATE REGULATORY REDUCTION ORDER" shall mean a final order
issued by a federal, state or local governmental or regulatory authority
relating to Rate Regulatory Matters
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which effectuates after the date hereof and prior to or as of the Closing Date
a reduction in the aggregate rates charged to subscribers for basic service.
1.39. "REAL ESTATE AGREEMENT" means the agreement dated the date
hereof between Buyer and Xxxxxxx X. and Xxxxxx X. Xxxxxxx relating to the
purchase by Buyer of certain property identified therein for $5,000,000.
1.40. "REAL PROPERTY" means all of the fee estates and buildings and
other improvements thereon, leasehold interests in real estate, private
easements, private rights to access, private rights-of-way, and other real
property interests which are owned or leased or, for purposes of Section 3.13
hereof, operated by Seller, and used, useful or held for use in the conduct of
the business or operations of the System. "Real Property" shall include,
without limitation, the real property being conveyed to Buyer pursuant to the
Real Estate Agreement.
1.41. "REDSTONE ARSENAL PROPERTY" means the Real Property subject to
that certain Lease dated March 1, 1989, as amended, between the United States
Secretary of the Army and Seller.
1.42. "RELATED REAL PROPERTY" means the Real Property to be purchased
by Buyer pursuant to the Real Estate Agreement.
1.43. "RELEASE" means any emission, spill, seepage, leak, escape,
leaching, discharge, injection, pumping, pouring, emptying, dumping, disposal,
or release from any source (including without limitation the Real Property)
into or upon the environment, including the air, soil, improvements, surface
water, groundwater, the sewer, septic system, or waste treatment, storage, or
disposal systems at, on, above, from, or under the Real Property.
1.44. "SELLER NONCOMPETITION AGREEMENT" means the Noncompetition
Agreement to be executed by Seller, Xxxxxxx X. Xxxxxxx and Buyer at Closing in
the form attached hereto as Exhibit B.
1.45. "SURVEY" means the survey for the parcel or parcels of the
Related Real Property prepared by a registered land surveyor licensed in the
state where the Related Real Property is located (the "Surveyor"), prepared
prior to Closing in accordance with the "Minimum Standard Detail Requirements
and Classification for Land Title Surveys" jointly established and adopted by
ALTA, ACSM and NSPS in 1997, certified by the Surveyor to Buyer and showing (a)
the location of all lot and street lines, (b) the location of encroachments,
overhangs or projections by buildings or improvements erected on adjacent lands
or on the Related Real Property, (c) adequate means of ingress and egress to
public roads, (d) the location of all utility and other easements, rights of
way, set-back lines and other
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matters of record affecting such real property; (e) a description and the
location of all existing improvements (including parking areas), and (f) such
other facts and information as Buyer may reasonably require.
1.46. "TAXES" means all levies and assessments of any kind or nature
imposed by any Governmental Authority, including but not limited to all income,
sales, use, ad valorem, value added, franchise, severance, net or gross
proceeds, withholding, payroll, employment, excise or property taxes, together
with any interest and penalties thereon.
1.47. "TITLE INSURANCE COMMITMENT" means an irrevocable title
insurance commitment issued prior to Closing by a title insurance company
acceptable to Buyer for (a) an owner's policy of title insurance (on ALTA 1992
Owner's Form), showing good and marketable fee simple title to the Related Real
Property in Buyer or, with respect to the Redstone Arsenal Property, a valid
leasehold interest in Buyer, and (b) a prepaid full-coverage mortgagee policy
of title insurance (on the ALTA 1992 Lender's Form or as otherwise required by
Buyer's lender), naming Buyer's lender as the insured party, insuring that the
mortgage of Buyer's lender constitutes a valid and recorded first lien on a
good and marketable fee simple interest in the Related Real Property or on a
valid leasehold interest in the Redstone Arsenal Property, and providing full
protection against filed and unfiled mechanics' and materialmen's liens, which
Title Insurance Commitment shall not include any (i) survey matters exceptions
(except those matters shown on the Survey and not reasonably disapproved of by
Buyer prior to Closing), (ii) standard printed exceptions, (iii) creditor's
rights exceptions, (iv) mechanics and materialmen's liens exceptions, or (v)
any other exceptions that are not Permitted Exceptions (as defined below).
"Permitted Exceptions" shall mean (i) the lien of real estate taxes not yet due
and payable, (ii) all matters revealed in the Title Insurance Commitment which
are not reasonably disapproved by Buyer in writing prior to Closing (it being
understood that if the Closing occurs, all matters revealed in the Title
Insurance Commitment (or, if Buyer fails to obtain the Title Insurance
Commitment, all matters of record) which are not discharged or otherwise
eliminated from the Title Insurance Commitment at or prior to Closing shall be
deemed to be Permitted Exceptions), and (iii) all existing building, zoning and
other city, state, county or federal laws, codes and regulations affecting the
Related Real Property or the Redstone Arsenal Property, as applicable.
1.48. "TRANSACTION DOCUMENTS" means all instruments and documents
executed and delivered by or on behalf of Buyer or Seller pursuant to this
Agreement.
1.49. LIST OF ADDITIONAL DEFINITIONS. The following is a list of
additional terms used in this Agreement and a reference to the Section hereof
in which such term is defined:
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Term Section
---- -------
active customer 1.15
Adjustment Amounts 2.6.1
Adjustment Time 2.5
Affiliate Transactions 3.22
Agreement Preamble
Assets 2.1
Assumed Liabilities 2.8.1
Audited Financial Statements 5.1.5
Balance Sheet 3.10
Balance Sheet Date 3.10
Business Combination 5.1.4
Buyer Preamble
Buyer Indemnified Person 9.2
Buyer's Guaranty Recitals
Buyer's Parent Recitals
CLI 3.12.4
Closing 7.1
Closing Date 7.1
Commonly Controlled Entity 3.8.1
Current Items Amount 2.5
EBITDA of the System 2.7.1
Employee Benefit Plan 3.8.1
Escrow Agent 2.3
Excluded Assets 2.2
FAA 3.12.5
Final Adjustment 2.6.2
Forms 394 5.7
GAAP 2.5
Indemnity Escrow Agreement 2.3
Indemnitee 9.4
Indemnitor 9.4
Information 11.1.1
Initial Adjustment Certificate 2.6.1
Interim Cost of Capital Amount 2.7.2
Interim EBITDA Amount 2.7.1
Interim Financial Statements 3.10
Interim Period 2.7.1
Landlord Estoppel Certificates 5.1.6
Material Consent 6.1.2
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Multiemployer Plan 3.8.1
Non-Assumed Liabilities 2.8.2
Outside Closing Date 7.1
Permitted Exceptions 1.47
Pro Forma Statement 2.7.3
Purchase Price 2.3
Seller Preamble
Seller's Guaranty Recitals
Seller's Parent Recitals
Signals 3.12.2
Subject Property 5.12
Subscriber Adjustment Amount 2.4
System Recitals
Tenant Estoppel Certificates 5.1.6
Vacation Pay Amount 5.5
1997 Audited Financial Statements 5.1.5
1998 Audited Financial Statements 5.1.5
2. PURCHASE AND SALE OF THE ASSETS.
2.1. Agreement to Purchase and Sell. Subject to the terms and
conditions set forth in this Agreement, at the Closing, Seller shall sell,
convey, assign, transfer and deliver to Buyer, and Buyer shall purchase from
Seller, free and clear of all Liens, the System and all of Seller's real,
personal and mixed assets, rights, benefits and privileges, both tangible and
intangible, wheresoever situated or located, used, useful or held for use in
connection with the conduct of the business or operations of the System,
including without limitation the following (collectively, the "Assets"),
provided, however, the "Assets" shall not include the Excluded Assets as defined
in Section 2.2.
2.1.1. the Personal Property;
2.1.2. the Real Property;
2.1.3. the Franchises;
2.1.4. the Assumed Contracts;
2.1.5. the Accounts Receivable;
2.1.6. the Advertising Accounts Receivable;
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2.1.7. the Licenses;
2.1.8. all of Seller's intellectual property and proprietary
information, technical information and data, machinery and equipment
warranties, maps, computer disks and tapes, plans, diagrams,
blueprints and schematics relating to the System, including, without
limitation, filings with the FCC, and any trademarks, trade names and
service marks;
2.1.9. all of Seller's training materials, manuals,
technical documents and other information relating to the System;
2.1.10. all of Seller's customer records, personnel records,
financial records, other records of every kind, books, documents,
files, accounts receivable information and credit history and customer
lists relating to, used or held for use by Seller in conducting, the
business of the System, subject to the right of Seller to have such
books and records made available to Seller for a reasonable period,
not to exceed the statute of limitations for any claims related to the
same; provided, however, that Buyer shall have no obligation to
maintain or preserve any such books and records for any period longer
than the period that Seller would have been required to maintain and
preserve such books and records under applicable Legal Requirements
had the transactions hereunder not been consummated;
2.1.11. the goodwill and going concern value generated by
Seller with respect to the System, if any; and
2.1.12. all intangible assets of Seller relating to the
System and not specifically described above.
2.2. Excluded Assets. The following assets shall not be
transferred to Buyer by Seller and are specifically excluded from the Assets
(collectively, the "Excluded Assets"):
2.2.1. Seller's cash on hand as of the Closing Date and all
other cash in any of Seller's bank or savings accounts, any and all
insurance policies, construction and performance bonds, letters of
credit or other similar items and any cash surrender value in regard
thereto, and any stocks, bonds, certificates of deposit and similar
investments;
2.2.2. Seller's programming contracts and Benefit Plans;
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2.2.3. any books and records that Seller is required by law
to retain, subject to the right of Buyer to have access to and to copy
for a reasonable period, not to exceed three years from the Closing
Date, and Seller's minute books and other books and records related to
internal corporate matters and financial relationships with Seller's
lenders;
2.2.4. any claims, rights and interests in and to any refunds
of federal, state or local franchise, income or other taxes or fees
for periods prior to the Closing Date;
2.2.5. any notes receivable from Affiliates; and
2.2.6. the rights, assets and properties described on
SCHEDULE 2.2.
2.3. Purchase Price. Subject to the terms and conditions of this
Agreement, at the Closing, Buyer shall deliver to Seller by wire transfer of
immediately available funds, to such account or accounts as are designated in
written instructions by Seller to Buyer, which written instructions shall be
provided to Buyer at least two business days prior to the Closing Date, the sum
of $60,000,000 (the "Purchase Price"), which sum shall be (i) reduced by an
amount equal to $3,250,000, which is to be retained by Regions Bank ("Escrow
Agent") for a period of one hundred twenty (120) days following the Closing
Date (or such longer period as may be contemplated by the Indemnity Escrow
Agreement), to secure payment by Seller of any indemnification obligations to
Buyer in accordance with the terms of an Indemnity Escrow Agreement in the form
attached hereto as Exhibit C (the "Indemnity Escrow Agreement") and (ii)
subject to upward or downward adjustment, as the case may be, pursuant to
Sections 2.4 and 2.5 below.
2.4. Subscriber Adjustment. If on the Closing Date, the System has
less than 31,390 Equivalent Basic Subscribers, the Purchase Price shall be
decreased by an amount equal to $2,071 for each Equivalent Basic Subscriber
less than 31,390. If on the Closing Date, the System has more than 31,500
Equivalent Basic Subscribers, the Purchase Price shall be increased by an
amount equal to $2,071 for each Equivalent Basic Subscriber more than 31,500;
provided no upward adjustment to the Purchase Price will be made for any
Equivalent Basic Subscribers exceeding 31,850 (the amount of any adjustment
pursuant to this Section 2.4 is the "Subscriber Adjustment Amount").
2.5. Current Items Amount. Buyer or Seller, as appropriate, shall
pay to the other (by increasing or decreasing the Purchase Price paid by Buyer
to Seller at Closing) the net amount of the adjustments and prorations effected
pursuant to Sections 2.5.1, 2.5.2 and 2.5.3 below (the "Current Items Amount").
The adjustments provided for herein shall be made in accordance with generally
accepted accounting principles ("GAAP") as of 11:59 p.m.
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(Huntsville, Alabama time) on the last day of the month during which the
Closing occurs (the "Adjustment Time").
2.5.1. Advance Payments and Deposits. The Purchase Price
shall be decreased by an amount equal to the aggregate of (i) all
deposits of subscribers of the System for converters, decoders, and
similar items, and (ii) all payments previously paid to Seller for
services to be rendered by Buyer to subscribers of the System or other
third parties after the Adjustment Time. The Purchase Price shall be
increased by an amount equal to the aggregate of all deposits made by
Seller under utility, pole rental and other agreements that are
Assumed Contracts assumed by Buyer hereunder.
2.5.2. Expenses. The following expenses shall be prorated, in
accordance with GAAP, so that all expenses for periods prior to the
Adjustment Time shall be for the account of Seller, and all expenses
for periods after the Adjustment Time shall be for the account of
Buyer: (i) all payments and charges under the Franchises, the
Licenses, and the Assumed Contracts; (ii) Taxes levied or assessed
against any of the Assets, including an estimate of any real estate
taxes payable for the year of Closing; (iii) Taxes, if any, payable
with respect to cable television service and related sales to
subscribers of the System; (iv) charges for utilities and other goods
or services furnished to the System; (v) copyright fees based on
signal carriage by the System; (vi) all refund liabilities due to
subscribers in connection with the rates of the System; (vii) prepaid
expenses of Seller which relate to the Assets to be acquired except
prepaid expenses related to any Excluded Asset; and (viii) all other
items of expense relating to the System; provided, however, that
Seller and Buyer shall not prorate any items of expense to the extent
payable with respect to (a) any Excluded Assets, which shall remain
and be solely for the account of Seller and (b) any Assumed Liability
described in Section 2.8.1(iii) which shall be solely for the account
of Buyer.
2.5.3. HSR Act Expenses. The Purchase Price shall be
decreased by an amount equal to one-half of the $45,000 filing fee
paid by Buyer to the Federal Trade Commission in connection with the
HSR Act filing.
2.6. Calculations of Adjustments
2.6.1. Initial Adjustment Certificate. The Subscriber
Adjustment Amount and Current Items Amount (collectively, the
"Adjustment Amounts"), shall be estimated in good faith by Seller and
set forth, together with a detailed statement of the calculation
thereof, in a certificate executed by the Chief Financial Officer of
Seller and delivered to Buyer not later than ten days prior to Closing
(the "Initial Adjustment Certificate"). Seller shall use reasonable
efforts to keep Buyer informed during its preparation of the
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Initial Adjustment Certificate and shall provide Buyer with such
documentation as Buyer may reasonably request to support such Initial
Adjustment Certificate. The Initial Adjustment Certificate shall
constitute the basis on which the Adjustment Amounts are calculated
for purposes of Closing.
2.6.2. Final Adjustment. Seller and Buyer shall endeavor in
good faith to agree upon the actual Adjustment Amounts within 90 days
after the Closing (the "Final Adjustment"). Seller or Buyer, as
appropriate, shall pay to the other party within 10 business days
after the Final Adjustment, the amount by which the parties agree that
the actual Adjustment Amounts differ from the Adjustment Amounts as
estimated in the Initial Adjustment Certificate. Any amounts in
dispute at the end of such 90 day period will be determined within 120
days after the Closing Date by Xxxxxx Xxxxxxxx & Co., whose
determination will be conclusive. Buyer and Seller will each be
responsible for one-half of the fees and expenses payable to such firm
in connection with such determination. Any appropriate payment
required after determination of all disputed amounts will be made by
the responsible party within 10 business days after the final
determination.
2.7. Certain Additional Financial Arrangements
2.7.1. EBITDA of the System. The parties acknowledge and
agree that the EBITDA of the System (as defined below) during the
period between September 1, 1998, and the Closing Date (the "Interim
Period") shall be for the benefit of Buyer (the "Interim EBITDA
Amount"). As used herein, "EBITDA of the System" shall mean all
earnings (excluding proceeds from insurance) before interest, taxes,
depreciation and amortization of Seller in connection with the
business and operations of the System, derived from financial
statements prepared in accordance with GAAP consistent with past
practice. Seller shall pay to Buyer at Closing in accordance with
Buyer's written instructions, which written instructions shall be
provided to Seller at least two business days prior to the Closing
Date, an amount equal to the Interim EBITDA Amount. In the event of
any dispute between Buyer and Seller regarding the calculation of the
Interim EBITDA Amount which cannot be resolved by the parties within a
reasonable time period prior to Closing, Buyer and Seller shall submit
the dispute to a mutually acceptable outside accounting firm (which
shall be instructed to determine the Interim EBITDA Amount in
accordance with this Section 2.7.1), whose determination will be
conclusive, final and binding on the parties.
2.7.2. Interim Cost of Capital Amount. In consideration for
the payment of the Interim EBITDA Amount to Buyer, Buyer shall pay to
Seller at Closing an amount equal to interest on $65 million during
the Interim Period calculated at a rate per
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annum (computed on the basis of a 360 day year and applied to the
actual number of days elapsed in the interest calculation period)
equal to eight and one-half percent (8.5%) (the "Interim Cost of
Capital Amount"). If the Closing does not occur on or prior to October
30, 1998, then the parties agree to renegotiate in good faith the
interest rate used to calculate the Interim Cost of Capital Amount;
provided, however, that in renegotiating such interest rate, the
parties shall consider factors internal to Seller and the System (such
as internal rates of return on capital), and not then prevailing
market rates of interest.
2.7.3. Pro Forma. SCHEDULE 2.7.3 hereto contains a pro forma
calculation of the Interim EBITDA Amount and the Interim Cost of
Capital Amount as if the Closing occurred as of September 30, 1998,
and the Interim Period was September 1, 1998, through September 30,
1998 (the "Pro Forma Statement"). SCHEDULE 2.7.3 is attached hereto
solely for the purpose of demonstrating by example the manner in which
the Interim Cash Flow Amount and the Interim Cost of Capital Amount
shall be calculated as of the Closing Date.
2.8. Assumption of Liabilities
2.8.1. Assumed Liabilities. As of and from the Closing Date,
Buyer shall assume, pay, discharge, and perform when due the following
(the "Assumed Liabilities"): (i) all liabilities and obligations of
Seller with respect to periods subsequent to the Adjustment Time under
any Franchise, License, or Assumed Contract; (ii) other obligations
and liabilities of Seller only to the extent that there shall be an
adjustment in favor of Buyer with respect thereto pursuant to Section
2.5; (iii) the accounts payable of Seller of the type listed on
SCHEDULE 2.8 up to an aggregate amount equal to the Accounts
Receivable Amount and (iv) all obligations and liabilities arising out
of Buyer's ownership or operation of the Assets or System, to the
extent that such obligations and liabilities relate to the time period
after the Adjustment Time.
2.8.2. Non-Assumed Liabilities. Except for those liabilities
expressly assumed by Buyer pursuant to Section 2.8.1 hereof, Buyer
assumes no other liabilities of any kind or description whether
connected with the business and operations of the System, Seller or
otherwise, including, without limitation, all claims, liabilities,
obligations, requirements, penalties, fines or costs (including costs
of environmental remediation or removal) arising from the ownership or
operation of any of the Assets or the business and operations of the
System or Seller prior to the Closing Date (such liabilities of the
System or Seller which are not assumed by Buyer are hereinafter
collectively referred to as the "Non-Assumed Liabilities"). Without
limiting the foregoing, Buyer assumes no liabilities or obligations
under any Affiliate Transactions (as defined in Section 3.22)
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or any Benefit Plans. All Non-Assumed Liabilities shall remain with
and be solely the responsibility of Seller.
2.9. Allocation. For federal income and other applicable tax
purposes, the Purchase Price shall be allocated among the Assets in the manner
described on SCHEDULE 2.9, which Schedule will be prepared by Buyer and
provided to Seller prior to Closing, and which Schedule shall be reasonably
acceptable to Seller.
2.10. Transfer Taxes and Fees. Any sales, use, transfer or documentary
taxes imposed in connection with the sale and delivery of the Assets and rights
acquired by Buyer under this Agreement and the Real Estate Agreement, including,
without limitation, those taxes payable by Buyer pursuant to Section 11(a) of
the Real Estate Agreement, shall be paid equally by Seller and Buyer.
2.11. Allocation of Franchise Settlement Payment. Buyer agrees to pay
to Seller within 5 business days after the receipt by Buyer of the Franchise
Settlement Payment paid in respect of the 1998 calendar year, an amount equal to
(i) the amount of such Franchise Settlement Payment received by Buyer multiplied
by (ii) the number of months in 1998 prior to the Adjustment Time (including the
month during which the Adjustment Time occurs) divided by twelve.
2.12. Audited Financial Statement Expenses. Buyer shall, within 5
business days after Buyer's receipt of a copy of the xxxx from Seller's auditors
for the work performed in connection with the preparation of the Audited
Financial Statements pursuant to Section 5.1.5 hereof, reimburse Seller for (a)
all of the expenses incurred by Seller in complying with Section 5.1.5 hereof
with respect to preparation of the 1998 Audited Financial Statements and (b)
half of the expenses incurred by Seller in complying with Section 5.1.5 hereof
with respect to the preparation of the 1997 Audited Financial Statements;
provided, however, that the maximum amount payable by Buyer pursuant to this
Section 2.12(b) shall not exceed Ten Thousand Dollars ($10,000).
2.13. Franchise Settlement Payments. At all times from and after the
Closing Date, Seller shall take such actions as may be necessary to insure and
guarantee that the Franchise Settlement Payments are made to Buyer no later than
six (6) months after such payments are due pursuant to the provisions of
Paragraphs 4 and 7 of the Huntsville Resolution; provided, however, that
Seller's obligations under this Section 2.13 shall be limited to the amounts of
the Franchise Settlement Payments that Seller would have been entitled to
receive had (i) Seller not assigned to Buyer its rights to receive the Franchise
Settlement Payments, and (ii) Seller remained in compliance with all obligations
and conditions under the Huntsville Resolution. If Seller shall receive any of
the Franchise Settlement Payments at any time after the Closing
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Date, Seller shall promptly pay such amounts to Buyer in accordance with
Buyer's instructions.
3. SELLER'S REPRESENTATIONS. Seller represents and warrants to Buyer as
follows:
3.1. Organization and Qualification. Seller is a corporation duly
organized, validly existing, and in good standing under the laws of the State of
Alabama and has all requisite corporate power and authority to own and lease the
properties and assets it currently owns and leases and to conduct its activities
and to carry on its business as such activities and business are currently
conducted. Seller has no subsidiaries or any equity interest in any Person.
3.2. Authorization. Seller has full corporate power and authority to
execute, deliver, and perform this Agreement and to consummate the transactions
contemplated in this Agreement. The execution, delivery, and performance of this
Agreement and the consummation of the transactions contemplated in this
Agreement on the part of Seller have been duly and validly authorized and
approved by all necessary corporate action on the part of Seller. This Agreement
has been duly and validly executed and delivered by Seller and is the valid and
binding obligation of Seller, enforceable against Seller in accordance with its
terms.
3.3. System Information.
3.3.1. SCHEDULE 3.3 sets forth the following complete, true
and correct information in all material respects as of the date of
this Agreement with respect to the System: (i) a description of the
basic and tier services, and communications and data services,
available from the System, the rates charged by Seller for each,
together with any other charges by Seller for services to subscribers;
(ii) rental payments under current real property and material personal
property lease obligations; (iii) pole attachment rentals; (iv)
personal property taxes payable with respect to the Assets; (v) the
signals and programming services carried on the System and the channel
position of each such station and service; (vi) approximate number of
miles of activated aerial and underground plant in the System and
approximate number of dwelling units passed; (vii) agreements with or
commitments or obligations to subscribers for free service or service
with rates departing from the System's standard rate schedule; (viii)
listing and description of all performance bonds maintained by Seller
with respect to the System; (ix) the channel and megahertz capacity of
the System and all aeronautical frequencies used by the System and (x)
Federal Aviation Administration tower clearances and approvals.
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3.3.2. The System meets the technical standards of Part 76,
Subpart K, of the rules and regulations of the FCC in all material
respects. SCHEDULE 3.3 sets forth a complete, true and correct, in all
material respects, description of the cable network system of Seller.
Seller has made available to Buyer and its representatives at the
Huntsville, Alabama office of the System, current and accurate copies
of all of the blue prints, schematics, as-built drawings and
engineering records maintained with respect to the System.
3.3.3. The System had not less than Thirty One Thousand Five
Hundred Fifty-Four (31,554) Equivalent Basic Subscribers as of the
Balance Sheet Date.
3.4. Title and Condition of Personal Property.
3.4.1. SCHEDULE 3.4 contains a list and description of all
material items of Personal Property included in the Assets. The
Personal Property, together with the Assets, Excluded Assets and Real
Property being conveyed to Buyer pursuant to the Real Estate
Agreement, constitutes all personal property necessary to conduct
lawfully the business and operations of the System as now conducted.
Seller owns all of the Personal Property, free and clear of all Liens.
All of the material Personal Property is in good working order and
repair, ordinary wear and tear excepted and is suitable and adequate
for the uses for which it is being used.
3.5. Franchises, Licenses, and Contracts.
3.5.1. SCHEDULE 3.5 lists all Franchises, Licenses and Contracts
(including a description of all requirements where compliance would
require making capital expenditures other than in the ordinary course
of business), other than: (i) subscription agreements with individual
residential subscribers for the cable services provided by the System
in the ordinary course of business which may be canceled by the System
without penalty on not more than 30 days notice and (ii) Contracts and
Licenses included in Excluded Assets. Seller has delivered to Buyer
true and complete copies of each of the Franchises, Licenses and
Contracts listed on SCHEDULE 3.5, including any amendments thereto,
other than Contracts described in clauses (i) and (ii) above.
3.5.2. Except as set forth in SCHEDULE 3.5, each of the
Franchises, Licenses and Contracts listed on SCHEDULE 3.5 is valid, in
full force and effect with respect to the Seller and, to the Seller's
Knowledge, with respect to other parties thereto and enforceable in
accordance with its terms against Seller and, to Seller's Knowledge,
the other parties thereto other than Seller, and Seller has fulfilled
when due all of its obligations thereunder. There has not occurred any
default (without regard to lapse of
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time, the giving of notice, the election of Seller, or any combination
thereof) by Seller nor, to the Knowledge of Seller, has there occurred
any default (without regard to lapse of time, the giving of notice,
the election of Seller or any combination thereof) by any Person other
than Seller under any of such Franchises, Licenses, or Contracts.
Neither Seller nor, to the Knowledge of Seller, any other Person is in
arrears in the performance or satisfaction of its obligations under
any of such Franchises, Licenses, or Contracts, and no waiver or
indulgence has been granted by any of the parties thereto. Except as
set forth in SCHEDULE 3.5, the Franchises, Licenses and Contracts,
together with all of the other Assets, Excluded Assets and the Real
Property being conveyed to Buyer pursuant to the Real Estate Agreement
are sufficient to permit Seller to operate the System lawfully in the
manner in which it is currently operated.
3.5.3. Except as set forth in SCHEDULE 3.5, to the Seller's
Knowledge the System is the only cable television system presently
serving the areas covered by the Franchises and, to the Seller's
Knowledge, no other cable television system is presently contemplated
by any Person in the area now served by the System. To the Seller's
Knowledge, SCHEDULE 3.5 specifies for each area covered by the
Franchises, the other cable television systems serving such area. To
the Seller's Knowledge, no cable television franchises other than
those listed on SCHEDULE 3.5 have been issued with respect to the
areas served by the System.
3.5.4. Seller is the sole and exclusive legal and equitable
owner of all right, title and interest in and to the Franchise
Settlement Payments, free and clear of all Liens and without current
right of offset, deduction, withholding or claim from the City of
Huntsville or any other Person. Seller's right, title and interest in
and to the Franchise Fee Payments are freely assignable to Buyer
without the consent or approval of the City of Huntsville or any other
Person, and without any notification to or filing with the City of
Huntsville or any other Person. There are no franchise fees payable by
the franchisee to the City of Huntsville under the City of Huntsville
Franchise described on SCHEDULE 3.5 hereto.
3.6. No Conflicts; Consents. Except as described on SCHEDULE 3.6, the
execution, delivery, and performance by Seller of this Agreement does not and
will not: (i) violate any Legal Requirement or any Judgment to which the Seller
or the Assets is subject; (ii) conflict with or violate any provision of the
organizational documents of Seller; (iii) conflict with, violate, result in a
breach of, constitute a default under (without regard to requirements of notice,
lapse of time, or elections of other Persons, or any combination thereof),
accelerate, or permit the termination, material modification or acceleration of
the performance required by, any Franchise, License or material Contract listed
on SCHEDULE 3.5; (iv) result in the creation or imposition of any Lien against
or upon any of the Assets; or (v) require the Seller to give
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any notice to, make any filing with, or obtain any consent, approval, or
authorization of, any Governmental Authority or other Person, except as
required under the HSR Act.
3.7. Litigation and Judgments. As of the date hereof, except as set
forth on SCHEDULE 3.7, there is no Litigation pending or, to Seller's Knowledge,
threatened, against or involving Seller, the Assets or the System which, in the
case of threatened Litigation, individually or in the aggregate could reasonably
be expected to result in any materially adverse change in the financial
condition or operation of the System or the ability of Seller to consummate the
transactions under this Agreement. Except as described on SCHEDULE 3.7, there
are no proceedings pending to which Seller is a party or, to Seller's Knowledge,
threatened, nor have any demands been made by any Governmental Authority,
utility, pole lessor, or other Person, which seeks the termination, material
modification, suspension or material limitation of Seller's rights or
obligations with respect to the Franchises, Licenses, or Contracts listed on
SCHEDULE 3.5. There are no Rate Regulatory Matters pending or, to Seller's
Knowledge, threatened with respect to the System. There is no outstanding
Judgment against Seller requiring Seller to take any action of any kind with
respect to the Assets or the operation of the System, or to which the System or
the Assets are subject or by which they are bound or affected.
3.8. Employment Matters.
3.8.1. ERISA. Neither any employee benefit plan (as such term
is defined in ERISA) maintained by Seller or to which Seller has or
has had the obligation to contribute in respect of any of Seller's
employees that render services in connection with the System (an
"Employee Benefit Plan"), nor Seller in connection with the
maintenance or operation of any Employee Benefit Plan, is in violation
of the provisions of ERISA, the Code or other applicable Legal
Requirements, except for any violation which would not have a Material
Adverse Effect; no reportable event, within the meaning of Title IV of
ERISA, has occurred and is continuing with respect to any such
Employee Benefit Plan, and, to Seller's Knowledge, no prohibited
transaction, within the meaning of Title I of ERISA, has occurred with
respect to any such Employee Benefit Plan. Each Employee Benefit Plan
is in compliance with its terms, except for any noncompliance which
would not, individually or in the aggregate, have a Material Adverse
Effect. No Employee Benefit Plan is or has been a multiemployer plan
within the meaning of Section 3(37) of ERISA (a "Multiemployer Plan").
Neither Seller nor any entity required to be aggregated with Seller
(each, a "Commonly Controlled Entity") pursuant to Section 414(b),
(c), (m) or (o) of the Code has completely or partially withdrawn from
any Multiemployer Plan. No termination liability to the Pension
Benefit Guaranty Corporation or withdrawal liability to any
Multiemployer Plan has been or is reasonably expected to be incurred
with respect to
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any Multiemployer Plan by Seller or any Commonly Controlled Entity,
except for any liability which would not, individually or in the
aggregate, have a Material Adverse Effect. Neither Seller nor any
Commonly Controlled Entity has (or could incur) any liability under
Title IV of ERISA that could become a liability or obligation of Buyer
as a result of the consummation of the transactions contemplated
hereunder.
3.8.2. Collective Bargaining. There are no collective
bargaining agreements applicable to any Persons employed by Seller
that render services in connection with the System, and Seller has no
duty to bargain with any labor organization with respect to any such
Persons. There is not pending any demand for recognition or any other
request or demand from a labor organization for representative status
with respect to any Persons employed by Seller that render services in
connection with the System.
3.8.3. Legal Compliance. SCHEDULE 3.8 contains a true and
complete, in all material respects, list of names, positions and rates
of compensation of all employees of the System as of the date hereof.
With respect to any Persons employed by Seller that render services in
connection with the System, Seller is in compliance with all
applicable Legal Requirements respecting employment conditions and
practices, has withheld all amounts required by any applicable Legal
Requirements or Contracts to be withheld from wages or salaries, and
is not liable for any arrears of wages or any taxes or penalties for
failure to comply with any of the foregoing. Seller is not a party to
or otherwise bound by any employment or consulting Contract.
3.8.4. No Unfair Labor Practices. With respect to any Persons
employed by Seller that render services in connection with the System,
(i) Seller has not engaged in any unfair labor practice within the
meaning of the National Labor Relations Act and has not violated any
Legal Requirements prohibiting discrimination on the basis of race,
color, national origin, sex, religion, age, marital status or handicap
in its employment conditions or practices; and (ii) except as
described on SCHEDULE 3.8, there are no pending or, to Seller's
Knowledge, threatened unfair labor practice charges or discrimination
complaints relating to race, color, national origin, sex, religion,
age, marital status or handicap against Seller before any Governmental
Authority nor to Seller's Knowledge does any basis therefor exist.
3.8.5. No Labor Controversies. There are no existing or, to
Seller's Knowledge, threatened, labor strikes, disputes, or grievances
affecting the System or other labor controversies which could
reasonably be expected to have a material and adverse effect on the
financial condition or operations of the System. There are no pending
or, to the knowledge of Seller, threatened arbitration proceedings
under any
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Contracts respecting Seller's employees nor to Seller's
Knowledge does any basis therefor exist.
3.9. Taxes. Except as described on SCHEDULE 3.9 (i) Seller has paid
in a timely manner all Taxes due and payable for which Seller is liable,
including the Taxes of any other Person other than Seller (a) under Treas. Reg.
Sec. 1.1502-6 (or any similar provision of state, local or foreign law), (b) as
a transferee or successor, (c) by contract or (d) otherwise; (ii) Seller has
received no notice of, nor does Seller have any Knowledge of, any notice of
deficiency or assessment, or of any proposed deficiency or assessment, from any
taxing Governmental Authority with respect to the Assets or the System; (iii)
there are no audits pending with respect to the Assets or the System and there
are no outstanding agreements or waivers by Seller that extend the statutory
period of limitations applicable to any federal, state, local, or foreign tax
returns or Taxes with respect to the System; and (iv) Seller has timely filed
all Tax returns and Tax reports required to be filed by Seller and all such
returns and reports are accurate and complete in all material respects.
3.10. Financial Statements. Seller has delivered to Buyer copies of
the following financial statements, which are in accordance with GAAP (except
for the absence of notes) consistently applied throughout the periods
indicated: (a) unaudited balance sheets and statements of operations and cash
flows as of and for the fiscal years ended September 30, 1996 and 1997, and (b)
the unaudited balance sheet (the "Balance Sheet") and statements of operations
and cash flows of Seller as of and for the eleven-month period ending August
31, 1998 (the "Balance Sheet Date") (the financial statements described in this
clause (b), the "Interim Financial Statements"). All of the financial
statements described in this Section 3.10 present fairly in all material
respects, as of the respective dates thereof, the financial condition, assets
and liabilities (taken as a whole) and results of operations and cash flows of
Seller, subject, in the case of the Interim Financial Statements, to customary
non-material year-end adjustments. As of the Balance Sheet Date, Seller was the
owner of all the properties and assets set forth in the Balance Sheet. There
are no material liabilities, accrued, absolute, contingent or otherwise, that
are not reflected in the Balance Sheet other than liabilities arising in the
ordinary course of the Seller's business since the Balance Sheet Date. The Pro
Forma Statements have been prepared in good faith by Seller in accordance with
Seller's books and records and in a manner consistent with the Interim
Financial Statements. The Pro Forma Statements present fairly in all material
respects the EBITDA of the System for the month ended September 30, 1998.
3.11. No Adverse Change. Except as described on SCHEDULE 3.11, there
has been no material adverse change in the business, financial condition or
operations of the System since the Balance Sheet Date, other than changes
arising from matters of a general economic nature or matters caused by or
arising from legislation, rulemaking or regulation affecting the cable
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television industry in general, and since such date, no material portion of the
movable Personal Property has been removed from the System except in the
ordinary course of business. Since the Balance Sheet Date, Seller has not (a)
incurred loss of, or significant injury to, any of the Seller's material
Assets, whether as the result of any natural disaster, labor trouble, accident,
other casualty, or otherwise; (b) sold, exchanged, transferred or otherwise
disposed of any of the Assets except in the ordinary course of business, or
canceled any debts or claims except in the ordinary course of business; (c)
written down the value of any Assets or written off as uncollectible any
accounts receivable, except write downs and write offs in the ordinary course
of business, none of which, individually or in the aggregate, are material; (d)
entered into any transactions other than in the ordinary course of business;
(e) made any change in any method of accounting or accounting practice; or (f)
made any agreement to do any of the foregoing.
3.12. Compliance with Legal Requirements.
3.12.1. No Violation of Legal Requirements. The operation of
the System as currently conducted does not violate or infringe, in any
material respect, any Legal Requirements currently in effect. Seller
has received no notice of any violation by Seller or the System of any
Legal Requirement applicable to the operation of the System as
currently conducted and, to Seller's Knowledge, there is no basis for
the allegation of any such violation. Seller is not, in any material
respect, in default of, or in violation with respect to, any Judgment.
3.12.2. Licensing. Seller is permitted under all applicable
Franchises, Licenses and FCC rules, regulations and orders to
distribute the transmissions (whether television, satellite, radio or
otherwise) of video programming or other information that the Seller
makes available to subscribers of the System (the "Signals") and to
utilize all carrier frequencies generated by the operations of the
System, and is licensed to operate all the facilities required by
Legal Requirements to be licensed, including without limitation any
business radio and any cable television relay service system being
operated as part of the System. No correspondence has been received by
Seller during the three years preceding the date of this Agreement
from the FCC, the United States Copyright Office or any other Person
challenging or questioning the right of Seller to operate the System
and of any FCC-licensed or registered facility used in conjunction
with Seller's operation of the System. Seller is not utilizing and is
not required to utilize any microwave CARS license issued by the FCC
in connection with the business and operations of the System in
accordance with Legal Requirements.
3.12.3. Cable Act. The System and Seller's operation of the
System are in compliance in all material respects with the FCC's rules
and regulations and the provisions of the Cable Act as such Legal
Requirements apply to Seller and/or the
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System. Except as described on SCHEDULE 3.12, Seller is in compliance
in all material respects with the must-carry and retransmission
consent provisions of the 1992 Cable Act as they relate to the System.
All of the television broadcast signals carried by the System are
carried either pursuant to the must-carry requirements or pursuant to
executed retransmission consent agreements. To Seller's Knowledge, the
rates charged to subscribers, effective since September 1, 1993, are
or were allowable under the Cable Act and any authoritative
interpretation thereof now or then in effect, whether or not such
rates are or were subject to regulation on or after that date by any
Governmental Authority, including any local franchising authority
and/or the FCC, unless such rates were and are not subject to
regulation pursuant to a specific exemption from rate regulation
contained in the Cable Act other than the failure of any franchising
authority to have been certified to regulate rates. Seller has
delivered to Buyer complete and correct copies of all reports and
filings for the past three years made or filed pursuant to the Cable
Act or FCC rules or regulations with respect to the System, including,
without limitation, FCC Forms 159 (Remittance Advice), 159C, 320, 325,
328, 329, 393, 395A, 854, 1200, 1205, 1210, 1215, 1220, 1225, 1230 and
1240, copies of Seller's material correspondence with any Governmental
Authority relating to rate regulation generally or specific rates
charged to subscribers of the System including, without limitation,
copies of any complaints filed with the FCC with respect to Seller's
rates charged to such subscribers and sufficient documentation
supporting an exemption from the rate regulation provisions of the
Cable Act. Seller is in material compliance with the commercial leased
access provisions of the 1992 Cable Act and has delivered to Buyer
copies of any demands for commercial leased access carriage and any
correspondence relating to such requests. SCHEDULE 3.12 contains a
list of all Franchise areas that are certified to regulate rates
pursuant to the regulations of the FCC and a list of all Franchise
areas in which a complaint regarding cable programming services has
been filed with the FCC and received by Seller. A request for renewal
has been timely filed under Section 626(a) of the Cable Act with the
proper Governmental Authority with respect to each franchise of the
System expiring within 36 months of the date of this Agreement. To
Seller's Knowledge, Seller has not violated any laws or any duty or
obligation with regard to protecting the privacy rights of any past or
present subscribers of the System.
3.12.4. CLI. Seller has conducted all system and microwave
performance tests and all Cumulative Leakage Index ("CLI") related
tests applicable to the System. Seller has (i) maintained appropriate
log books and other recordkeeping which accurately and completely
reflect in all material respects all results required to be shown
thereon; (ii) to the extent required by the rules and regulations of
the FCC, corrected any radiation leakage of the System required to be
corrected in connection with Seller's monitoring obligations under the
rules and regulations of the FCC; and (iii) otherwise
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complied in all material respects with all applicable CLI rules and
regulations in connection with the operation of the System.
3.12.5. FAA Rules and Regulations. The System is being
operated in all material respects in compliance with the Rules and
Regulations of the Federal Aviation Administration ("FAA"). SCHEDULE
3.3 lists all the existing towers utilized in conjunction with the
System. Without limiting the generality of the foregoing, the existing
towers of the System are obstruction marked and lighted in all
material respects in accordance with the Rule and Regulations of the
FAA and FCC if so required. All required authorizations, including but
not limited to, Hazard to Air Navigation determinations, for such
towers have been issued by and pursuant to the Rules and Regulations
of the FAA. Except as set forth in SCHEDULE 3.3, Seller does not lease
space on such towers to any third party.
3.12.6. Copyright. Seller has deposited with the United
States Copyright Office all 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 as are required to obtain, hold and maintain the compulsory
copyright license for, cable television systems prescribed in Section
111 of the Copyright Act. Seller is in compliance in all material
respects with the Copyright Act and the rules and regulations of the
Copyright Office with respect to the operation of the System. Seller
is entitled to hold and does 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, canceled, encumbered or adversely affected in any manner.
3.13. Environmental Laws and Regulations.
3.13.1. In connection with the System, Seller and all Real
Property are currently in material compliance with and have previously
been in compliance with, all Environmental Laws.
3.13.2. In connection with the System, Seller has no material
liability under any Environmental Law, nor does any other Person for
whose conduct Seller is or may be held to be responsible. In
connection with the System, Seller has not, either directly or
indirectly acted or failed to act in a manner or under circumstances
which could reasonably give rise to any material liability under any
Environmental Law. To Seller's Knowledge, no other present or previous
owner, tenant, operator, occupant or user of any Real Property, or any
other Person, has committed or suffered the
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foregoing. To Seller's Knowledge, no material Release of Hazardous
Substances has entered or threatens to enter any Real Property.
3.13.3. There are no pending or, to the Knowledge of Seller,
threatened actions, suits, claims, legal proceedings or other
proceedings based on, and neither Seller nor any officer, director or
stockholder thereof has received any notice of any complaint, order,
directive, citation, violation, notice of responsibility, notice of
potential responsibility, or information request from any Governmental
Authority or any other Person or entity, or knows or suspects any
fact(s) which might form the basis for any such actions or notices
arising out of or attributable to: (i) the current or past presence,
Release, or threatened Release of Hazardous Substances at, on, under,
or from any part of the Real Property; (ii) the off-site
transportation, disposal or treatment of Hazardous Substances
originating on or from the Real Property or the businesses or assets
of Seller in connection with the System; or (iii) any violation of
Environmental Laws at any part of the Real Property or arising from
Seller's activities (or the activities of Seller's predecessors in
title) involving Hazardous Substances which would have a Material
Adverse Effect.
3.13.4. No underground storage tanks are located upon any
Real Property. To Seller's Knowledge, no Real Property has been used
at any time as a gasoline service station or any other facility for
storing, pumping, dispensing or producing gasoline or any other
petroleum products or wastes. Neither the Real Property nor any
building or other structure on any Real Property contains (i)
asbestos, asbestos containing materials or materials presumed to be
asbestos containing materials (as defined by EPA or OSHA); (ii) PCBs;
or (iii) any dump or any filled in land which will require
investigation, sampling, monitoring, operation and maintenance,
treatment, excavation, containment, closure, clean up, removal
actions, remediation, restoration, reclamation, or response actions,
to avoid or mitigate liability under or violation of Environmental
Law.
3.13.5. Seller has provided Buyer with complete, accurate,
and correct copies of: (a) all investigations, studies, audits, tests,
reviews, reports, surveys, or other written materials in Seller's
possession or control relating to the System and Hazardous Substances
or Environmental Laws; and (b) all notices or other materials received
by Seller relating to the System, any Real Property, and Seller or any
predecessor's compliance with or liability under any Environmental
Laws.
3.13.6. Seller has and will maintain through the Closing Date
all Environmental Permits to operate the System in the manner in which
it is currently being operated. Seller has supplied Buyer with a true
and complete list of all
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Environmental Permits required in order for buyer to operate the
System substantially as presently operated. None of the Environmental
Permits are nontransferable or require consent, notification,
recording, filing, waiting period, approval, investigation,
remediation, approval or other action to remain in full force and
effect following the Closing, and no other consent, notification,
recording, filing, waiting period, investigation, remediation,
approval or other action is required by Seller under any Environmental
Law in order to consummate the transactions contemplated by this
Agreement.
3.13.7. No Real Property currently or formerly owned,
operated or leased by Seller, and no property to which Hazardous
Substances originating on or from such property or in the businesses
or assets Seller in connection with the System has been sent for
treatment or disposal, is listed or proposed to be listed on the
National Priorities List or CERCLIS or on any other governmental
database or list of properties that may or do require investigation or
cleanup under Environmental Laws.
3.13.8. No Encumbrance in favor of any person relating to or
in connection with any claim under any Environmental Law has been
filed or has attached to the property currently owned, operated, or
leased by Seller.
3.14. Real Property.
3.14.1. Seller does not hold any fee simple interest in any
Real Property. SCHEDULE 3.14 lists all the Real Property. Seller has
provided to Buyer true and correct copies of all agreements and other
instruments evidencing the material items listed on SCHEDULE 3.14,
including any amendments or modifications to such items. Seller has
valid leasehold interests, and, in the case of easements, rights of
access, rights-of-way, licenses and other interests included in the
Real Property, such title or other interest as is necessary to permit
the use and enjoyment of such properties substantially in the manner
such properties are now used by Seller. Seller's interest in the Real
Property is free and clear of all Liens, except, in the case of the
Related Real Property, for Permitted Exceptions. The Real Property
listed on SCHEDULE 3.14, including the Real Property being conveyed to
Buyer pursuant to the Real Estate Agreement, includes all real
property interests necessary to operate the System as the System is
presently operated. All Real Property (including the improvements
thereon) (a) is in good condition and repair consistent with its
present use, (b) is available to Seller for immediate use in the
conduct of the business or operations of the System, and (c) complies
in all material respects with all applicable Legal Requirements,
including, without limitation, local zoning and subdivision
ordinances. All leases of real property that are included in the
Assets or the Assumed Liabilities and to which Seller is a party
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as either lessor or lessee are valid and binding obligations of the
Seller and, to the Seller's Knowledge, the other parties thereto, are
in full force and effect, there exists no defaults by Seller, or to
Seller's Knowledge, by any other party. Except as set forth on
SCHEDULE 3.14, on the Closing Date, no Personal Property used or
useful in the business and operation of the System will be located on
any real property not included in the Real Property being conveyed to
Buyer at Closing. All buildings, towers, structures, fixtures and
other improvements on the Real Property used in the conduct of
Seller's business are in good repair and condition, and fit for the
uses to which they are currently devoted, and lie entirely within the
boundaries of the Real Property.
3.14.2. Seller has delivered to Buyer true and correct copies
of the following documents and information relating to the Related
Real Property that are either (a) in the possession of Seller or the
Owners or (b) of which Seller has Knowledge and which are readily
available: (i) any and all engineering studies, environmental reports,
soil boring test results, boundary or topographic surveys; (ii)
existing title policies or title reports, along with copies of
exceptions referenced therein; and (iii) any and all existing
proposed, and proffered conditions and agreements accepted and agreed
to by the Owners or any predecessor in title to the Owners as a
condition to development of the Related Real Property.
3.14.3. The Owners are the sole owners of good and marketable
fee simple title to the Related Real Property, free and clear of all
Liens, easements, covenants and restrictions, excepting the Permitted
Exceptions. The Owners are the sole owners of good and marketable
title to all buildings, structures, fixtures and improvements on the
Related Real Property, free and clear of all Liens, easements,
covenants, encumbrances and restrictions excepting the Permitted
Exceptions.
3.14.4. The Related Real Property is not subject to any
unrecorded Contract or other unrecorded material restriction of any
nature whatsoever preventing or limiting the Owners' right to convey
the Related Real Property to Buyer, or preventing or limiting the
right of Seller or any Owner to use it for the purposes for which it
is currently used.
3.14.5. Seller has not received any notice that any portion
of the Related Real Property or any building, structure, fixture or
improvement thereon is the subject of, or affected by, any
condemnation, eminent domain or inverse condemnation proceeding
currently pending, and Seller has no Knowledge that any of the
foregoing are, or will be, the subject of, or affected by, any such
proceeding.
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3.14.6. The Related Real Property has direct and unobstructed
access to a public right-of-way and to adequate electric, gas, water,
sewer and telephone lines, all of which are adequate for the uses to
which the Related Real Property is currently devoted. No structures of
any kind encroach onto the Related Real Property.
3.15. Commitments. There are no unfulfilled binding material
commitments for capital improvements which Seller is obligated to make in
connection with the System. To the best of Seller's Knowledge, there are no
complaints by subscribers or other users of Seller's services that,
individually or in the aggregate, could reasonably be expected to materially
and adversely affect the financial condition, operations or business of the
System. Except with respect to the persons listed on SCHEDULE 3.15, there is no
free service liability to subscribers existing with respect to the System.
Except with respect to deposits for converters, encoders, decoders and related
equipment, and any other item which is to be adjusted for pursuant to Section
2.5 hereof, Seller has no obligation or liability for the refund of monies or
for the provision of rebates to its subscribers. Except as set forth in the
Franchises with respect to the System, Seller has not made a commitment to any
franchising authority to maintain a local office in any location. Seller has
not made any commitment to any of the municipalities served by the System to
pay franchise fees to any such municipality in excess of the amounts set forth
in the Franchises.
3.16. Non-Infringement. To the best of Seller's Knowledge, the
operation of the System as currently conducted does not infringe upon, or
otherwise violate, the rights of any person or entity in any copyright, trade
name, trademark right, service xxxx, service name, patent, patent right,
license or trade secret, and there is not pending or, to Seller's Knowledge,
threatened any action with respect to any such infringement or breach.
3.17. Books and Records. All of the books, records, and accounts of
the System are in all material respects true and complete, are maintained in
accordance with good business practice and all applicable Legal Requirements.
3.18. Accounts Receivable. Seller is the true and lawful sole owner of
the Accounts Receivable and the Advertising Accounts Receivable, free and clear
of all Liens, with the right to transfer Seller's interest therein to Buyer.
Each such Account Receivable and Advertising Account Receivable is in all
material respects, a true and correct statement of the account for merchandise
actually sold and delivered to, or for actual services performed for, such
account debtor.
3.19. Bonds. SCHEDULE 3.19 contains an accurate and complete list of
all bonds (franchise, construction, fidelity, or performance) of Seller which
are required to be obtained
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by Seller and which relate in any way to the ownership or use of the Assets or
the operation of the System.
3.20. Sufficiency of Assets. Together with the Excluded Assets and the
Real Property being conveyed to Buyer pursuant to the Real Estate Agreement and
except as set forth in SCHEDULE 3.20, the Assets collectively (i) constitute all
assets and rights that relate directly or indirectly to, or are used in, the
operation of the System as a going enterprise and (ii) constitute all assets and
rights necessary to operate the business and operation of the System as
presently operated.
3.21. Disclosure. No representation or warranty by Seller in this
Agreement contains any untrue statement of a material fact or omits to state a
material fact necessary to make the statements contained therein, in light of
the circumstances in which they were made, not misleading.
3.22. Affiliates. SCHEDULE 3.22 describes the material contracts,
leases, arrangements and transactions between the Seller and any Affiliate of
Seller since October 1, 1997, or existing as of the date hereof (collectively,
the "Affiliate Transactions"). Seller shall take such actions as may be
necessary to terminate no later than Closing any Affiliate Transactions that in
any way adversely affect or could adversely affect any of the Assets or impose
any liabilities or obligations on Buyer, and to pay or otherwise satisfy any
liabilities or obligations arising under such Affiliate Transactions.
4. BUYER'S REPRESENTATIONS. Buyer hereby represents, warrants and
covenants to Seller as follows:
4.1. Organization. Buyer is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware, and has
all requisite corporate power and authority to own and lease the properties and
assets it currently owns and leases and to conduct its activities and to carry
on its business as such activities and business are currently conducted. Buyer
is duly qualified to do business as a foreign corporation and is in good
standing in the State of Alabama.
4.2. Authorization. Buyer has full corporate power and authority to
execute, deliver, and perform this Agreement and to consummate the transactions
contemplated in this Agreement. The execution, delivery, and performance of
this Agreement and the consummation of the transactions contemplated in this
Agreement on the part of Buyer have been duly and validly authorized and
approved by all necessary corporate action on the part of Buyer. This Agreement
has been duly and validly executed and delivered by Buyer, and is the valid and
binding obligation of Buyer, enforceable against Buyer in accordance with its
terms.
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4.3. No Conflicts; Consents. The execution, delivery, and performance
by Buyer of this Agreement does not and will not: (i) violate any Legal
Requirement or Judgment to which the Buyer or its assets is subject; (ii)
conflict with or violate any provision of the organizational documents of
Buyer; (iii) conflict with, violate, result in a breach of, constitute a
default under (without regard to requirements of notice, lapse of time, or
elections of other Persons, or any combination thereof), accelerate, or permit
the termination, modification or acceleration of the performance required by,
any material contract to which Buyer is a party or to which its assets are
subject; or (iv) require the Buyer to give any notice to, make any filing with,
or obtain any consent, approval, or authorization of, any Governmental
Authority or other Person, except as required under the HSR Act.
4.4. Litigation. There is no Litigation pending or, to Buyer's
Knowledge, threatened, against or involving Buyer which could reasonably be
expected to materially adversely affect the ability of Buyer to consummate the
transactions under this Agreement.
4.5. Disclosure. No representation or warranty of Buyer in this
Agreement contains any untrue statement of a material fact or omits to state a
material fact necessary to make the statements contained therein not misleading
in any material respect.
5. COVENANTS.
5.1. Certain Affirmative Covenants of Seller. Seller covenants and
agrees, from and after the execution and delivery of this Agreement until and
including the Closing Date, as follows:
5.1.1. Access. Seller, upon reasonable notice, shall give
Buyer and its representatives full access during normal business hours
to all of the properties, books, and records relating to the Assets
and the System, and furnish Buyer with such information concerning the
Assets and the System as Buyer may reasonably request. Subject to the
provisions of Paragraph 5 of the Real Estate Agreement, Seller shall,
and shall cause the Owners to, permit Buyer, its agents,
representatives and employees, to have full access, during normal
business hours throughout the period prior to Closing, to the Related
Real Property and all books, records, Contracts and other
documentation and information relating to the Related Real Property.
5.1.2. Conduct of Business. Seller shall operate the System
in the ordinary and usual course and in accordance with past
practices, which shall include, without limitation, using commercially
reasonable efforts to: (i) maintain appropriate staff and management
personnel at the System, consistent with past practices; (ii) not
delay any
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of its expenditures incurred in the ordinary course of business of the
System; (iii) maintain and preserve the Seller's goodwill, business
relationships, Licenses and Franchises; (iv) keep all Assets
comprising the System in good working order and repair (reasonable
wear and tear excepted), and keep in effect the casualty and liability
insurance covering the Assets in force on the date of this Agreement;
(v) not sell or dispose of or contract to sell or dispose of any
Assets comprising the System, except in the ordinary course of
business (up to a maximum aggregate amount of $10,000), consistent
with past practice; (vi) continue normal marketing, advertising and
promotional expenditures with respect to the System; and (vii) comply
in all material respects with all applicable Legal Requirements,
perform all of its material obligations under all of the Franchises,
Licenses, and material Contracts, and maintain the books, records, and
accounts relating to the System in the usual, regular, and ordinary
manner on a basis consistent with past practices.
5.1.3. Consents; Efforts; HSR Act. Except as otherwise
provided herein, Seller shall, at Seller's own cost and expense, use
commercially reasonable efforts to obtain as promptly as possible, all
Consents required to be obtained by Seller in order to consummate the
transactions contemplated by this Agreement, including approvals of
the FCC, Governmental Authorities, and other Persons. With respect to
Consents required to be obtained by Seller relating to the transfer of
any Franchise, Seller shall use commercially reasonable efforts to
obtain Consents which contain an affirmation that: (a) such Franchise
is in full force and effect; (b) the quality of Seller's service,
including signal quality, response to consumer complaints and billing
practices has been reasonable in light of community needs; (c) Seller
is in substantial compliance with the terms of the Franchise and other
applicable Legal Requirements; (d) there are no circumstances or
conduct by Seller which would constitute a default by Seller under the
Franchise and no event has occurred or exists which would permit the
Governmental Authority to revoke or terminate the Franchise; (e) Buyer
is permitted to grant a security interest in the Franchise to Buyer's
lender(s) and (f) such other matters as Buyer and/or lenders may
reasonably request. Subsequent to the Closing, Seller shall continue
to use commercially reasonable efforts to obtain in writing any
Consent required to be obtained by it that was not obtained on or
before Closing and with respect to which Buyer waived in writing as a
closing condition, and deliver copies of such to Buyer.
5.1.4. No Shopping. Seller hereby agrees that during the
period commencing on the date hereof and ending with the earlier to
occur of the Closing or termination of this Agreement, (a) Buyer shall
have the sole and exclusive right to negotiate with Seller for any
proposed merger, consolidation, sale or acquisition of Seller, the
Assets comprising the System (other than the sale or acquisition of
equipment or inventory in
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the ordinary course of business) and/or the stock of Seller (each, a
"Business Combination"), and (b) neither Seller, nor any officer,
director, shareholder or employee of Seller, or any agent or
representative thereof, will solicit, favorably respond to indications
of interest from, or enter into negotiations with, any Person other
than the Buyer for any possible Business Combination.
5.1.5. Financial Information; Audit. Seller shall promptly
deliver to Buyer true and complete copies of all of its monthly
operating reports and any reports with respect to the operation of the
System prepared by or for it at any time from the date of this
Agreement until Closing. Seller shall cause its outside accounting
firm, Deloitte & Touche LLP, to audit the statements of the System
(including a balance sheet, statement of operations and cash flows) as
of and for the eleven-month period ended August 31, 1998 (the "1998
Audited Financial Statements") and as of and for Seller's fiscal year
ended September 30, 1997 (the "1997 Audited Financial Statements";
together with the 1998 Audited Financial Statements, the "Audited
Financial Statements"). Seller shall cause such accounting firm to
complete such audit and deliver an unqualified report with respect to
the Audited Financial Statements as soon as reasonably practicable but
in no event later than December 15, 1998. The Audited Financial
Statements shall be prepared in accordance with GAAP, and the
financial condition, assets and liabilities and results of operations
and cash flows of Seller reflected in the 1998 Audited Financial
Statements shall not be materially adversely different than the
financial condition, assets and liabilities and results of operations
and cash flows of Seller set forth in the Interim Financial
Statements. Upon the reasonable request of Buyer and at the expense of
Buyer, Seller shall provide assistance and such other financial and
other information as shall be necessary or desirable to permit Buyer
to prepare or to cause to be prepared any additional financial
statements or information concerning the System required to comply
with Regulation S-X of the Securities and Exchange Commission,
including, without limitation, providing customary management
representation letters to Buyer's auditors.
5.1.6. Estoppel Certificates. Seller shall use reasonable
efforts to obtain, at or prior to Closing, a certificate, reasonably
satisfactory to Buyer, from the lessor of each Real Property lease to
the effect that such lease is valid, in full force and effect and not
in default, has been approved, if necessary, for transfer to Buyer,
and any other matters reasonably requested by Buyer (collectively, the
"Landlord Estoppel Certificates"). Seller shall use reasonable efforts
to obtain, at or prior to Closing, a certificate, reasonably
satisfactory to Buyer, from the tenant to each Real Property lease
under which Seller is the landlord to the effect that: (i) such lease
is valid, in full force and effect, (ii) tenant is not in default (or
with the giving of notice or the passage of time will not be in
default) under the lease, (iii) landlord is not in default under the
lease,
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and tenant has no claim against off-set, credit, defense, counterclaim
or deductions against landlord or any rent or other sums due or
payable under the lease, (iv) tenant has not assigned, transferred, or
hypothecated its interest in the lease or entered into a sublease or
license for all or any portion of the premises covered by the lease,
and (v) any other matters reasonably requested by Buyer (collectively,
the "Tenant Estoppel Certificates").
5.2. Certain Negative Covenants of Seller. Between the date of this
Agreement and the Closing Date Seller shall not:
5.2.1. (i) modify, terminate, renew, suspend, or abrogate any
of the Contracts, except in the ordinary course of business, (ii)
modify, terminate, renew, suspend, or abrogate any of the Franchises
or Licenses, except in the ordinary course of business, (iii)
transfer, convey, or otherwise dispose of any of the Assets (except
that it may use inventory and dispose of damaged or defective
equipment or material in the normal course of business), (iv) take any
action that would result in the creation of a Lien on any of the
Assets, (v) engage in any marketing, subscriber installation, or
collection practices that are inconsistent with its past practices, or
(vi) implement any material increase or decrease in the rates charged
by the System to its subscribers except in the ordinary course or
pursuant to a Legal Requirement or Judgment; or
5.2.2. enter into any transaction with any Affiliate of
Seller, except in the ordinary course of business consistent with past
practices and of the type described in SCHEDULE 3.22, including,
without limitation, any renewal, extension, modification or other
change in, any existing Contract to which an Affiliate of Seller is a
party or any other transaction involving an Affiliate of Seller.
5.3. Certain Affirmative Covenants of Buyer. Buyer covenants and
agrees, from and after the execution and delivery of this Agreement, as follows:
5.3.1. Buyer hereby agrees that it will use commercially
reasonable efforts to obtain any consents required to be obtained by
Buyer in order for Buyer to consummate the transaction in accordance
with the provisions hereof and that Buyer will cooperate with Seller
in obtaining the Consents, but Buyer will not be required (i) to make
any payment to any Person from whom such Consent is sought or (ii) to
accept any material changes in, or the imposition of any adverse
condition to any Assumed Contract, Franchise, or License as a
condition to obtaining any Consent. Buyer agrees to reimburse Seller
at Closing for the amount of capital costs reasonably incurred by
Seller and approved by Buyer in advance in writing in connection with
the wiring of any multiple dwelling unit between the date hereof and
Closing.
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5.3.2. Buyer hereby agrees that it will use the trade names,
trademarks and other service marks transferred to the Buyer pursuant
to Section 2.1.8 of this Agreement only in connection with the
provision of data, communications and cable television services.
5.4. HSR Act Compliance. Each of the parties covenants that it has
filed, or will file as promptly as practicable, notification and report forms
and related material that may be required to be filed with the Federal Trade
Commission and the Antitrust Division of the United States Department of
Justice under the HSR Act, and will make any further filings pursuant thereto
that may be necessary or advisable in connection therewith.
5.5. Employees of Seller. Without Buyer's prior written consent,
Seller shall make no change in the compensation payable or to become payable by
Seller to any Person employed in connection with the conduct of the business or
operations of any of the System, except in accordance with past practices.
Seller shall be responsible for compliance with the COBRA notice and
continuation coverage requirements under Part 6 of Title I of ERISA, with
respect to all employees of Seller (and their beneficiaries) experiencing a
qualifying event (as defined in Section 603 of ERISA) on account of termination
of employment or reduction of hours by Seller while such employees were
employed by Seller. Buyer shall offer employment to all employees of Seller on
substantially the same terms existing as of the date of this Agreement
(including without limitation wages, benefits and positions); provided, that
Buyer shall not assume, be deemed to assume or be obligated to pay any benefits
under any Benefit Plan of Seller or its Affiliates. At Closing, Seller shall
pay to Buyer an amount equal to the cash value of earned and unused vacation
time under Seller's vacation Benefit Plan as of the Closing Date (the "Vacation
Pay Amount"). Seller shall deliver to Buyer at Closing (a) a copy of Seller's
vacation Benefit Plan, and (b) a detailed statement of the Vacation Pay Amount
for each of Seller's employees, which Benefit Plan and statement shall be
certified by Seller's Chief Financial Officer as being true, accurate and
complete. Such certified statement shall include, for each employee, the amount
of the Vacation Pay Amount foregone for each vacation day taken by such
employee. Buyer agrees to disburse the Vacation Pay Amount to Seller's former
employees promptly following the end of calendar year 1998, or at each
employee's option, permit them to take vacation days during calendar year 1998,
all in accordance with such certified statement and certified Benefit Plan.
Such payments of the Vacation Pay Amount shall be subject to any withholdings
required to be made by Buyer under the Code or any provision of state or local
tax law. Nothing in this Section 5.5 or in any other provision of this
Agreement is intended to confer upon any employee of Seller or such employee's
legal representative or heirs any rights as a third party beneficiary or
otherwise or any remedies of any kind whatsoever under or by reason of this
Agreement, or the transactions contemplated hereby, including without
limitation any rights to continued employment with
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Seller or Buyer. All rights and obligations created by this Agreement are
solely between the parties.
5.6. Employee Retention Program. If requested by Buyer in writing,
the parties shall, at Buyer's expense, develop and implement an employee
retention program, containing terms and conditions acceptable to Seller and
Buyer, to incent current employees to remain employed by Seller through the
Closing.
5.7. Forms 394. Within ten (10) business days after the date of this
Agreement, Seller and Buyer shall, if required, prepare and file properly
prepared Applications for Franchise Authority Consent to Assignment or Transfer
of Control of Cable Television Franchise FCC 394 ("Forms 394") with the local
Governmental Authorities which have issued Franchises to Seller, and shall file
with such Forms 394 all additional information required by such Franchises or
applicable local Legal Requirements or that the Governmental Authorities deem
necessary or appropriate in connection with their consideration of the request
of Seller and Buyer that such Governmental Authorities approve the transfer of
the Franchises to Buyer.
5.8. Programming. Each party shall execute and deliver such documents
and take such action as may reasonably be requested by the other party to
enable such other party to comply with the requirements of its programming
agreements with respect to divestitures and acquisitions of cable television
systems; provided, however, that Buyer shall not be required hereunder to
provide specific programming or channels or to assume any liability with
respect to or under Seller's programming agreements.
5.9. Satisfaction of Closing Conditions. Each of the parties hereto
shall use its commercially reasonable efforts to fulfill, or cause to be
fulfilled, the conditions to Closing in Section 6 and to otherwise cause the
consummation of the transaction contemplated hereby.
5.10. Notice of Developments. Each of Buyer and Seller will give prior
notice to the other of any breach of its own representations and warranties
herein.
5.11. Transitional Services. For a period of up to sixty (60) days
after the Closing Date, Seller agrees to provide to Buyer such accounting and
other office administrative services as Buyer may reasonably request in
connection with the transition of the System from Seller to Buyer. The terms
and conditions of such services requested by Buyer, including the rates of
compensation therefor, shall be subject to the mutual agreement of the parties
which the parties agree to negotiate in good faith.
5.12. Environmental Audits.
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Subject to Paragraph 5 of the Real Estate Agreement, Seller
hereby agrees that Buyer and its consultants, representatives and agents shall
have the right to enter and inspect the Related Real Property and, subject to
the terms of the lease for the Redstone Arsenal Property, the Redstone Arsenal
Property (the Related Real Property and the Redstone Arsenal Property,
collectively, the "Subject Property"). In order to complete such
investigations, Buyer or its designated consultant shall have the right but not
the obligation: (i) to conduct tests of the soil, surface or subsurface waters,
and air quality at, in, on, beneath or about the Subject Property, in a manner
consistent with good engineering practice; (ii) to inspect all records,
reports, permits, applications, monitoring results, studies, correspondence,
data and any other information or documents relevant to Hazardous Substances or
other environmental conditions; and (iii) to inspect all buildings and
equipment at the Subject Property for asbestos-containing materials or other
Hazardous Substances. Buyer agrees to conduct such investigations in a manner
that minimizes the disruption to Seller's business activities, and Seller
agrees, subject to the terms of the lease for the Redstone Arsenal Property, to
permit or cause the Owners to permit, as the case may be, Buyer reasonable
access to all portions of the Subject Property during normal business hours. In
the event that any Phase I audits, Phase II audits or similar investigations of
the Subject Property indicate the presence of Hazardous Substances on or at the
Subject Property which would impair the value of the Subject Property, then
Buyer shall have the unilateral right, in its sole discretion, to terminate its
obligations under this Agreement without penalty on or before the completion of
its investigation of the Subject Property. Buyer agrees to keep and hold
confidential any and all reports, summaries, studies or results that are the
product of its investigations of the Subject Property and not to disclose such
reports without the written consent of Seller or unless required to do so by
applicable Legal Requirements.
5.13. Termination of Leases. Seller shall take such actions as may be
necessary to terminate, effective as of the Closing Date, the real estate
leases described at Items 7 and 8 of SCHEDULE 2.2 hereto.
6. CONDITIONS PRECEDENT.
6.1. Conditions Precedent to Buyer's Obligations. Precedent to
Buyer's Obligations. The obligations of Buyer under this Agreement with respect
to the purchase and sale of the Assets shall be subject to the fulfillment on
or prior to the Closing Date of each of the following conditions, any of which
may be waived by Buyer:
6.1.1. Accuracy of Representations; Performance of Agreements;
and Officer's Certificate. All of the representations and warranties
of Seller contained in this Agreement (including, without limitation,
the representations and warranties contained in Annex A hereto), and
the representations and warranties of Seller's Parent contained
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in Seller's Guaranty, shall be true and correct at and as of the
Closing Date in all material respects with the same effect as though
such representations and warranties had been made on and as of the
Closing Date (except for any representations and warranties that speak
as of a specified date, which shall have been true and correct in all
material respects when made, and provided that any representation or
warranty contained herein that is qualified by a materiality standard
shall be true and correct in all respects). Seller shall have complied
with and performed in all material respects all of the agreements,
covenants, and conditions required by this Agreement to be performed
or complied with by it on or prior to the Closing. Seller shall have
furnished Buyer with a certificate of an executive officer of Seller
dated as of the Closing, certifying to the fulfillment of the
foregoing conditions.
6.1.2. Consents. Seller shall have obtained and delivered to
Buyer each of the Consents identified on SCHEDULE 3.6 as material
consents ("Material Consents") with no materially adverse conditions
imposed by such Consents.
6.1.3. No Litigation. There shall be no Legal Requirement,
and no Judgment shall have been entered and not vacated by any
Governmental Authority of competent jurisdiction in any Litigation or
arising therefrom, which (i) enjoins, restrains, makes illegal, or
prohibits consummation of the transaction contemplated by this
Agreement or (ii) would prohibit Buyer's ownership or operation of any
portion of the System or the Assets and there shall be no Litigation
pending or threatened that seeks, or which if successful would have
the effect of, any of the foregoing.
6.1.4. Deliveries. Seller shall have made or stand willing to
and able to make all of the deliveries to Buyer set forth in Section
7.2.
6.1.5. No Adverse Change. Since the Balance Sheet Date, there
shall have been (i) no material adverse change in the fixed assets of
the System or in the financial condition, business or operations of
the System, (ii) no loss, damage, impairment, confiscation or
condemnation of any of the Assets (material in the aggregate) that has
not been repaired or replaced, or (iii) any pending or threatened
Litigation which would have a Material Adverse Effect.
6.1.6. Legal Matters. All actions, proceedings, instruments
and documents required to carry out this Agreement or incidental
thereto and all related legal matters shall be reasonably satisfactory
to and approved by Buyer's counsel.
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6.1.7. HSR Act. The waiting period applicable to the
consummation of the purchase and sale of the Assets under the HSR Act
shall have expired or been terminated.
6.1.8. Real Estate Closing. The purchase and sale contemplated
by the Real Estate Agreement shall have been consummated
simultaneously with the Closing.
6.1.9. Consulting Agreement. Buyer shall have entered into a
consulting or employment agreement with Xx. Xxxxxxx Xxxxx, on
acceptable terms and conditions, for Xx. Xxxxx to provide Buyer
support, access, goodwill and related services for an aggregate of no
more than $75,000 for a minimum period of six months following the
Closing.
6.1.10. Audited Financial Statements. Seller shall have
delivered to Buyer the Audited Financial Statements (including the
unqualified auditor's report thereon) required by Section 5.1.5;
provided, however, that Buyer agrees to waive the condition set forth
in this Section 6.1.10 if in Buyer's reasonable judgment the final
Audited Financial Statements (including the unqualified auditor's
report thereon) will be delivered to Buyer by December 15, 1998.
6.1.11. Releases. If the report described in Section 7.2.8
evidences that judgments, financing statements, tax liens, mechanic's,
materialmen's or other statutory liens are on file with respect to any
of the Assets, Seller shall have obtained and delivered to Buyer a
termination statement or other appropriate document signed by the
secured party or lienholder evidencing the release or termination of
such financing statement or such lien and, if applicable, a pay-off
letter from such secured party or lienholder
6.1.12. Title Insurance Commitment. Buyer shall have received
the Title Insurance Commitment and the Survey with respect to the
Related Real Property and the Redstone Arsenal Property, all in form
and substance reasonably satisfactory to Buyer.
6.1.13 Interim Cost of Capital Amount. If the Closing shall
not have occurred on or prior to October 30, 1998, then the parties
shall have agreed upon the new interest rate pursuant to the last
sentence of Section 2.7.2 hereof.
6.2. Conditions Precedent to Seller's Obligations. The obligations of
Seller under this Agreement with respect to the purchase and sale of the Assets
shall be subject to the
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fulfillment on or prior to the Closing of each of the following
conditions, which may be waived by Seller:
6.2.1. Accuracy of Representations; Performance of Agreements;
and Officer's Certificate. All of the representations and warranties
of Buyer contained in this Agreement and the representations and
warranties of Buyer's Parent contained in Buyer's Guaranty shall be
true and correct at and as of the Closing Date in all material
respects with the same effect as though such representations and
warranties had been made on and as of the Closing Date (except for any
representations and warranties that speak as of a specified date,
which shall have been true and correct in all material respects when
made, and provided that any representation or warranty contained
herein that is qualified by a materiality standard shall be true and
correct in all respects). Buyer shall have complied with and performed
in all material respects all of the agreements, covenants, and
conditions required by this Agreement to be performed or complied with
by it on or prior to the Closing. Buyer shall have furnished Seller
with a certificate of an executive officer of Buyer, dated as of the
Closing, certifying to the fulfillment of the foregoing conditions.
6.2.2. No Litigation. There shall be no Legal Requirement, and
no Judgment shall have been entered and not vacated by any
Governmental Authority of competent jurisdiction in any Litigation or
arising therefrom, which enjoins, restrains, makes illegal, or
prohibits consummation of the transaction contemplated by this
Agreement.
6.2.3. Deliveries. Buyer shall have made or stand willing and
able to make all the deliveries to Seller set forth in Section 7.3.
6.2.4. Legal Matters. All actions, proceedings, instruments and
documents required to carry out this Agreement or incidental thereto
and all related legal matters shall be reasonably satisfactory to and
approved by Seller's counsel.
6.2.5. Real Estate Closing. The purchase and sale contemplated
by the Real Estate Agreement shall have been consummated
simultaneously with the Closing.
6.2.6. HSR Act. The waiting period applicable to the
consummation of the purchase and sale of the Assets under the HSR Act
shall have expired or been terminated.
6.2.7. Interim Cost of Capital Amount. If the Closing shall not
have occurred on or prior to October 30, 1998, then the parties shall
have agreed upon the new interest rate pursuant to the last sentence
of Section 2.7.2 hereof.
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7. CLOSING.
7.1. Time and Place. The consummation of the sale of the Assets to
Buyer and the receipt of the consideration therefore by Seller shall constitute
the "Closing". Unless otherwise mutually agreed to by the parties, the Closing
shall take place by mail and/or by facsimile. The parties agree that a
signature on a document received by the other party via facsimile shall be
deemed valid and binding. The Closing shall occur on the last business day of
the month in which all conditions set forth in Sections 6.1 and 6.2 have been
satisfied or waived or on such other date as Buyer and Seller shall mutually
agree (the "Closing Date"). All allocations provided for hereunder shall be
made as of the Adjustment Time, except as otherwise agreed in writing by the
parties. In no event shall the Closing be held later than December 15, 1998
(the "Outside Closing Date"), unless Buyer and Seller otherwise mutually agree.
7.2. Seller's Deliveries. At the Closing, Seller shall deliver or
cause to be delivered to Buyer the following:
7.2.1. Xxxx of Sale. An executed Xxxx of Sale, Assignment and
Assumption Agreement in the form attached hereto as Exhibit D;
7.2.2. Vehicle Titles. Title certificates to all vehicles
included among the Assets, endorsed for transfer of title to Buyer;
7.2.3. Officer's Certificates. The Initial Adjustment
Certificate described in Section 2.6.1, the officer's certificate
described in Section 6.1.1 and the certified statement described in
Section 5.5;
7.2.4. Consents. The Consents, Landlord Estoppel Certificates
and Tenant Estoppel Certificates obtained by Seller;
7.2.5. Noncompetition Agreements. The Seller Noncompetition
Agreement and the Xxxxx Noncompetition Agreement;
7.2.6. Indemnity Escrow Agreement. An executed counterpart of
the Indemnity Escrow Agreement; and
7.2.7. Opinions of Counsel. Opinions of Xxxx, Raywid &
Xxxxxxxxx, L.L.P., Seller's communications counsel, and Sirote &
Permutt, P.C., Seller's and Seller's Parent's local Alabama counsel,
each addressed to Buyer and its lender(s) dated the
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Closing Date, each in a form reasonably acceptable to Buyer and its
counsel and addressing such matters as are customary in a transaction
of this type, such as, in the case of the opinion of local Alabama
counsel, organization, good standing, authorization, execution and
delivery, enforceability, no violations of organizational documents,
laws or contracts, litigation and receipt of all requisite Franchise
approvals;
7.2.8. UCC Report. A report dated not more than ten (10) days
prior to the Closing Date of the appropriate filing officers in the
States of Alabama and Arizona with respect to judgments, financing
statements, tax liens, mechanics, materialmen or other statutory liens
on file with respect to the Assets.
7.2.9. Other Documents. Such other documents and instruments as
shall be necessary to effect the intent of this Agreement and
consummate the transaction contemplated by this Agreement.
7.3. Buyer's Obligations. At the Closing, Buyer shall deliver or
cause to be delivered to Seller the following:
7.3.1. Purchase Price. The Purchase Price, payable as provided
in Section 2.3;
7.3.2. Xxxx of Sale, Assignment and Assumption Agreement. An
executed Xxxx of Sale, Assignment and Assumption Agreement in the form
attached hereto as Exhibit D;
7.3.3. Officer's Certificate. The certificate described in
Section 6.2.1;
7.3.4. Indemnity Escrow Agreement. An executed counterpart of
the Indemnity Escrow Agreement; and
7.3.5. Other Documents. Such other documents and instruments as
shall be necessary to effect the intent of this Agreement and
consummate the transaction contemplated by this Agreement.
8. TERMINATION.
8.1. Termination Events. This Agreement may be terminated and the
transaction contemplated by this Agreement may be abandoned:
8.1.1. at any time, by the mutual agreement of Buyer and Seller;
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8.1.2. by either Buyer or Seller, at any time, if the other is
in material breach or default of its respective covenants, agreements,
or other obligations in this Agreement, or if any of its
representations in this Agreement or any Transaction Document are not
true and accurate when made or when otherwise required by this
Agreement to be true and accurate in all material respects (provided
that any representation or warranty contained herein that is qualified
by a materiality standard shall not be further qualified hereby),
provided that such breach or default is incapable of cure or has not
been cured within 20 calendar days after receipt of written notice of
such breach, default or misrepresentation from the other party;
8.1.3. by Buyer, upon written notice to Seller, if the Closing
shall not have occurred on or before the Outside Closing Date for any
reason other than (a) a breach or default by Buyer of its covenants,
agreements or other obligations hereunder, or (b) any of Buyer's
representations herein not being true and accurate when made or when
otherwise required by this Agreement to be true and accurate in all
material respects;
8.1.4. by Seller, upon written notice to Buyer, if the Closing
shall not have occurred on or before the Outside Closing Date for any
reason other than (a) a breach or default by Seller of its covenants,
agreements or other obligations hereunder, or (b) any of Seller's
representations herein not being true and accurate when made or when
otherwise required by this Agreement to be true and accurate in all
material respects;
8.1.5. as otherwise provided in this Agreement, including,
without limitation, Section 10(b) hereof.
8.2. Effect of Termination.
8.2.1. Costs and Return of Information. Without limiting any
other provision of this Section 8.2, if the transactions contemplated
by this Agreement are terminated and abandoned as provided herein: (i)
each party shall pay the costs and expenses incurred by it in
connection with this Agreement, and no party (or any of its officers,
directors, employees, agents, representatives or shareholders) shall
be liable to any other party for any costs, expenses or damages except
as expressly specified herein; (ii) each party shall re-deliver all
documents, work papers and other materials of the other party relating
to the transaction contemplated hereby, whether so obtained before or
after the execution hereof, to the party furnishing the same; (iii)
all confidential information received by either party hereto shall be
treated in accordance with Section 11.1 hereof, and (iv) neither party
hereto shall have any liability or further
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obligation to the other party to this Agreement except (a) as stated
in subparagraphs (ii) and (iii) of this Section 8.2.1, and (b) to the
extent applicable, as set forth in Sections 8.2.2 below.
8.2.2. Any termination pursuant to Section 8.1.2, 8.1.3, 8.1.4
or 8.1.5 shall not relieve any party of any liability for breach of
its obligations hereunder prior to such termination.
9. SURVIVAL OF REPRESENTATIONS AND INDEMNITY.
9.1. Survival of Representations and Warranties. All representations
and warranties contained in this Agreement shall survive the Closing Date. The
representations and warranties contained in this Agreement shall survive for a
period ending on the date which is eighteen (18) months after the Closing Date,
except for representations and warranties set forth in Section 3.1
(Organizations and Qualification), Section 3.2 (Authorization), Section 3 with
respect to the ownership of the Assets and Section 3.5.4, which shall survive
indefinitely, the representations and warranties set forth in Section 3.8
(Employment Matters), Section 3.9 (Taxes), Section 3.12 (Legal Requirements)
and Section 3.13 (Environmental Laws and Regulations) which shall survive for
the applicable statute of limitations. Seller's obligations with respect to all
obligations and liabilities not assumed by Buyer, and Buyer's obligations with
respect to the Assumed Liabilities, shall survive until such obligations and
liabilities have been paid, performed or discharged in full, and the covenants
and agreements in this Section 9 shall continue in full force and effect until
fully discharged. Any representation, warranty, covenant or agreement that is
the subject of a claim which is asserted prior to the expiration of the
applicable survival period set forth above shall survive with respect to such
claim or dispute until the final resolution thereof. Following the Closing,
this Section 9 shall be the exclusive remedy of either party hereto for
monetary damages with respect to any representation, warranty or covenant
contained in this Agreement or any Transaction Document; provided, that the
foregoing shall not limit, diminish or affect any rights or remedies that might
be available to either party (a) for declaratory relief in connection with any
claim made by Buyer pursuant to the Indemnification Escrow Agreement, (b) to
have any non-monetary obligations of the other party specifically performed, or
(c) to have any actions or potential actions of the other party temporarily or
permanently enjoined.
9.2. Seller's Indemnity. Notwithstanding the Closing and regardless
of any investigation made at any time by or on behalf of Buyer or any
information Buyer may have, Seller shall indemnify and hold Buyer, its
respective affiliates, officers, directors, employees, agents, and
representatives, and any Person claiming by or through any of them, as the case
may be (each a "Buyer Indemnified Person"), harmless from and against any
Losses arising out of or resulting from any of the following, provided that a
claim for indemnity with respect
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to such Losses, specifying such claim in reasonable detail, has been delivered
to Seller by Buyer before the date eighteen months after the Closing Date
unless a longer survival period is specified in Section 9.1, in which case the
end of such applicable survival period:
(i) all refund liabilities due to subscribers for
periods prior to the Closing that arise in
connection with Rate Regulatory Matters or Rate
Regulatory Reduction Orders;
(ii) the business or operations of the System
prior to the Closing Date (except for Assumed
Liabilities for which an adjustment has been made at
Closing and Permitted Liens), any failure by Seller
to pay, perform or discharge any liabilities or
obligations of Seller or the System not expressly
assumed by Buyer pursuant to Section 2.8.1 hereof,
and all claims and demands made in respect of any of
the foregoing whether or not known or asserted at or
prior to the Closing;
(iii) any misrepresentation, breach of warranty,
or nonfulfillment of any agreement or covenant on
the part of Seller under this Agreement or any
Transaction Document;
(iv) the Litigation described in SCHEDULE 3.7
hereto; and
(v) any claim by the City of Huntsville or any
other Person that, contrary to Paragraph 7 of the
Huntsville Resolution, Buyer or any of its
successors or assigns is required or alleged to be
required to pay any franchise fees to the City of
Huntsville for any period prior to the expiration of
the City of Huntsville Franchise.
provided, however, that the Seller shall not be liable under Section 9.2(iii)
in respect of Losses unless the aggregate of such Losses exceeds Two Hundred
Thousand Dollars ($200,000) in which case the Seller will be liable for all
such Losses up to a maximum aggregate amount of Fifteen Million Dollars
($15,000,000). Seller will be liable, in the aggregate, for all Losses under
this Section 9.2 up to a maximum amount of Sixty Five Million Dollars
($65,000,000); provided, however, that such limitations and qualifications
shall not apply in the case of Losses resulting from or arising out of the
Seller's breach of its obligations under Sections 2.6.2, 2.10 and 2.13, Section
5.5, Section 12 and Section 13.4 hereof.
9.3. Buyer's Indemnity. Notwithstanding the Closing, and regardless
of any investigation made at any time by or on behalf of Seller or any
information Seller may have, Buyer shall indemnify and hold Seller, its
affiliates, officers, directors, employees, agents, and
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representatives, and any Person claiming by or through any of them, as the case
may be, from and against any Losses arising out of or resulting from any of the
following, provided that a claim for indemnity with respect to such Losses,
specifying such claim in reasonable detail, has been delivered to Seller by
Buyer before the date eighteen months after the Closing Date unless a longer
survival period is specified in Section 9.1, in which case the end of such
applicable survival period:
9.3.1. the Assumed Liabilities and any failure by Buyer to pay,
perform or discharge the Assumed Liabilities; and
9.3.2. any misrepresentation, breach of warranty, or
nonfulfillment of any agreement or covenant on the part of Buyer under
this Agreement or any Transaction Document;
provided, however, that the Buyer shall not be liable under Section 9.3.2 in
respect of Losses unless the aggregate of such Losses exceeds Two Hundred
Thousand Dollars ($200,000) in which case the Buyer will be liable for all such
Losses up to a maximum aggregate amount of Fifteen Million Dollars
($15,000,000). Buyer will be liable, in the aggregate, for all Losses under
this Section 9.3 up to a maximum amount of Sixty Five Million Dollars
($65,000,000); provided, however, that such limitations and qualifications
shall not apply in the case of Losses resulting from or arising out of the
Seller's breach of its obligations under Sections 2.6.2, 2.10, 2.11 and 2.12,
Section 12 and Section 13.4 hereof.
9.4. Procedure for Indemnified Third Party Claim. Promptly after
receipt by a party entitled to indemnification under this Agreement (the
"Indemnitee") of written notice of the assertion or the commencement of any
Litigation with respect to any matter referred to in Sections 9.2 and 9.3, the
Indemnitee shall give written notice thereof to the party from whom
indemnification is sought pursuant hereto (the "Indemnitor") and thereafter
shall keep the Indemnitor reasonably informed with respect thereto; provided,
however, that failure of the Indemnitee to give the Indemnitor notice as
provided herein shall not relieve the Indemnitor of its obligations hereunder.
In case any Litigation shall be brought against any Indemnitee, the Indemnitor
shall be entitled to assume the defense thereof with counsel reasonably
satisfactory to the Indemnitee, at the Indemnitor's sole expense. In the event
that within a reasonable time after such notice from the Indemnitee, the
Indemnitor shall fail to undertake to defend such claim, then the Indemnitee
(upon further written notice to the Indemnitor) shall have the right to
undertake the defense, compromise or settlement of such claim, by counsel or
other representatives of its own choosing, on behalf of and for the account and
risk of the Indemnitor. In the event that the Indemnitee undertakes the defense
of a claim for which the Indemnitee is entitled to indemnification hereunder,
the Indemnitor shall pay to the Indemnitee, in addition to the other sums
required to be paid hereunder, the reasonable costs
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and expenses incurred by the Indemnitee in connection with such defense,
compromise or settlement, as and when such costs and expenses are so incurred.
If the Indemnitor shall assume the defense of any Litigation, it shall not
settle the Litigation unless the settlement shall include as an unconditional
term thereof the giving by the claimant or the plaintiff of a release of the
Indemnitee from all liability with respect to such Litigation. Anything in this
Section 9.4 to the contrary notwithstanding, in the event that the Indemnitor
undertakes the defense of any claim pursuant to this Section 9.4, (i) the
Indemnitee, at its own expense, by counsel or other representative of its own
choosing, shall have the right to participate in the defense, compromise or
settlement thereof and each party and its counsel and other representatives
shall cooperate with the other party and its counsel and representatives in
connection therewith; and (ii) the Indemnitor shall have an obligation to keep
the Indemnitee informed of the status of the defense of such claim and furnish
the Indemnitee with all documents, instruments and information that the
Indemnitee shall reasonably request in connection therewith. Notwithstanding
the foregoing, in the event a conflict of interest shall exist between the
Indemnitor and the Indemnitee with respect to any claim, the Indemnitee shall
be entitled to undertake the defense of any claim pursuant to this Section 9.4
and Indemnitor shall pay to the Indemnitee the reasonable costs and expenses,
for which Indemnitee is entitled to indemnification hereunder, incurred by the
Indemnitee in the defense of such claim.
10. RISK OF LOSS. The risk of loss or damage by fire or other casualty or
cause to the Assets from the date hereof until the Closing Date shall be upon
Seller. In the event any such loss or damage shall not be restored, replaced,
or repaired as of the Closing Date, Buyer shall, at its option, either:
(a) proceed with the Closing and receive at Closing, the
insurance proceeds received by Seller, and all rights of Seller or its
Affiliates to receive insurance proceeds, with respect to such loss or damage,
less any amounts previously spent by Seller in restoring, repairing or
replacing such loss or damage and with respect to which Seller shall have
consulted with Buyer prior to restoring, repairing, or replacing such loss or
damage; or
(b) if such loss or damage has had or would have a Material
Adverse Effect, terminate this Agreement by written notice to Seller.
11. CONFIDENTIALITY AND PRESS RELEASES.
11.1. Confidentiality.
11.1.1. It is understood that Seller desires to maintain the
confidentiality of all documents or other information or data, whether
written or oral, relating to the System and furnished to Buyer or its
employees, agents or consultants in the course of the
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transaction contemplated by this Agreement (the "Information"). Unless
and until the Closing occurs, Buyer will hold and will use all
reasonable efforts to cause its officers, directors, employees,
lenders, accountants, representatives, agents, consultants and
advisors to hold in strict confidence all of the Information received
by it, and will not, without the prior written consent of Seller, (i)
use the Information for any purpose other than in connection with the
transactions contemplated by this Agreement; or (ii) release or
disclose any Information to any other person, except to such foregoing
persons who need to know the Information in connection with the
transactions contemplated by this Agreement, who are informed by Buyer
of the confidential nature of the Information and who agree to be
bound by the terms and conditions hereof. Notwithstanding the
foregoing, the following will not constitute Information for the
purposes of this Agreement: (a) information that the Buyer can show
was known by it, its directors, officers, employees, consultants or by
its affiliates prior to the disclosure thereof by the Seller; (b)
information that is or becomes generally available to the public other
than as a result of a disclosure directly or indirectly by the Buyer
or its directors, officers, employees or consultants in breach of this
Section 11.1 or any other duty of confidentiality; (c) information
that is independently developed by the Buyer, its directors, officers,
employees, consultants or its affiliates; or (d) information that is
or becomes available to the Buyer on a non-confidential basis from a
source other than the Seller or its directors, officers, employees;
provided that such source is not bound by any obligation of
confidentiality in relation thereto.
11.1.2. In the event that Buyer shall provide to Seller any
information or data relating to Buyer or its business and such
information or data would constitute "Information" if provided by
Seller to Buyer, then Seller agrees to hold and use all reasonable
efforts to cause its officers, directors, employees, lenders,
accountants, representatives, agents, consultants and advisors to hold
in strict confidence all of such information or data received by it,
and will not, without the prior written consent of Buyer, (i) use the
Information for any purpose other than in connection with the
transactions contemplated by this Agreement; or (ii) release or
disclose any Information to any other person, except to such foregoing
persons who need to know the Information in connection with the
transactions contemplated by this Agreement, who are informed by
Seller of the confidential nature of the Information and who agree to
be bound by the terms and conditions hereof.
11.2. Press Releases. No press release or public disclosure, either
written or oral, of the existence or terms of this Agreement shall be made by
either Buyer or Seller prior to the Closing without the consent of the other,
and Buyer and Seller shall each furnish to the other advance copies of any
release which it proposes to make public concerning this Agreement or the
transactions contemplated hereby and the date upon which Buyer or Seller, as
the case may
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be, proposes to make such press release. This provision shall not, however, be
construed to prohibit any party from making any disclosures to any Governmental
Authority which it is required to make under any Legal Requirement or in
connection with obtaining any Consents, or from filing this Agreement with, or
disclosing the terms of this Agreement to, any governmentally regulated
institutional lender to such party.
12. BROKERAGE FEES. Each party hereto represents and warrants to the other
that it has not incurred any obligations or liabilities, contingent or
otherwise, for brokerage or finder's fees or agent's commissions or other like
payment in connection with this Agreement or the transactions contemplated
hereby for which the other party hereto will have any liability. Buyer shall
indemnify and hold Seller harmless from and against any Losses incurred by
Seller with respect to any breach by Buyer of the provisions of this Section
12, and Seller shall indemnify and hold Buyer harmless from and against any
Losses incurred by Buyer with respect to any breach by Seller of the provisions
of this Section 12.
13. MISCELLANEOUS.
13.1. Further Assurances. From time to time after the Closing, Seller
shall, if requested by Buyer, make, execute and deliver to Buyer such
additional assignments, bills of sale, deeds and other instruments of transfer,
as may be necessary to transfer to Buyer all of Seller's right, title, and
interest in and to the Assets. Such efforts and assistance shall be without
cost to Buyer.
13.2. Notices. All notices, requests, demands, and other
communications required or permitted to be given under this Agreement shall be
in writing and shall be deemed to have been duly given if (i) mailed,
registered or certified mail, return receipt requested, postage prepaid, (ii)
delivered by hand, (iii) sent by facsimile transmission, or (iv) delivered by
reputable overnight courier, to the following addresses, or at such other
address as a party may designate by notice given in accordance with this
Section 13.2:
(i) If to Buyer:
c/o Knology Holdings, Inc.
0000 X.X. Xxxxxxx Xxxxx
Xxxx Xxxxx, Xxxxxxx 00000
Attn: Xxxx Xxxxxxx
Fax No.: (000) 000-0000
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With a copy to:
Xxxxx & Xxxxxxx L.L.P.
000 00xx Xxxxxx, X.X.
Xxxxxxxxxx, X.X. 00000
Attn: Xxxxxx X. Xxxxxxx
Fax No.: (000) 000-0000
(ii) If to Seller:
c/o CableAmerica Corporation
0000 Xxxx Xxxxxxxxx Xxxx, Xxxxx, 000
Xxxxxxx, Xxxxxxx 00000-0000
Attn: Xxxxxxx X. Xxxxxxx
Fax No.: (000) 000-0000
With a copy to:
Ropes & Xxxx
Xxx Xxxxxxxxxxxxx Xxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000-0000
Attn: Xxxx X. Xxxxxxxx
Fax No.: (000) 000-0000
Notices delivered personally, by overnight courier or by registered or
certified mail shall be effective upon receipt by the intended recipient.
Notices transmitted by facsimile transmission shall be effective when
confirmation of transmission is received.
13.3. Assignment; Binding Effect. Neither party may assign this
Agreement or any interest herein without the prior written consent of the other
party; provided, however, that at any time after Closing, Buyer shall have the
right, upon written notice to Seller, to assign all of its rights and
obligations hereunder to any Person in connection with a sale of all or
substantially all of the assets of the System, provided, however, no such
assignment shall release Buyer of its obligations to pay the Purchase Price to
Seller hereunder.
13.4. Expenses. Except as otherwise expressly provided for in this
Agreement, each party shall bear its own expenses and the fees and expenses of
its legal counsel, accountants, and other experts incurred in connection with
the preparation of this Agreement and the consummation of the transactions
contemplated by this Agreement. Without limiting the
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foregoing, the Title Insurance Commitments and Surveys shall be prepared at the
sole cost and expense of Buyer.
13.5. Collection of Accounts. From and after the Closing Date, Buyer
shall have the right and authority, at its expense, to collect for its account
all Accounts Receivable and Advertising Accounts Receivable to which it is
entitled as provided in this Agreement and to endorse with the name of Seller
any checks or drafts received on account of any such items.
13.6. Entire Agreement; Amendments; and Waivers. This Agreement merges
all previous negotiations between the parties hereto, constitutes the entire
agreement and understanding between the parties with respect to the subject
matter of this Agreement and supersedes any such other understandings or
agreements between the parties with respect to the subject matter of this
Agreement, including without limitation, the Letter of Intent between the
parties hereto dated August 28, 1998. No alteration, modification or change of
this Agreement shall be valid except by an agreement in writing executed by the
parties hereto. No failure or delay by any party in exercising any right, power
or privilege hereunder (and no course of dealing between or among any of the
parties) shall operate as a waiver of any such right, power, or privilege. No
waiver of any default on any one occasion shall constitute a waiver of any
subsequent or other default. No single or partial exercise of any such right,
power, or privilege shall preclude the further or full exercise thereof.
13.7. Counterparts. This Agreement may be executed in one or more
counterparts with the same effect as if all of the signatures on such
counterparts appeared on one document. All executed counterparts shall together
constitute one and the same agreement.
13.8. Severability. If any provision of this Agreement or the
application thereof to any Person or circumstance shall be invalid or
unenforceable to any extent, the remainder of this Agreement and the
application of such provision to other Persons or circumstances shall not be
affected thereby and shall be enforced to the greatest extent permitted by law.
13.9. Schedules and Exhibits, Headings. All references herein to
Schedules and Exhibits are to the Schedules and Exhibits attached hereto, which
shall be incorporated in and constitute a part of this Agreement by such
reference. The headings in this Agreement are for purposes of reference only
and shall not limit or otherwise affect the meaning of this Agreement.
13.10. Governing Law. The validity, performance, and enforcement of
this Agreement and all Transaction Documents, unless expressly provided to the
contrary, shall be governed by the laws of the State of Alabama, without giving
effect to the principles of conflicts of law of such State.
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13.11. Third Parties; Joint Ventures. This Agreement constitutes an
agreement solely among the parties hereto for their benefit, and except as
otherwise provided herein, is not intended to and will not confer any rights,
remedies, obligations, or liabilities, legal or equitable, including any right
of employment, on any Person (including but not limited to any employee or
former employee of Seller) other than the parties hereto, and their respective
successors, or assigns, or otherwise constitute any Person a third party
beneficiary under or by reason of this Agreement. Nothing in this Agreement,
expressed or implied, is intended to or shall constitute the parties hereto
partners or participants in a joint venture.
13.12. Construction. This Agreement has been negotiated by Buyer and
Seller and their respective legal counsel, and legal or equitable principles
that might require the construction of this Agreement or any provision of this
Agreement against the party drafting this Agreement shall not apply in any
construction or interpretation of this Agreement.
13.13. Commercially Reasonable Efforts. For the purposes of this
Agreement, "commercially reasonable efforts" will 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 fees and processing fees, if any.
13.14. Specific Performance. Seller acknowledges that the Assets to be
sold and delivered to Buyer pursuant to this Agreement are unique and that
Buyer has no adequate remedy at law if Seller shall fail to perform any of its
obligations hereunder, and Seller therefore confirms and agrees that Buyer's
right to specific performance is essential to protect the right and interests
of Buyer. Accordingly, in addition to any other remedies which Buyer may have
hereunder or at law or in equity or otherwise, Seller hereby agrees that Buyer
shall have the right to have all obligations, undertakings, agreements and
other provisions of this Agreement specifically performed by Seller and that
Buyer shall have the right to obtain an order or decree of such specific
performance in any of the courts of the United States or of any state or other
political subdivision thereof.
[SEE SIGNATURE PAGE ATTACHED]
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IN WITNESS WHEREOF, the parties have executed this Asset Purchase
Agreement as of the date first written above.
SELLER:
CABLE ALABAMA CORPORATION
an Alabama corporation
By:
----------------------------------
Name:
--------------------------------
Title:
-------------------------------
BUYER:
KNOLOGY OF HUNTSVILLE, INC.
a Delaware corporation
By:
----------------------------------
Name:
--------------------------------
Title:
-------------------------------
59
EXHIBIT A
[FORM OF XXXXX NONCOMPETITION AGREEMENT]
(SEE SEPARATE DOCUMENT ATTACHED)
A-1
60
EXHIBIT B
[FORM OF SELLER NONCOMPETITION AGREEMENT]
(SEE SEPARATE DOCUMENT ATTACHED)
B-1
61
EXHIBIT C
[FORM OF INDEMNITY ESCROW AGREEMENT]
(SEE SEPARATE DOCUMENT ATTACHED)
C-1
62
EXHIBIT D
[FORM OF XXXX OF SALE, ASSIGNMENT AND ASSUMPTION AGREEMENT]
D-1
