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Exhibit 10.39
TRANSACTION AGREEMENT XX. 0
XXXXXXXXXXX XXXXXXXXX XX. 0, dated as of September 15, 1998 (this
"Agreement"), among ADVANCE PUBLICATIONS, INC., a New York corporation
("Advance"), XXXXXXXX BROADCASTING CORPORATION, a New York corporation
("Xxxxxxxx"), ADVANCE/XXXXXXXX PARTNERSHIP, a New York general partnership
("Advance/Xxxxxxxx"), TIME WARNER ENTERTAINMENT COMPANY, L.P., a Delaware
limited partnership ("TWE"), PARAGON COMMUNICATIONS, a Colorado general
partnership ("Paragon"), and TIME WARNER ENTERTAINMENT-ADVANCE/XXXXXXXX
PARTNERSHIP, a New York general partnership (the "Partnership").
WHEREAS, Advance/Xxxxxxxx and TWE entered into a Partnership
Agreement, dated as of September 9, 1994, as amended, pursuant to which they
formed the Partnership (the "Partnership Agreement");
WHEREAS, Advance, Xxxxxxxx, Advance/Xxxxxxxx, TWE and the
Partnership entered into a Contribution Agreement, dated as of September 9,
1994, as amended (the "Contribution Agreement"), pursuant to which each of
Advance/Xxxxxxxx and TWE contributed certain specified assets to the
Partnership;
WHEREAS, in connection with the Amended and Restated Transaction
Agreement, dated as of October 27, 1997, among Advance, Xxxxxxxx,
Advance/Xxxxxxxx, TWE, TW Holding Co. and the Partnership, TWE, Advance/Xxxxxxxx
and Paragon entered into the First Amendment to the Partnership Agreement, dated
as of February 12, 1998 (the "First Amendment"), pursuant to which, among other
things, Paragon became a partner of the Partnership;
WHEREAS, the Partnership, TWE-A/N Texas Cable Partners General
Partner LLC, TCI Texas Cable Holdings LLC, TCI Texas Cable Inc. and Texas Cable
Partners, L.P., a Delaware limited partnership (the "TCI Joint Venture"), have
entered into a Contribution Agreement, dated as of June 23, 1998 (the "TCI
Contribution Agreement"), pursuant to which, among other things, the Partnership
has agreed to contribute to the TCI Joint Venture certain assets;
WHEREAS, in connection with the TCI Contribution Agreement the
parties hereto entered into Transaction Agreement No. 2, dated as of June 23,
1998 (the "Second Transaction Agreement"), pursuant to which, among other
things, the parties have agreed to further amend the Partnership Agreement on
the terms set forth in the Second Amendment to the Partnership Agreement
attached thereto (the "Second Amendment");
WHEREAS, the parties hereto desire to cause the cable television
systems described on Schedule 1 hereto (the "Winston Salem Systems"), which are
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currently owned by Summit Cable Services of Thom-A-Lex, Inc. and Summit Cable
Services of Forsyth County, Inc. (collectively,"Summit"), to be contributed to
the Partnership on the terms set forth herein;
WHEREAS, prior to the Closing (as defined below) such Winston Salem
Systems will be transferred by Summit to Paragon and, pursuant to this
Agreement, Paragon will transfer such Winston Salem Systems to the Partnership;
NOW, THEREFORE, in consideration of the mutual covenants and
agreements contained herein and for other good and valuable consideration, the
receipt and adequacy of which are hereby acknowledged, the parties agree as
follows:
1. Contribution of Winston Salem Systems.
(a) Subject to the conditions set forth in Section 3, at the
Closing (as defined below), (i) Paragon shall contribute, assign, convey,
transfer and deliver to the Partnership its right, title and interest in and to
the Winston Salem Systems and (ii) the Partnership shall assume, and agree to
pay and discharge, as and when they become due, or otherwise take subject to,
the indebtedness and other liabilities associated with the Winston Salem Systems
that are described on Schedule 2 hereto (the "Assumed Winston Salem
Liabilities").
(b) At the Closing, (i) Paragon shall deliver instruments
executed by it and in form and substance reasonably satisfactory to the
Partnership contributing, assigning, conveying, transferring and delivering to
the Partnership its right, title and interest in and to the Winston Salem
Systems and (ii) the Partnership shall deliver instruments executed by it and in
form and substance reasonably satisfactory to Paragon by which it shall assume
and agree to pay and discharge the Assumed Winston Salem Liabilities.
(c) In exchange for the contributions contemplated by Section
1(a), Paragon shall receive (i) Common Partnership Units (as defined in the
Partnership Agreement) having a value equal to 50% of the Net Winston Salem
Contribution and (ii) Series B Preferred Partnership Units (as defined in the
Third Amendment described below) having a value equal to 50% of the Net Winston
Salem Contribution. For purposes of the foregoing, "Net Winston Salem
Contribution" means the excess of (i) the Winston Salem System Value determined
in accordance with Section 7 over (ii) the Assumed Winston Salem Indebtedness
(as defined on Schedule 2 hereof).
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2. Beneficial Assets and Subsidiary Beneficial Assets. If any
consent or approval is required in connection with the contribution to the
Partnership pursuant to this Agreement of any cable television system (or the
franchise pursuant to which such cable television system is operated) and such
consent or approval is not obtained prior to the Closing, then in lieu of
contributing (and pending the actual contribution of) such cable television
systems to the Partnership, Paragon will hold such cable television systems (or
cause such cable television systems to be held) for the use and benefit of the
Partnership. Such cable television systems shall be treated as Beneficial Assets
(as defined in the Contribution Agreement) or Subsidiary Beneficial Assets (as
defined in the Contribution Agreement) in either case in accordance with Section
5.8 of the Partnership Agreement and Section 6.7 of the Contribution Agreement.
In accordance with Section 6.7 of the Contribution Agreement, following the
Effective Date, Paragon shall continue to use its reasonable best efforts to
obtain any consent or approval necessary to effectuate the contribution to the
Partnership of any Beneficial Asset or Subsidiary Beneficial Asset not
contributed to the Partnership on the Effective Date, and shall take all
reasonable actions to effectuate the contribution of such Beneficial Asset or
Subsidiary Beneficial Asset after such consent or approval is obtained;
provided, however, that no cable television franchise comprising a Beneficial
Asset or Subsidiary Beneficial Asset shall be required to be contributed to the
Partnership until consents or approvals shall have been obtained with respect to
the contribution of all cable television franchises in the same cable television
system as such franchise.
3. Closing Conditions. The obligations of Paragon and the
Partnership to effect the transactions contemplated by this Agreement, shall be
subject to the satisfaction at or prior to the Closing of the following
conditions, the imposition of which are solely for the benefit of such parties
and any one or more of which may be waived by such parties in their discretion:
(a) each of TWE, Advance/Xxxxxxxx and Paragon shall have
executed and delivered an amendment to the Partnership Agreement substantially
in the form of Exhibit A (the "Third Amendment");
(b) with respect to the assumption by the Partnership of the
Assumed Winston Salem Liabilities, each of the conditions to Assumption, as
defined in the Credit Agreement dated as of November 10, 1997 (the "Credit
Agreement") among Time Warner Inc. ("TWX"), Time Warner Companies, Inc., TWE,
Xxxxxx Broadcasting System, Inc., the Partnership, TWI Cable Inc., the Lenders
Party thereto and The Chase Manhattan Bank, as Administrative Agent, shall have
been satisfied (or waived by the parties entitled to waive same);
(c) the consents and approvals required in connection with the
contribution of the franchises pursuant to which the Winston Salem Systems are
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operated shall have been obtained or not required with respect to franchises
having at least 85% of the total number of subscribers in the Winston Salem
Systems, as set forth on Schedule 1 hereto;
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(d) the board of directors of TWX and the Management Committee
of TWE shall have approved the transactions contemplated by this Agreement;
(e) the waiting periods (and any extensions thereof), if any,
applicable to the transactions contemplated by this Agreement under the
Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 0000 (xxx "XXX Xxx") shall have
been terminated or shall have expired (it being understood that as soon as
practicable after the execution of this Agreement, the parties will complete and
file, or cause to be completed and filed, any notification and report required
to be filed under the HSR Act and each such filing shall request early
termination of the waiting period imposed by the HSR Act); and
(f) no temporary restraining order, preliminary or permanent
injunction or other order issued by any court of competent jurisdiction or other
legal restraint or prohibition preventing the consummation of the transactions
contemplated hereby shall be in effect.
4. Advance/Xxxxxxxx Contribution. Subject to the consummation of the
transfer or beneficial assignment of the Winston Salem Systems to the
Partnership, on or prior to July 1, 2000 (the "Maturity Date") (but in no event
prior to the date that is six months following the Effective Date),
Advance/Xxxxxxxx shall contribute to the Partnership cash in an amount equal to
the Advance/Xxxxxxxx Contribution Amount, plus interest thereon at the Interest
Rate compounded (to the extent not paid) on a quarterly basis, from July 1, 1998
until the date such contribution is made in full. For the purposes of the
foregoing, (i) "Advance/Xxxxxxxx Contribution Amount" means an amount equal to
50% of the value of the Common Partnership Units received by Paragon in exchange
for its contribution of the Winston Salem Systems and (ii) "Interest Rate" shall
mean a rate per annum equal to the average interest rate applicable from time to
time to borrowings by the Partnership under the senior revolving credit facility
of the Partnership plus 6.48%. In the event Advance/Xxxxxxxx contributes all or
a portion of the Advance/Xxxxxxxx Contribution Amount prior to the Maturity
Date, it shall pay to the Partnership a prepayment penalty equal to the amount
of such contribution multiplied by the product of (x) .01775% and (y) the number
of days from the date of such prepayment to and including the Maturity Date. At
the Closing, Advance/Xxxxxxxx shall execute and deliver to the Partnership a
promissory note (the "Advance/Xxxxxxxx Note") substantially in the form of
Exhibit B hereto having a principal amount equal to the Advance/Xxxxxxxx
Contribution Amount, as security for its obligation to contribute to the
Partnership the Advance/Xxxxxxxx Contribution Amount, plus interest as provided
in this Section 4. Advance/Xxxxxxxx shall take any and all actions and execute
and deliver all documents or agreements reasonably requested by the Partnership
to enable the Partnership to perfect its security interest in the
Advance/Xxxxxxxx Note. Advance/Xxxxxxxx and
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the Partnership acknowledge and agree that the Advance/Xxxxxxxx Note shall not
be deemed an asset of the Partnership unless and until the Partnership seeks to
realize upon its security interest therein. In exchange for its agreement to
contribute the Advance/Xxxxxxxx Contribution Amount, Advance/Xxxxxxxx shall
receive Common Partnership Units having a value equal to 50% of the value of the
Common Partnership Units received by Paragon in exchange for its contribution of
the Winston Salem Systems.
5. Time and Place of Closing. Subject to the satisfaction (or
waiver) of each of the conditions set forth in Section 3, the closing of the
transactions contemplated by this Agreement (the "Closing") shall take place at
the offices of Xxxx, Weiss, Rifkind, Xxxxxxx & Xxxxxxxx, 1285 Avenue of the
Xxxxxxxx, Xxx Xxxx, Xxx Xxxx 00000-0000 (or such other place as the parties may
mutually agree), at 10:00 a.m. (New York City time) on the last day of the month
following the date that is the fifth business day following satisfaction or
waiver of the conditions set forth in Section 3, or such earlier date as TWE may
determine (upon 2 business days' notice to Advance/Xxxxxxxx), or such later date
as the parties may mutually agree in writing. The date on which the Closing
occurs is referred to herein as the "Effective Date."
6. Representations and Warranties; Indemnification. Subject to the
Closing having occurred, each of TWX and Paragon (i) shall use commercially
reasonable efforts, at the Partnership's expense, to enforce its rights with
respect to the representations and warranties set forth in the Agreement and
Plan of Merger, dated as of September 12, 1994 (the "Acquisition Agreement"), by
and among Time Warner Inc., Summit Communications Group, Inc. and certain of the
stockholders of Summit Communications Group, Inc., to the extent such
representations and warranties relate to the Winston Salem Systems, including by
way of seeking indemnification in accordance with the terms of the Acquisition
Agreement, and (ii) shall grant to the Partnership the benefits, if any,
obtained as a result of the enforcement of such rights.
7. Valuation of Winston Salem Systems Subscribers.
(a) Winston Salem Systems. The gross value of the Winston
Salem Systems (the "Winston Salem System Value") shall equal $244,171,561, as
adjusted pursuant to Section 8.
(b) Procedure; Dispute Resolution. Within 60 days following
the Effective Date, Paragon shall deliver to the Partnership, Advance/Xxxxxxxx
and TWE a certificate (the "Valuation Certificate"), signed by an appropriate
officer of Paragon after due inquiry by such officer, but without any personal
liability to such officer, setting forth the Winston Salem System Value, the Net
Winston Salem Contribution and the calculation thereof in accordance with
Section 1(c), Section 8 and this Section 7. At the request of Advance/Xxxxxxxx
or TWE, Paragon shall provide
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the requesting party with prompt and complete access to all working papers and
relevant supporting documentation as well as appropriate TWX, Paragon or TWE
personnel, in each case reasonably necessary in connection with such party's
review of the information set forth in the Valuation Certificate. If either
Advance/Xxxxxxxx or TWE shall conclude that the Valuation Certificate is not
accurate, then Advance/Xxxxxxxx or TWE, as appropriate (the "Disputing Party"),
within 90 days of receipt of such Valuation Certificate, shall furnish Paragon
with a written statement of any discrepancy or discrepancies believed to exist
(the "Discrepancy Certificate"). The Disputing Party and Paragon shall attempt
jointly to resolve any discrepancy set forth in the Discrepancy Certificate
within 30 days after receipt thereof, which resolution, if achieved, shall be
binding upon all parties to this Agreement and not subject to dispute or review.
If the Disputing Party and Paragon cannot resolve the discrepancy to their
mutual satisfaction within such 30-day period, the Disputing Party and Paragon
shall, within 10 days following the expiration of such 30-day period, jointly
designate a nationally known independent certified public accounting firm to
review the Valuation Certificate, together with the Discrepancy Certificate, and
any other relevant documents. If the Disputing Party and Paragon do not agree
upon a nationally known independent certified public accounting firm in
accordance with the preceding sentence within such 10-day period, then such
review shall be performed by a nationally known independent certified public
accounting firm selected by two other nationally known certified public
accounting firms, one selected by the Disputing Party and one selected by
Paragon; provided that if one party fails to notify the other party of its
selection within five days following receipt from the other party of its
selection, the accounting firm so selected shall perform such review. The cost
of retaining such independent public accounting firm shall be borne one-half by
the Disputing Party and one-half by Paragon Such firm shall report its
conclusions and such report shall be conclusive and binding on all parties to
this Agreement and not subject to dispute or review. The Winston Salem System
Value, the Net Winston Salem Contribution, the Advance/Xxxxxxxx Contribution
Amount and the Assumed Winston Salem Liabilities, shall be adjusted, if
necessary, to reflect any such resolution.
8. Closing Adjustments. At the Closing, Paragon shall deliver to the
Partnership a certificate setting forth the estimated Paragon Adjustment Amount
(as defined below), which shall be determined in good faith by Paragon. If the
estimated Paragon Adjustment Amount is greater than zero, then the Winston Salem
System Value shall be reduced by an amount equal to such estimated Paragon
Adjustment Amount. If the estimated Paragon Adjustment Amount is less than zero,
then the Winston Salem System Value shall be increased by an amount equal to the
absolute value of such Paragon Adjustment Amount. The Valuation Certificate
delivered by Paragon pursuant to Section 7(b) shall set forth the final Paragon
Adjustment Amount and, to the extent necessary, the Winston Salem System Value,
the Net Winston Salem Contribution, the Advance/Xxxxxxxx Contribution Amount and
the Assumed Winston
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Salem Liabilities shall be adjusted to reflect the difference between the final
Paragon Adjustment Amount and the estimated Paragon Adjustment Amount.
The foregoing adjustments are intended to place the Partnership and
its Partners in substantially the same after-tax economic position with respect
to the Winston Salem Systems that it would have been in had the Effective Date
occurred on July 1, 1998. For purposes of the foregoing, "Paragon Adjustment
Amount" means (A) the Cash Flow (as defined below) generated by the Winston
Salem Systems during the period from July 1, 1998 to the Effective Date, less
(B) interest on the Assumed Winston Salem Indebtedness accruing from July 1,
1998 to the Effective Date (calculated at an interest rate equal to the interest
rate that would have been applicable to such Assumed Winston Salem Indebtedness
had such amounts been indebtedness of the Partnership under the senior bank
credit facility of the Partnership in effect during such period), less (C) the
Series B Priority Return (as defined in the Third Amendment) that would have
accrued from July 1, 1998 to the Effective Date on the Series B Preferred
Partnership Units issued in accordance with Section 1(c) hereof on the Effective
Date had such Series B Preferred Partnership Units been outstanding throughout
such period, less (D) an amount equal to the income taxes that would be payable
on the net income relating to the Cash Flow described in clause (A), calculated
at the Special Effective Tax Rate (as defined in the Third Amendment) assuming
for such purposes that such net income were reduced by the amount of interest
described in clause (B) and the amount of the Series B Priority Return described
in clause (C) and (ii) "Cash Flow" means, with respect to any period, (A) total
revenues less total operating, selling, general and administrative expenses,
determined in accordance with generally accepted accounting principles
(excluding expenses that do not result in the accrual of current liabilities),
generated at the cable system level, including an allocation of the management
fees payable to TWE (calculated in a manner consistent with the manner in which
such management fees would have been calculated under Section 3.1(h) of the
Partnership Agreement had such systems been owned by the Partnership during such
period) minus (B) capital expenditures, plus the negative working capital, if
any, existing at the end of such period or minus the positive working capital,
if any, existing at the end of such period. The adjustments made pursuant to
this Section 8 are already reflected in the capital account balances of the
partners of the Partnership and, accordingly, no additional adjustments to the
partners' capital account balances shall be made in respect of such adjustments.
9. Amendments to Partnership Agreement. If the Closing occurs prior
to the closing of the transactions contemplated by the Second Transaction
Agreement, the parties agree that, notwithstanding anything to the contrary
contained in the Second Transaction Agreement, the Second Amendment contemplated
thereby shall not be executed and shall not be a condition of closing under the
Second Transaction Agreement. In such event, the parties shall rename the Third
Amendment as the "Second Amendment" and shall make such other ministerial
modifications as are
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necessary or advisable to reflect the intent of this Agreement and the Second
Transaction Agreement.
10. Miscellaneous.
(a) This Agreement shall be governed by and construed in
accordance with the laws of the State of New York (other than its rules of
conflicts of law to the extent the application of the law of another
jurisdiction would be required thereby).
(b) The parties hereto shall cooperate with each other and
their respective counsel and accountants in connection with any steps required
to be taken as part of their respective obligations under this Agreement and
will each use reasonable best efforts to perform or fulfill all conditions and
obligations to be performed or fulfilled by them under this Agreement so that
the transactions contemplated hereby shall be consummated.
(c) Section headings contained in this Agreement are inserted
only as a matter of convenience and reference and in no way define, limit,
extend or describe the scope of this Agreement or the intent of any provisions
hereof.
(d) This Agreement may be executed in one or more
counterparts, each of which shall be an original and all of which, when taken
together, shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties have executed this Agreement as of
the date first above written.
ADVANCE PUBLICATIONS, INC.
By: /s/ X.X. Xxxxxxxx Jr.
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Name: X.X. Xxxxxxxx, Jr.
Title: Chairman/Vice President
XXXXXXXX BROADCASTING
CORPORATION
By: /s/ Xxxxxx X. Xxxxx
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Name: Xxxxxx X. Xxxxx
Title: Vice President
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ADVANCE/XXXXXXXX PARTNERSHIP
By: ADVANCE COMMUNICATION
CORP., General Partner
By: /s/ Xxxxxx X. Xxxxx
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Name: Xxxxxx X. Xxxxx
Title: President
By: XXXXXXXX BROADCASTING
CORPORATION, General Partner
By: /s/ Xxxxxx X. Xxxxx
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Name: Xxxxxx X. Xxxxx
Title: Vice President
TIME WARNER ENTERTAINMENT
COMPANY, L.P.
By: /s/ Xxxxxx X. Xxxxxx
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Name:Xxxxxx X. Xxxxxx
Title: Vice President
PARAGON COMMUNICATIONS
By: KBL COMMUNICATIONS, INC.,
Managing General Partner
By: /s/ Xxxxxxx X.Xxxx
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Name: Xxxxxxx X. Xxxx
Title: Vice President
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TIME WARNER ENTERTAINMENT -
ADVANCE/XXXXXXXX PARTNERSHIP
By: TIME WARNER ENTERTAINMENT
COMPANY, L.P., General Partner
By: /s/ Xxxxxx X. Xxxxxx
----------------------------------
Name: Xxxxxx X. Xxxxxx
Title: Vice President
By: ADVANCE/XXXXXXXX
PARTNERSHIP, General Partner
By: ADVANCE COMMUNICATION CORP.,
General Partner
By: /s/ Xxxxxx X. Xxxxx
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Name: Xxxxxx X. Xxxxx
Title: President
By: XXXXXXXX BROADCASTING
CORPORATION, General Partner
By: /s/ Xxxxxx X. Xxxxx
------------------------------
Name: Xxxxxx X. Xxxxx
Title: Vice President
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For purposes of Section 6 only:
TIME WARNER INC.
By: /s/ Xxxxxx X. Xxxxxx
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Name: Xxxxxx X. Xxxxxx
Title: Vice President
Accepted and agreed to as
of the date set forth above:
MEDIAONE GROUP, INC. (as successor in interest to
U S WEST, INC. and U S WEST
MULTIMEDIA COMMUNICATIONS, INC.
under TWE's limited partnership agreement)
By: /s/ Xxxxxx Xxxxxxxx
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Name: Xxxxxx Xxxxxxxx
Title: Executive Vice President
