EXHIBIT 10.19
================================================================================
ASSET EXCHANGE AGREEMENT
BY AND AMONG
HERITAGE CABLEVISION OF SOUTH EAST MASSACHUSETTS, INC.
HERITAGE CABLEVUE, INC., TCI CABLEVISION OF ST. ▇▇▇▇▇▇▇, INC.,
TCI OF COUNCIL BLUFFS, INC., TCI OF VIRGINIA, INC.,
UA-COLUMBIA CABLEVISION OF MASSACHUSETTS, INC.,
UNITED CABLE TELEVISION OF SARPY COUNTY, INC.,
UNITED CABLE TELEVISION OF SCOTTSDALE, INC.,
AND
TCI AMERICAN CABLE HOLDINGS, L.P.,
AND
COXCOM, INC.
DATED
DECEMBER 31, 1996
================================================================================
TABLE OF CONTENTS
Page
----
1. Definitions...................................................................................... 1
1.1. Additional System Agreement............................................................... 2
1.2. Additional System Closing Date............................................................ 2
1.3. Affiliate................................................................................. 2
1.4. Annualized Cash Flow...................................................................... 2
1.5. Assets.................................................................................... 2
1.6. Basic Cable Service....................................................................... 2
1.7. Business Day.............................................................................. 2
1.8. Cable Act................................................................................. 2
1.9. Closing................................................................................... 2
1.10. Communications Act........................................................................ 3
1.11. Compensation Arrangement.................................................................. 3
1.12. Contracts................................................................................. 3
1.13. Contribution.............................................................................. 3
1.14. ▇▇▇....................................................................................... 3
1.15. CPST or Cable Programming Services Tier................................................... 3
1.16. Employee Plan............................................................................. 3
1.17. Encumbrance............................................................................... 4
1.18. Environmental Law......................................................................... 4
1.19. Equivalent Billing Unit................................................................... 4
1.20. ERISA..................................................................................... 5
1.21. FAA....................................................................................... 5
1.22. FCC....................................................................................... 5
1.23. Franchises................................................................................ 5
1.24. GAAP...................................................................................... 5
1.25. Governmental Authority.................................................................... 5
1.26. Governmental Permits...................................................................... 5
1.27. Hazardous Substances...................................................................... 5
1.28. HSR Act................................................................................... 6
1.29. Intangibles............................................................................... 6
1.30. Legal Requirement......................................................................... 6
1.31. Material Adverse Effect................................................................... 6
1.32. Multiemployer Plan........................................................................ 6
1.33. Permitted Encumbrances.................................................................... 6
1.34. Person.................................................................................... 7
1.35. Quad Cities Rebuild....................................................................... 7
1.36. Quarterly Cash Flow....................................................................... 7
1.37. Real Property............................................................................. 7
1.38. Required Consents......................................................................... 7
1.39. Service Areas............................................................................. 7
1.40. System or Systems......................................................................... 8
1.41. System Material Adverse Effect............................................................ 8
1.42. Tangible Personal Property................................................................ 8
1.43. TCI....................................................................................... 8
1.44. Other Definitions......................................................................... 8
2. Exchange of Assets............................................................................... 9
2.1. Exchange.................................................................................. 9
2.2. Inclusion of Assets....................................................................... 9
2.3. Value of Exchanged Assets................................................................. 9
3. Additional Consideration......................................................................... 10
3.1. Valuation Differential.................................................................... 10
3.2. Adjustments to Cash Consideration......................................................... 10
3.3. Determination of Adjustments to Cash Consideration........................................ 12
3.4. Additional System Adjustments............................................................. 13
4. Assumed Liabilities and Excluded Assets.......................................................... 14
4.1. Assignment and Assumption................................................................. 14
4.2. Excluded Assets........................................................................... 14
5. Representations and Warranties of TCI Subsidiaries and TCI, L.P.................................. 16
5.1. Organization, Standing and Authority...................................................... 16
5.2. Authorization and Binding Obligation...................................................... 16
5.3. No Consents; Absence of Conflicting Agreements............................................ 17
5.4. Governmental Permits...................................................................... 17
5.5. Real Property............................................................................. 18
5.6. Tangible Personal Property................................................................ 19
5.7. Contracts................................................................................. 19
5.8. Complete System........................................................................... 20
5.9. Trademarks, Trade Names and Copyrights.................................................... 20
5.10. Information on TCI Systems................................................................ 21
5.11. Financial Statements...................................................................... 22
5.12. Employee Benefit Plans.................................................................... 22
5.13. Labor Relations........................................................................... 23
5.14. Tax Returns; Other Reports................................................................ 23
5.15. Claims and Legal Actions.................................................................. 24
5.16. Environmental Matters..................................................................... 24
5.17. Compliance with Laws...................................................................... 25
5.18. Conduct of Business in Ordinary Course.................................................... 25
5.19. FCC and Copyright Compliance.............................................................. 25
5.20. Accounts Receivable....................................................................... 27
5.21. Competitive Activity...................................................................... 27
5.22. Cure...................................................................................... 27
6. Representations and Warranties of Cox............................................................ 27
6.1. Organization, Standing and Authority...................................................... 27
6.2. Authorization and Binding Obligation...................................................... 28
6.3. No Consents; Absence of Conflicting Agreements............................................ 28
6.4. Governmental Permits...................................................................... 29
6.5. Real Property............................................................................. 29
6.6. Tangible Personal Property................................................................ 30
6.7. Contracts................................................................................. 31
6.8. Complete System........................................................................... 31
6.9. Trademarks, Trade Names and Copyrights.................................................... 31
6.10. Information on Cox Systems................................................................ 32
6.11. Financial Statements...................................................................... 33
6.12. Employee Benefit Plans.................................................................... 33
6.13. Labor Relations........................................................................... 34
6.14. Tax Returns; Other Reports................................................................ 34
6.15. Claims and Legal Actions.................................................................. 35
6.16. Environmental Matters..................................................................... 35
6.17. Compliance with Laws...................................................................... 36
6.18. Conduct of Business in Ordinary Course.................................................... 36
6.19. FCC and Copyright Compliance.............................................................. 36
6.20. Accounts Receivable....................................................................... 38
6.21. Competitive Activity...................................................................... 38
6.22. Cure...................................................................................... 38
6.23. Additional System(s)...................................................................... 38
7. Pre-Closing Covenants............................................................................ 38
7.1. Access to Premises and Records............................................................ 38
7.2. Continuity and Maintenance of Operations.................................................. 39
7.3. Employee Benefit Matters.................................................................. 41
7.4. Broker's Fees............................................................................. 42
7.5. Required Consents and Estoppel Certificates............................................... 42
7.6. Title Commitments and Surveys............................................................. 44
7.7. Environmental Investigations.............................................................. 44
7.8. HSR Notification.......................................................................... 45
7.9. No Shop................................................................................... 46
7.10. Notification of Certain Matters........................................................... 46
7.11. Risk of Loss; Condemnation................................................................ 46
7.12. Lien and Judgment Searches................................................................ 47
7.13. Transfer Taxes, Fees and Expenses......................................................... 47
7.14. Noncompetition; Nonsolicitation........................................................... 47
7.15. Cooperation; Satisfaction of Conditions................................................... 47
7.16. Confidentiality........................................................................... 48
7.17. Publicity................................................................................. 48
7.18. Billing Services.......................................................................... 48
7.19. Delivery of Financial Information......................................................... 49
7.20. Capital Expenditures...................................................................... 49
7.21. Franchise Renewals........................................................................ 49
7.22. Use of Transferor's Name.................................................................. 49
7.23. Completion of the Contribution............................................................ 50
7.24. Certain Post-Closing Covenants............................................................ 50
7.25. Updated Schedules......................................................................... 50
7.26. Leased Vehicles........................................................................... 50
7.27. DCR/DMX................................................................................... 50
7.28. Additional System(s)...................................................................... 51
7.29. Interim Financial Statements.............................................................. 51
7.30. Iowa Microwave Interconnect............................................................... 51
8. Closing.......................................................................................... 52
9. Conditions to Closing............................................................................ 52
9.1. Conditions to the Obligations of Transferee and Transferor................................ 52
9.2. Conditions to the Obligations of Transferee............................................... 52
9.3. Conditions to Obligations of Transferor................................................... 55
9.4. Waiver of Conditions...................................................................... 55
10. Primary and Secondary Transfers.................................................................. 55
10.1. Primary Transfer.......................................................................... 55
10.2. Subsequent Transfers...................................................................... 56
10.3. Management Agreements..................................................................... 56
10.4. Construction.............................................................................. 56
10.5. Cash Consideration........................................................................ 56
10.6. Termination of Management Agreement or Revocation of Retained Franchise................... 57
11. Termination...................................................................................... 57
11.1. Events of Termination..................................................................... 57
11.2. Liabilities in Event of Termination....................................................... 57
11.3. Procedure Upon Termination................................................................ 57
12. Survival; Indemnification........................................................................ 57
12.1. Survival of Representations and Warranties................................................ 57
12.2. Indemnification by Transferor............................................................. 58
12.3. Indemnification by Transferee............................................................. 59
12.4. Procedure for Indemnification............................................................. 59
12.5. Limitations on Liability.................................................................. 60
12.6. Special Indemnification relating to the Additional System(s).............................. 61
12.7. Release of TCI Subsidiaries............................................................... 61
13. Miscellaneous.................................................................................... 61
13.1. Parties Obligated and Benefitted.......................................................... 61
13.2. Notices................................................................................... 61
13.3. Right to Specific Performance; Remedies................................................... 62
13.4. Waiver.................................................................................... 63
13.5. Captions.................................................................................. 63
13.6. Choice of Law............................................................................. 63
13.7. Terms..................................................................................... 63
13.8. Rights Cumulative......................................................................... 63
13.9. Further Actions........................................................................... 63
13.10. Time of the Essence....................................................................... 63
13.11. Late Payments............................................................................. 63
13.12. Counterparts.............................................................................. 64
13.13. Entire Agreement.......................................................................... 64
13.14. Severability.............................................................................. 64
13.15. Construction.............................................................................. 64
LIST OF EXHIBITS AND SCHEDULES
EXHIBITS
--------
A List of TCI Systems and Franchises Related to the TCI Systems
B List of Cox Systems and Franchises Related to the Cox Systems
C Excluded Assets
D Form of Noncompetition and Nonsolicitation Agreement
E Form of Opinion of TCI's General Counsel
F Form of Opinion of Counsel for Cox
G Form of Assumption Agreement
H Form of Management Agreement
SCHEDULES
---------
1.17 Combined Basic Cable Service and CPST Rates for EBU Calculation
1.31A TCI Contested Taxes and Assessments
1.31B Cox Contested Taxes and Assessments
3.2.6 Capital Expenditures
3.2.7 Equivalent Billing Unit Information for Closing Adjustments
5.1 TCI Incorporation and Joint Ventures
5.3 TCI Required Consents
5.4 TCI Governmental Permits
5.5 TCI Real Property
5.6 TCI Tangible Personal Property
5.7 TCI Contracts
5.9 TCI Trademarks, Trade Names and Copyrights
5.10.1 TCI System Information
5.10.3 TCI Rate Information
5.10.4 TCI Channel Line-up Information
5.10.5 TCI Access Issues
5.10.6 TCI Bonds, Surety Instruments and Letters of Credit
5.10.7 TCI MDS, MMDS or SMATV Operations
5.11 TCI Financial Statements
5.12 TCI Employee Benefit Plans
5.13 TCI Employees
5.14 TCI Tax Matters
5.15 TCI Litigation
5.16 TCI Environmental Matters
5.17 TCI Notice of Noncompliance
5.18 TCI Exceptions to Conduct of Business in Ordinary Course
5.19 TCI FCC Compliance
5.21 TCI Competition
6.1 Cox Incorporation and Joint Ventures
6.3 Cox Required Consents
6.4 Cox Governmental Permits
6.5 Cox Real Property
6.6 Cox Tangible Personal Property
6.7 Cox Contracts
6.9 Cox Trademarks, Trade Names and Copyrights
6.10.1 Cox System Information
6.10.3 Cox Rate Information
6.10.4 Cox Channel Line-up Information
6.10.5 Cox Access Issues
6.10.6 Cox Bonds, Surety Instruments and Letters of Credit
6.10.7 Cox MDS, MMDS or SMATV Operations
6.11 Cox Financial Statements
6.12 Cox Employee Benefit Plans
6.13 Cox Employees
6.14 Cox Tax Matters
6.15 Cox Litigation
6.16 Cox Environmental Matters
6.17 Cox Notice of Noncompliance
6.18 Cox Exceptions to Conduct of Business in Ordinary Course
6.19 Cox FCC Compliance
6.21 Cox Competition
7.2A TCI Exceptions to Operations in Ordinary Course
7.2B Cox Exceptions to Operations in Ordinary Course
9.2.6 Aggregate Minimum Number of Equivalent Billing Units
ASSET EXCHANGE AGREEMENT
------------------------
This Asset Exchange Agreement (this "Agreement") is dated this 31st day of
December, 1996, by and among Heritage Cablevision of South East Massachusetts,
Inc., a Massachusetts corporation, Heritage Cablevue, Inc., a Delaware
corporation, TCI Cablevision of St. ▇▇▇▇▇▇▇, Inc., a Louisiana corporation, TCI
of Council Bluffs, Inc., an Iowa corporation, TCI of Virginia, Inc., a Virginia
corporation, UA-Columbia Cablevision of Massachusetts, Inc., a Massachusetts
corporation, United Cable Television of Sarpy County, Inc., a Nebraska
corporation, United Cable Television of Scottsdale, Inc., an Arizona
corporation, (each individually a "TCI Subsidiary" and collectively, the "TCI
Subsidiaries") and TCI American Cable Holdings, L.P., a Colorado Limited
Partnership ("TCI, L.P."), and CoxCom, Inc., a Delaware corporation.
Capitalized terms used herein shall have the meaning set forth in Section 1
below or as otherwise defined herein.
RECITALS
--------
A. The TCI Subsidiaries listed on Exhibit A own and operate the cable
---------
television systems (the "TCI Systems") listed on Exhibit A, providing cable
---------
television service to customers pursuant to the Franchises (as defined below)
listed opposite each such system on Exhibit A.
---------
▇. ▇▇▇ owns and operates cable television systems (the "Cox Systems")
listed on Exhibit B, each providing cable television service to customers
---------
pursuant to the Franchises (as defined below) listed opposite each such system
on Exhibit B.
---------
C. Prior to Closing, the TCI Subsidiaries will contribute the TCI Assets
to TCI, L.P..
D. TCI, L.P., and Cox desire to exchange on the Closing Date the assets
of the TCI Systems and the assets of the Cox Systems in a transaction intended
to qualify as a tax-free exchange of like-kind assets pursuant to Section 1031
of the Internal Revenue Code of 1986, as amended (the "Code"), on the terms and
conditions set forth herein.
AGREEMENT
---------
In consideration of the above recitals and the mutual agreements stated in
this Agreement, the parties agree as follows:
1. Definitions. All defined terms in this Agreement apply equally to
-----------
both the TCI Subsidiaries and Cox. When it is the parties' intent to limit the
scope of any defined term solely to one party, such intent is indicated by
referring specifically to one party or the other (and in such instances "TCI
Subsidiaries" may be shortened to "TCI"), e.g., "TCI Service Area" or "Cox
- -
Assets." The term "Transferor" shall refer equally to TCI, L.P., and Cox insofar
as the term refers to such party in its capacity of transferring assets to the
other party. The term "Transferee" shall refer equally to TCI, L.P. and Cox
insofar as the term refers to such party in its capacity of receiving assets
from the other party. Wherever practicable and appropriate, all disclosures on
Exhibits and Schedules contemplated by this Agreement shall be specified on a
System by System basis.
1.1. Additional System Agreement. The asset purchase agreement
---------------------------
pursuant to which the Additional System(s) is purchased.
1.2. Additional System Closing Date. The closing date of the purchase
------------------------------
of the Additional System(s) pursuant to the Additional System Agreement.
1.3. Affiliate. With respect to any Person, any other Person
---------
controlling, controlled by or under common control with such Person, with
"control" for such purpose meaning the possession, directly or indirectly, of
the power to direct or cause the direction of the management and policies of a
Person, whether through the ownership of voting securities or voting interests,
by contract or otherwise.
1.4. Annualized Cash Flow. The Quarterly Cash Flow for the calendar
--------------------
quarter immediately preceding the date of delivery of the Cash Flow Certificate,
multiplied by four.
1.5. Assets. All properties, privileges, rights, interests and
------
claims, real and personal, tangible and intangible, of every type and
description that are owned, leased, held or used principally in the cable
television business activities conducted by the TCI Subsidiaries or Cox, as
applicable through the Systems in and around the Service Areas, in which the TCI
Subsidiaries or Cox as applicable, have any right, title or interest or in which
they acquire any right, title or interest on or before the Closing Date,
including Real Property, Tangible Personal Property, Governmental Permits,
Contracts, Intangibles and accounts receivable, but excluding any Excluded
Assets. Notwithstanding the foregoing, if the Additional System is acquired on
or prior to the Closing Date or, if the Additional System is identified within
45 days after the Closing Date and the Additional System Closing Date occurs on
or before the Outside Additional System Closing Date, then the Additional System
shall be deemed to be a Cox System and the assets of such Additional System
shall be "Cox Assets," subject to the express limitations contained herein.
1.6. Basic Cable Service. The tier of cable television service which
-------------------
includes the retransmission of local broadcast signals as defined by the Cable
Act.
1.7. Business Day. Any day other than Saturday, Sunday or a day on
------------
which banking institutions in New York, New York or Denver, Colorado are
required or authorized to be closed.
1.8. Cable Act. The Cable Communications Policy Act of 1984 as
---------
amended by the Cable Television Consumer Protection and Competition Act of 1992,
as may be further amended, and the rules and regulations thereunder, as in
effect from time to time.
1.9. Closing. The consummation of the transactions contemplated by
-------
this Agreement, as described in Section 8, the date of which is referred to as
the "Closing Date."
1.10. Communications Act. The Communications Act of 1934, as amended,
------------------
and the rules and regulations thereunder, as in effect from time to time.
2
1.11. Compensation Arrangement. Any plan or compensation arrangement
------------------------
other than an Employee Plan or a Multiemployer Plan, whether written or
unwritten, which provides to employees of any of the TCI Subsidiaries or of Cox,
as applicable, or any entity related thereto (under the terms of Sections
414(b), (c), (m) or (o) of the Code) any compensation or other benefits, whether
deferred or not, in excess of base salary or wages and excluding overtime pay,
including, but not limited to, any bonus (including any bonus given to motivate
employees to work for any of TCI Subsidiaries or of Cox, as applicable, through
Closing), incentive plan, stock rights plan, deferred compensation arrangement,
stock purchase plan, severance pay plan and any other perquisites and employee
fringe benefit plan.
1.12. Contracts. All pole attachment and conduit agreements, personal
---------
property leases, wire-crossing agreements, subscriber agreements (including
multi-dwelling unit and commercial agreements), maintenance agreements,
retransmission consent agreements and other agreements, written or oral
(including any amendments and other modifications thereto) to which any of the
TCI Subsidiaries or Cox, as applicable, is a party and that relate to the Assets
or the business and operations of the Systems (other than the Governmental
Permits, programming agreements, agreements constituting Real Property and any
contracts listed on Exhibit C), and that are (i) in effect on the date hereof or
(ii) entered into by the TCI Subsidiaries or Cox, as applicable, in the ordinary
course of business and as permitted by this Agreement between the date hereof
and the Closing Date.
1.13. Contribution. The contribution by the TCI Subsidiaries of the
------------
TCI Assets to TCI, L.P.
1.14. Cox. CoxCom, Inc. and those corporations to whom it is the
---
successor in interest by merger.
1.15. CPST or Cable Programming Services Tier. The tier of cable
---------------------------------------
television service immediately above Basic Cable Service offered by a System
providing for a package of programming that includes satellite-delivered
services.
1.16. Employee Plan. Any pension, retirement, profit-sharing, deferred
-------------
compensation, vacation, severance, bonus, incentive, medical, vision, dental,
disability, life insurance or any other employee benefit plan as defined in
Section 3(3) of ERISA (other than a Multiemployer Plan) to which any of the TCI
Subsidiaries or Cox, as applicable, or any entity related thereto (under the
terms of Sections 414(b), (c), (m) or (o) of the Code) contributes or which any
of the TCI Subsidiaries or Cox, as applicable, or any entity related thereto
(under the terms of Sections 414(b), (c), (m) or (o) of the Code) sponsors or
maintains or by which Transferor or any such entity related to Transferor is
otherwise bound.
1.17. Encumbrance. Any mortgage, lien, security interest, security
-----------
agreement, conditional sale or other title retention agreement, limitation,
pledge, option, charge, assessment, restrictive agreement, restriction,
encumbrance, adverse interest, restriction on transfer or any exception to or
defect in title or other ownership interest (including reservations, rights of
way,
3
possibilities of reverter, encroachments, easements, rights of entry,
restrictive covenants, leases and licenses).
1.18. Environmental Law. Any Legal Requirement pertaining to land use,
-----------------
air, soil, surface water, groundwater (including protection, cleanup, removal,
remediation or damage thereof), public or employee health or safety or any other
environmental matter, including, without limitation, the following laws as the
same may be amended from time to time: (i) Clean Air Act (42 U.S.C. (S) 7401,
et seq.), (ii) Clean Water Act (33 U.S.C. (S) 1251, et seq.), (iii) Resource
-- --- -- ---
Conservation and Recovery Act (42 U.S.C. (S) 6901, et seq.), (iv) Comprehensive
-- ---
Environmental Response Compensation Liability Act, as amended (42 U.S.C. (S)
9601, et seq.) ("CERCLA"), (v) Safe Drinking Water Act (42 U.S.C. (S) 300f, et
-- --- --
seq.), (vi) Toxic Substance Control Act (15 U.S.C. (S) 2601, et seq.), (vii)
--- -- ---
Rivers and Harbors Act (33 U.S.C. (S) 401, et seq.), (viii) Endangered Species
-- ---
Act (16 U.S.C. (S) 1531, et seq.), and (ix) Occupational Safety and Health Act
-- ---
(29 U.S.C. (S) 651, et seq.), together with any other applicable federal, state
-- ---
or local laws relating to emissions, discharges, releases or threatened releases
of any Hazardous Substance into ambient air, land, surface water, ground water,
personal property or structures, or otherwise relating to the manufacture,
processing, distribution, use, treatment, storage, disposal, transport,
discharge or handling of any Hazardous Substance.
1.19. Equivalent Billing Unit. An active customer for Basic Cable
-----------------------
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 shall be determined on a System by System basis
by dividing the gross bulk-rate ▇▇▇▇▇▇▇▇ for both (i) Basic Cable Service and
(ii) CPST (but not ▇▇▇▇▇▇▇▇ from a la carte tiers or premium services,
installation or other non-recurring charges, converter rental, new product tier
or from any outlet or connection other than such customer's first or from any
pass-through charge for sales taxes, line-itemized franchise fees, fees charged
by the FCC and the like) attributable to such multi-unit dwelling or commercial
establishment during the most recent billing period ended prior to the date of
calculation (but excluding ▇▇▇▇▇▇▇▇ in excess of a single month's charge) by the
retail rate charged during that billing period to individual households for
combined Basic Cable Service and CPST offered by a System, such rate as of the
date of this Agreement being the rate for such System set forth on SCHEDULE 1.17
(excluding a la carte tiers or premium services, installation or other non-
recurring charges, converter rental, new product tier or from any outlet or
connection other than the first or from any pass-through charges for sales
taxes, line-itemized franchise fees, fees charged by the FCC and the like). For
purposes of this definition, an "active customer" shall mean any person,
commercial establishment or multi-unit dwelling at any given time that is
paying for and receiving Basic Cable Service from the System who has an account
that is not more than 60 days past due (except for past due amounts of $5 or
less, provided such account is otherwise current). For purposes of this
definition, an "active customer" does not include any person, commercial
establishment or multi-unit dwelling that as of the date of calculation has not
paid in full the charges for at least one month of the services ordered. For
purposes of this definition, the number of days past due of a customer account
shall be determined from the first day of the period for which the applicable
billing relates.
4
1.20. ERISA. The Employee Retirement Income Security Act of 1974, as
-----
amended, and the rules and regulations thereunder, as in effect from time to
time.
1.21. FAA. The Federal Aviation Administration.
---
1.22. FCC. The Federal Communications Commission.
---
1.23. Franchises. All franchise agreements, franchise applications,
----------
operating permits and similar governing agreements, instruments, resolutions,
statutes, ordinances, approvals, authorizations, and similar rights obtained
from any Governmental Authority which are necessary or required in order to
operate the TCI Systems or the Cox Systems, as applicable, and provide cable
television services thereto, including all amendments thereto and renewals or
modifications thereof, as listed on SCHEDULE 5.4 (TCI SYSTEMS) and SCHEDULE 6.4
(COX SYSTEMS).
1.24. GAAP. Generally accepted accounting principles as in effect from
----
time to time in the United States of America.
1.25. Governmental Authority. (i) The United States of America, (ii)
----------------------
any state, commonwealth, territory or possession of the United States of America
and any political subdivision thereof (including counties, municipalities and
the like) or (iii) any agency, authority or instrumentality of any of the
foregoing, including any court, tribunal, department, bureau, commission or
board.
1.26. Governmental Permits. All Franchises and all other approvals,
--------------------
authorizations, permits, licenses (including without limitation domestic
satellite earth station and business radio), registrations, qualifications,
leases, variances and similar rights obtained from any Governmental Authority
authorizing, permitting or governing the provision of cable television services
or otherwise required for the ownership of the TCI Systems or the Cox Systems,
as applicable, as described on SCHEDULE 5.4 (TCI SYSTEMS) or SCHEDULE 6.4 (COX
SYSTEMS) but excluding any Excluded Assets.
1.27. Hazardous Substances. Any pollutant, contaminant, hazardous or
--------------------
toxic substance, material, constituent or waste or any pollutant that is labeled
or regulated as such terms are defined in any Environmental Law or that is
labeled or regulated as such by any Governmental Authority including, without
limitation, asbestos and asbestos-containing materials and any material or
substance that is: (i) designated as a "hazardous substance" pursuant to
Section 307 of the Federal Water Pollution Control Act, 33 U.S.C. Section 1251,
et seq. (33 U.S.C. (S) 1317), (ii) defined as a "hazardous waste" pursuant to
-- ---
Section 1004 of the Federal Solid Waste Disposal Act, 42 U.S.C. Section 6901, et
--
seq. (42 U.S.C. (S) 6903), (iii) defined as a "hazardous substance" pursuant to
---
Section 101 of CERCLA or (iv) is so designated or defined under any other
applicable Legal Requirements.
1.28. HSR Act. The ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act of
-------
1976, as amended, and the rules and regulations thereunder, as in effect from
time to time.
5
1.29. Intangibles. All intangible assets owned, used primarily, or
-----------
held for use primarily in the business or operations of the Systems, including
trade secrets, proprietary information and technical information and data,
however embodied (e.g., in the form of subscriber lists, records, customer polls
and surveys, maps, computer disks and tapes, plans, diagrams, blue prints and
schematics, or contained in filings with the Governmental Authorities and the
FCC relating to the System, or in books and records relating to the business or
operations of the Systems (subject to Section 4.2.3)), rights or claims under
Tangible Personal Property warranties, copyrights and going concern value, if
any, but excluding any Excluded Assets.
1.30. Legal Requirement. Any statute, ordinance, code, law, rule,
-----------------
regulation, order or other requirement, standard or procedure enacted, adopted
or applied by any Governmental Authority, including judicial decisions applying
common law or interpreting any other Legal Requirement.
1.31. Material Adverse Effect. A material adverse effect on the
-----------------------
aggregate operations, assets or financial condition of the TCI Systems or the
Cox Systems, as applicable, taken as a whole, other than matters affecting the
cable television industry generally (including without limitation legislative,
regulatory or litigation matters) and matters relating to or arising from
national economic conditions (including financial and capital markets).
1.32. Multiemployer Plan. A plan, as defined in ERISA Sections 3(37)
------------------
or 4001(a)(3), to which the TCI Subsidiaries or Cox, as applicable, or any trade
or business which would be considered a single employer with them under Section
4001(b)(1) of ERISA contributed, contributes or is required to contribute.
1.33. Permitted Encumbrances. The following Encumbrances: (i)
----------------------
statutory landlord's liens and liens for current taxes, assessments and
governmental charges not yet due and payable (or being contested in good faith
all of which are listed in SCHEDULES 1.31A (TCI) and 1.31B (Cox)), (ii) zoning
laws and ordinances and similar Legal Requirements, (iii) statutory liens or
other encumbrances that are minor or technical defects in title that
individually or in the aggregate do not materially affect the value,
marketability or utility of a given Asset as presently utilized, (iv) such
liens, liabilities or encumbrances as are Assumed Liabilities; (v) leased
interests and mortgagee interests in property owned by others and leased
interests in property leased to others; (vi) rights reserved to any Governmental
Authority to regulate the affected property and (vii) as to interests in Real
Property, any easements, rights-of-way, servitudes, permits, restrictions and
minor imperfections or irregularities in title which are reflected in the public
records and which do not individually or in the aggregate with respect to a
given parcel of Real Property, materially interfere with the right or ability to
own, use or operate the Real Property as presently utilized or to convey good
and marketable title in fee simple to such Real Property, provided that
"Permitted Encumbrances" will not include any Encumbrance which could prevent or
inhibit in any material way the conduct of the business of the affected System,
and provided further that classification of any Encumbrance as a Permitted
Encumbrance under (i) above will not affect any responsibility Transferor may
have for such Encumbrance, including pursuant to the adjustment and proration
provisions of Article 3 and the indemnification provisions of Article 12.
6
1.34. Person. Any natural person, corporation, partnership, trust,
------
unincorporated organization, association, limited liability company,
Governmental Authority or other entity.
1.35. Quad Cities Rebuild. The upgrade of the Quad Cities System to
-------------------
achieve (i) all miles of distribution plant upgraded, spaced and activated to a
capacity of 750 MHz, and (ii) capability for signals to be transmitted
downstream between 50 MHz and 750 MHz.
1.36. Quarterly Cash Flow. For any calendar quarter, the net earnings
-------------------
or net income attributable to the business of operating the Systems for such
quarter, determined in accordance with GAAP, without taking into account any
interest income or any nonrecurring items of income, gain or expense and before
deduction of any amount on account of corporate overhead allocations, interest,
income taxes, depreciation, amortization or other noncash charges, it being
agreed that Quarterly Cash Flow shall be calculated in a manner consistent with
that used by the party for whom the determination is made in the preparation of
such party's Financial Statements.
1.37. Real Property. All assets consisting of realty, including
-------------
appurtenances, improvements and fixtures located on such realty, and any other
interests in real property, including fee interests in offices and headend sites
as well as leasehold interests and easements, including without limitation those
described on SCHEDULE 5.5 (TCI Systems) or SCHEDULE 6.5 (Cox Systems), plus such
additions thereto and deletions therefrom arising in the ordinary course of
business and as permitted by this Agreement between the date hereof and the
Closing Date, but excluding any right-of-way, easement or access agreements
pursuant to which the TCI Subsidiaries or Cox, as applicable, have access to
multiple dwelling units or commercial establishments (all of which shall be
treated as Contracts for purposes of this Agreement) and any Excluded Assets.
1.38. Required Consents. All Franchises, licenses, authorizations,
-----------------
approvals and consents required under Governmental Permits, Contracts or
otherwise for (i) Transferor to transfer the Assets and the business and
operations of the Systems to Transferee, (ii) Transferee to conduct the business
and operations of the Systems and to own, lease, use and operate the Assets at
the places and in the manner in which the business or operations of the Systems
is conducted as of the date of this Agreement and on the Closing Date and (iii)
Transferee to assume and perform the Governmental Permits and Contracts in
accordance with the terms hereof.
1.39. Service Areas. When used in reference to TCI, the term "Service
-------------
Areas" shall mean the areas in which the TCI Subsidiaries operate their cable
television business in and around the areas described in the Franchises listed
on Exhibit A. When used in reference to Cox, the term "Service Areas" shall
---------
mean the areas in which Cox operates its cable television business in and around
the areas described in the Franchises listed on Exhibit B.
---------
1.40. System or Systems. When used in the singular, the term refers to
-----------------
a single TCI System or a single Cox System and when used in the plural, the term
refers to all of the TCI Systems or all of the Cox Systems.
7
1.41. System Material Adverse Effect. A material adverse effect on the
------------------------------
operations, assets or financial condition of an individual System to which the
provision relates, other than matters affecting the cable television industry
generally (including without limitation legislative, regulatory or litigation
matters) and matters relating to or arising from national economic conditions
(including financial and capital markets).
1.42. Tangible Personal Property. All the machinery, equipment, tools,
--------------------------
vehicles, furniture, leasehold improvements, office equipment, plant, inventory,
spare parts, supplies and other tangible personal property which are owned or
leased by the TCI Subsidiaries or Cox, as applicable, and used primarily or held
primarily for use as of the date hereof in the conduct of the business and
operations of the Systems, plus such additions thereto and deletions therefrom
arising in the ordinary course of business and as permitted by this Agreement
between the date hereof and the Closing Date, but excluding any Excluded Assets.
1.43. TCI Collectively, TCI, L.P. and the TCI Subsidiaries.
---
1.44. Other Definitions. The following terms are defined in the
-----------------
Sections indicated:
Term Section
---- -------
Additional System Closing Date 3.4.2
Additional System Purchase Price 3.4.1
Additional System(s) 7.28.1
Antitrust Division 7.8
Assumed Liabilities 4.1
Cash Consideration 3.1
Cash Flow Certificate 7.24
CERCLA 1.12
Claimant 12.4.1
Closing Date 1.6
Code Recitals
Copyright Act 5.19.3
Cost of Service Election 5.19.2
Cox Easements 6.5
Cox Employees 6.13
Cox Financial Statements 6.11
Cox Related Agreements 6.2
Cox System Plans 6.12.1
Cox Systems Recitals
Escrow 3.4.2
Escrow Agent 3.4.2
Escrow Amount 3.4.2
Excluded Assets 4.2
Final Report 3.3.2
8
FTC 7.8
Indemnifying Party 12.4.1
Management Agreement 10.3
Noncompetition and
Nonsolicitation Agreement 7.14
Outside Additional System Closing Date 3.4.2
Preliminary Report 3.3.1
Primary Transfer 10.1
Prime Rate 13.11
Retained Assets 10.1
Retained Franchises 10.1
Subsequent Transfer 10.2
Survival Period 12.1
Taking 7.11.2
TCI Easements 5.5
TCI Employees 5.13
TCI Financial Statements 5.11
TCI Related Agreements 5.2
TCI Subsidiaries Recitals
TCI System Plans 5.12.1
TCI Systems Recitals
Transferee 1
Threshold Amount 12.5.1
Transferor 1
2. Exchange of Assets.
------------------
2.1. Exchange. Subject to the terms and conditions set forth in this
--------
Agreement, TCI and Cox agree to cause to be exchanged simultaneously at Closing
the TCI Assets for the Cox Assets.
2.2. Inclusion of Assets. With the exception of the Excluded Assets,
-------------------
and except as otherwise specifically provided in this Agreement, all of the
Assets are intended to be transferred, assigned and conveyed to Transferee,
whether or not described in the Schedules.
2.3. Value of Exchanged Assets. As permitted by Section 1031 of the
-------------------------
Code and regulations promulgated thereunder, (i) the TCI Tangible Personal
Property shall be exchanged for the Cox Tangible Personal Property, (ii) the TCI
Real Property shall be exchanged for the Cox Real Property and (iii) the TCI
Governmental Permits, Contracts and other Intangibles shall be exchanged for the
Cox Governmental Permits, Contracts and other Intangibles. The parties shall
use their commercially reasonable efforts to determine and finalize the value of
the TCI Assets and the Cox Assets (including separate valuations of the
categories of assets included in the preceding sentence) not later than 90 days
after the Closing Date. Once such valuations are mutually agreed to, TCI and
Cox shall not take any position inconsistent with such valuation, will file all
returns and reports with
9
respect to the transaction contemplated by this Agreement, including all
federal, state and local returns on a basis consistent with such valuations and
each promptly shall give to the other notice of any disallowance of or challenge
to such reporting by any taxing Governmental Authority.
3. Additional Consideration.
------------------------
3.1. Valuation Differential. In order to equalize the value of the
----------------------
transaction for both TCI and Cox, in addition to the exchange of the Assets of
the TCI Systems for the Assets of the Cox Systems as described in Section 2, at
Closing at TCI's option either (i) Cox shall pay to TCI by wire transfer, in
immediately available funds, $18,000,000, subject to adjustments as provided in
Sections 3.2 and 3.3 (the "Cash Consideration"), or (ii) Cox shall acquire the
Additional System(s) which shall be exchanged pursuant to Section 7.28 below.
3.2. Adjustments to Cash Consideration.
---------------------------------
3.2.1. Appropriate adjustments on a pro rata basis as of the
Closing Date will be made for all prepaid expenses other than inventory (but
only to the extent the full benefit thereof will be realizable by Transferee
within 12 months after the Closing Date), accrued vacation (only to the extent
Transferee honors such accrual as set forth in Section 7.3.4 below), accrued
expenses (including real and personal property taxes), prepaid income but
exclusive of any unearned revenues from the Home Shopping Network, all as
determined in accordance with GAAP consistently applied, and to reflect the
principle that all expenses and income attributable to the business and
operations of the Systems for the period prior to the Closing Date are for the
account of Transferor, and all expenses and income attributable to the business
and operations of the Systems for the period on and after the Closing Date are
for the account of Transferee.
3.2.2. All advance payments to, or funds of third parties on
deposit with, Transferor as of the Closing Date, relating to the business and
operations of the Systems, including advance payments by advertisers and advance
payments and deposits by customers served by the Systems for converters,
encoders, decoders, cable television service and related sales (including any
accrued interest on such customer deposits), will be retained by Transferor, and
Transferee shall receive a credit for assuming the obligations relating to such
advance payments and deposits in an amount equal to such obligations.
3.2.3. All deposits relating to the business and operations of
the Systems that are held by third parties as of the Closing Date for the
account of Transferor or as security for Transferor's performance of its
obligations, including deposits on leases and deposits for utilities, will be
credited to the account of Transferor in their full amounts and will become the
property of Transferee; provided that no adjustment will be made for any
deposits the full benefit of which for contractual or other reasons cannot be
made available to Transferee within 12 months following the Closing Date.
3.2.4. Transferor shall receive a credit for customer accounts
receivable assigned to Transferee at Closing as follows: (i) 100% of the face
amount of the customer accounts
10
receivable which are outstanding 60 days or less from the first day of the
period to which any outstanding ▇▇▇▇ for such account receivable relates, and
(ii) Transferor shall receive no credit for any customer accounts receivable (A)
any portion of which is 61 days or more past due from the first date of the
period to which any outstanding ▇▇▇▇ for such account receivable relates or (B)
from customers whose accounts are inactive or whose service is pending
disconnection for any reason as of the Closing Date.
3.2.5. Transferor shall receive a credit for advertising accounts
receivable assigned to Transferee at Closing as follows: (i) 100% of the face
amount of the advertising accounts receivable which are outstanding 90 days or
less from the invoice date, (ii) 80% of the face amount of all advertising
accounts receivable which are outstanding more than 90 but fewer than 121 days
from the invoice date. Transferor shall receive no credit for advertising
accounts receivable which are outstanding more than 120 days from the invoice
date. Notwithstanding the foregoing, Transferor shall receive a credit for
advertising accounts receivable assigned to Transferee at Closing of 100% of the
face amount of the advertising accounts receivable from national and regional
representation accounts and from Sprint, regardless of the age thereof.
3.2.6. Transferor shall receive a credit equal to the excess of the
aggregate amount of its capital expenditures expended in accordance with the
terms hereof for upgrading cable plant and converters and extending its cable
plant in Transferor's Systems during the period between January 1, 1996 and
Closing in excess of the amount budgeted for such purposes as described on
SCHEDULE 3.2.6, if Transferee requested such excess spending in writing pursuant
to Section 7.20 or such excess spending was otherwise permitted pursuant to
Section 7.20, and Transferee shall receive a credit equal to the amount by which
the aggregate amount of Transferor's capital expenditures utilized for upgrading
cable plant and converters and extending its cable plant in Transferor's System
during the same period is less than the amount budgeted for such purposes as
described on SCHEDULE 3.2.6.
3.2.7. Transferee shall receive a credit for an amount equal to the
aggregate "Per-EBU Value" indicated on SCHEDULE 3.2.7 with respect to
Transferor's Systems for each Equivalent Billing Unit less than the "Minimum
Number of EBUs" indicated on SCHEDULE 3.2.7 with respect to Transferor's
Systems, with the aggregate number of Equivalent Billing Units in Transferor's
Systems (calculated by taking the average of the Equivalent Billing Units for
the end of each of the thirteen months ending immediately prior to the Closing)
being estimated as of Closing in Transferor's certificate delivered to
Transferee in accordance with Section 9.2.12, and thereafter subject to post-
Closing verification and adjustment under Section 3.3.2.
3.2.8. The adjustments provided for in this Section 3.2 will be
made without duplication. In addition, none of the adjustments provided for in
this Section 3.2 will be made with respect to any Excluded Asset or with respect
to any item of income or expense related to an Excluded Asset or the Additional
System(s). The net amount of the adjustments, if any, provided for in this
Section 3.2 shall be treated as an adjustment to the Cash Consideration paid at
Closing.
11
3.3. Determination of Adjustments to Cash Consideration. Preliminary
--------------------------------------------------
and final adjustments to the Cash Consideration will be determined as follows:
3.3.1. At least ten Business Days prior to the Closing,
Transferor will deliver to Transferee a report with respect to Transferor's
Systems (the "Preliminary Report"), certified as to completeness and accuracy by
Transferor, showing in detail the preliminary determination of the adjustments
referred to in Section 3.2, calculated in accordance with such Section as of the
Closing Date (or as of any other date(s) agreed to by the parties) together with
any documents substantiating the determination of the adjustments to the Cash
Consideration proposed in the Preliminary Report. The Preliminary Report will
include the number of subscribers for each of Transferor's Systems, a
calculation of the number of Equivalent Billing Units and a schedule setting
forth advance payments and deposits made to or by Transferor, as well as
accounts receivable information relating to the Systems (showing sums due and
their respective aging as of the Closing Date). The parties shall negotiate in
good faith to resolve any dispute and to reach an agreement prior to the Closing
Date on such estimated adjustments as of the Closing Date or thereafter in
accordance with Section 3.3.2 and 3.3.3 below. The net adjustment shown in the
Preliminary Reports, as adjusted by agreement of the parties will be reflected
as an adjustment to the Cash Consideration payable at the Closing.
3.3.2. Within 90 days after the Closing, Transferor will deliver
to Transferee a report with respect to Transferor's Systems (the "Final
Report"), similarly certified by Transferor, showing in detail the final
determination of any adjustments which were not calculated as of the Closing
Date and containing any corrections to the Preliminary Report, together with any
documents substantiating the final calculation of the adjustments proposed in
the Final Report. Transferee will provide Transferor with reasonable access to
all records which Transferee has in its possession and which are necessary for
Transferor to prepare the Final Report.
3.3.3. Within 30 days after receipt of the Final Report,
Transferee will give Transferor written notice of Transferee's objections, if
any, to the other's Final Report. If there are no objections to the Final
Reports, the net amount of any adjustments to the Cash Consideration paid at
Closing reflected in the Final Reports shall be promptly paid by the appropriate
party. If there are objections to either Final Report, the parties shall use
good faith efforts to jointly resolve the objections within 30 days of
Transferor's receipt of Transferee's written notice of objections, which
resolution, if achieved, shall be binding upon both parties to this Agreement
and not subject to dispute or review. If the parties cannot resolve the
discrepancies to their mutual satisfaction within such 30-day period, the
parties shall, within the following 10 days, jointly designate a national
independent public accounting firm to be retained to review the Final Reports
together with the notice(s) of objections and any other relevant documents. The
parties agree that the foregoing independent public accounting firm shall not be
one that is regularly engaged by either party. The cost of retaining such
independent public accounting firm shall be borne equally by the parties. Such
firm shall report its conclusions as to adjustments pursuant to this Section 3.3
which shall be conclusive on all parties to this Agreement and not be subject to
dispute or review. If, after resolution of the Final Reports, an additional
adjustment to the Cash Consideration is appropriate with respect to the amount
of the adjustments paid or credited at the Closing, the appropriate party shall
promptly pay such amount.
12
3.4. Additional System Adjustments.
-----------------------------
3.4.1. If the Additional System is acquired by Cox on or prior to
the Closing Date and (i) the Additional System Purchase Price is greater than
the Cash Consideration (A) Cox shall pay to the seller of the Additional System,
the Cash Consideration and (B) TCI shall pay to the seller of the Additional
System the difference between (a) the Additional System Purchase Price and (b)
the Cash Consideration or (ii) the Additional System Purchase Price is less than
the Cash Consideration (Y) Cox shall pay to the seller of the Additional System,
the Additional System Purchase Price, and (Z) Cox shall pay to TCI an amount
equal to (a) the Cash Consideration less (b) the Additional System Purchase
Price. The "Additional System Purchase Price" means the purchase price paid by
Cox to acquire the Additional System, after taking into account preliminary
closing purchase price adjustments under the Additional System Agreement. Such
payments shall be made by wire transfer of immediately available funds.
3.4.2. If the Additional System is not acquired by Cox on or prior
to the Closing Date, on the Closing Date Cox shall deposit by wire transfer of
immediately available funds, the Cash Consideration (the "Escrow Amount") into
an escrow account with an escrow agent chosen by TCI (the "Escrow Agent")
pursuant to a mutually agreed upon form of escrow agreement (the "Escrow"). If
TCI does not identify and designate an Additional System within 45 days after
the Closing Date, Cox shall direct the Escrow Agent to pay the Escrow Amount to
TCI. If TCI does identify and designate an Additional System within 45 days
after the Closing Date but the Additional System Closing Date does not occur
within 180 days after the Closing Date (the "Outside Additional System Closing
Date"), or the Additional System Agreement is terminated before the Outside
Additional System Closing Date, then on the earlier of the date of termination
of the Additional System Agreement and the Outside Additional Closing Date, Cox
shall direct the Escrow Agent to pay the Escrow Amount to TCI. If an Additional
System is identified and designated within 45 days after the Closing Date and
the Additional System Closing Date occurs on or before the Outside Additional
System Closing Date, then on the Additional System Closing Date, (i) if the
Additional System Purchase Price is less than or equal to the Cash
Consideration, Cox shall direct the Escrow Agent to pay (A) the amount of the
Additional System Purchase Price to the seller of the Additional System, and (B)
the remainder of the Escrow Amount (including interest) to TCI, if any; and (ii)
if the Additional System Purchase Price is greater than the Cash Consideration,
Cox shall direct the Escrow Agent to pay the Escrow Amount (including interest)
to the seller of the Additional System; provided, however, that TCI pays an
amount equal to the Additional System Purchase Price less the Escrow Amount
(including interest) to the seller of the Additional System. The Escrow
Agreement shall provide that all fees to be paid to the Escrow Agent shall be
borne by TCI, and, except as provided in clause (ii) above, all interest earned
on the Escrow Amount shall be paid to TCI.
4. Assumed Liabilities and Excluded Assets.
---------------------------------------
4.1. Assignment and Assumption. At the Closing, Transferor will
-------------------------
assign, and Transferee will assume and perform, the Assumed Liabilities (the
"Assumed Liabilities"), which are
13
defined as: (i) Transferor's obligations to customers of the Systems for (A)
customer deposits held by Transferor as of the Closing Date and which are
refundable, in the amount for which Transferee received credit under Section
3.2, and (B) customer, advertising and other advance payments held by Transferor
as of the Closing Date for services to be rendered by Transferee on or after the
Closing Date, in the amount for which Transferee received credit under Section
3.2 and (ii) obligations accruing and relating to periods on or after the
Closing Date under Governmental Permits, Contracts and Real Property interests.
Transferee will not assume or have any responsibility for any liabilities or
obligations of Transferor, contingent, fixed or otherwise, other than the
Assumed Liabilities, including, without limitation, any liability for rate
refunds for any period prior to the Closing Date or any litigation commenced
prior to, or related to an event occurring prior to, the Closing Date. In no
event will Transferee assume or have any responsibility for any liabilities or
obligations associated with the Excluded Assets.
4.2. Excluded Assets. The Assets shall exclude the following assets,
---------------
which will be retained by the Transferor (the "Excluded Assets"):
4.2.1. Transferor's cash on hand as of the Closing Date and all
other cash or cash equivalents in any of Transferor's bank or savings accounts,
including without limitation, customer advance payments and deposits for which
Transferee receives credit pursuant to Section 3.2;
4.2.2. Any and all bonds, surety instruments, insurance policies
and all rights and claims thereunder, 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;
4.2.3. Any books and records that Transferor is required by law
to retain and any books of account, tax reports and returns and the like related
to the Assets and business and operations of the Systems and any correspondence
or memoranda related to the foregoing, subject to the right of Transferee to
have access to and to copy such documents for a reasonable period, not to exceed
three years from the Closing Date, and Transferor's corporate minute books and
other books and records related to internal corporate matters and financial
relationships with Transferor's lenders and affiliates;
4.2.4. Any claims, rights or choses in action related to the
period prior to the Closing Date (other than customer and advertising accounts
receivable), including, without limitation, any claims, rights and interest in
and to any refunds of federal, state or local franchise, income or other taxes,
fees or payments of any nature whatsoever for periods prior to the Closing Date
including, without limitation, fees paid to the U.S. Copyright Office;
4.2.5. All programming agreements and retransmission consent
agreements (other than the local programming agreements, and retransmission
consents and must-carry notices listed on SCHEDULES 5.7 and 6.7) of Transferor
including those relating to or benefitting the Systems;
14
4.2.6. Except as provided in Section 7.22, all owned or licensed
trademarks, trade names, service marks, service names, logos and similar
proprietary rights of the Transferor, and all patents of Transferor, whether or
not used in the business or operations of the Systems;
4.2.7. All tangible and intangible personal property owned,
leased or licensed by Transferor or any of Transferor's Affiliates that is used
or held for use in one or more of the Systems but also jointly and primarily
used or held for use in the ordinary course in cable television systems or other
operations of Transferor or its Affiliates other than the Systems, all material
items of which are listed on Exhibit C.
---------
4.2.8. Except to the extent provided in Section 7.3, any Employee
Plan, Compensation Arrangement or Multiemployer Plan;
4.2.9. All rights to receive fees or services from any Affiliate
of Transferor and any obligations or liabilities owing to any Affiliate of
Transferor unless pursuant to a Contract being assumed and listed in the
applicable Schedule to this Agreement;
4.2.10. Any assets acquired pursuant to pending cable system
transactions not consummated prior to December 31, 1995;
4.2.11. Any and all assets and rights of Transferor unrelated to
and not used in the business and the operations of the Systems;
4.2.12. Such office equipment and vehicles used exclusively in
the provision of Primestar service within the Service Areas as may hereafter be
agreed to by Transferor and Transferee, and all contracts and agreements for, or
related to the provision of Primestar services;
4.2.13. Other than items listed on SCHEDULE 5.1 (TCI Systems) or
SCHEDULE 6.1 (Cox Systems), all securities and partnership or other ownership
interests and all partnership, limited liability company or joint venture
agreements to which TCI or Cox, as applicable, is a party;
4.2.14. All credit, loan or other agreements under which TCI or
Cox, as applicable, has created, incurred, assumed or guaranteed indebtedness
for borrowed money or under which any Encumbrance securing such indebtedness has
been or may be imposed on any Asset;
4.2.15. All DCR or DMX subscriber agreements and all music
converter boxes utilized in Transferor's Systems, subject to the Transferee's
right to use such equipment on a temporary basis as permitted by Section 7.27
below;
4.2.16. The assets listed on Exhibit C hereto; and
---------
4.2.17. All equipment, software and agreements related to
Transferor's subscriber billing systems.
15
5. Representations and Warranties of TCI Subsidiaries and TCI, L.P. To
---------------------------------------------------------------
induce Cox to enter into this Agreement, the TCI Subsidiaries and TCI, L.P.,
jointly and severally represent and warrant to Cox regarding the business and
the operations of the TCI Systems and TCI Assets, as of the date of this
Agreement and as of the Closing as follows:
5.1. Organization, Standing and Authority. Each of the TCI
------------------------------------
Subsidiaries is a corporation duly organized , validly existing and in good
standing under the laws of the state of its incorporation, and is qualified to
conduct business as a foreign corporation in each jurisdiction in which the
property owned, leased or operated by it requires it to be so qualified, except
where the failure to be so qualified would not have a System Material Adverse
Effect. TCI, L.P., is a limited partnership duly organized and validly existing
under the laws of the State of Colorado, and is qualified to conduct business as
a foreign limited partnership in each jurisdiction in which the property owned,
leased or operated by it requires it to be so qualified, except where the
failure to be so qualified would not have a System Material Adverse Effect. The
jurisdictions of organization of each of the TCI Subsidiaries are disclosed on
SCHEDULE 5.1. Each TCI Subsidiary has the requisite corporate power and
authority and TCI, L.P., has the requisite partnership power and authority (i)
to own, lease and use the TCI Assets as presently owned, leased and used by it
and (ii) to conduct the business and operations of the TCI Systems owned by it
as presently conducted by it. Except as set forth in either Exhibit C or
---------
SCHEDULE 5.1, none of the TCI Subsidiaries or TCI, L.P., is a participant in any
joint venture or partnership with any other person or entity with respect to any
part of the businesses or operations of the TCI Systems or the TCI Assets,
including advertising sales joint ventures or partnerships that relate
exclusively to the TCI Systems.
5.2. Authorization and Binding Obligation. Each TCI Subsidiary has
------------------------------------
the corporate power and authority and TCI, L.P., has the partnership power and
authority to execute and deliver this Agreement and all other agreements,
instruments and certificates contemplated hereby and thereby to be executed by
it (collectively, the "TCI Related Agreements") and to carry out and perform all
of its other obligations under the terms of this Agreement and the TCI Related
Agreements. All corporate and partnership action by each of the TCI
Subsidiaries and by TCI, L.P., necessary for the authorization, execution,
delivery and performance by each of the TCI Subsidiaries and by TCI, L.P., of
this Agreement and the TCI Related Agreements has been taken and such action has
not been rescinded, repealed or amended. This Agreement has been duly executed
and delivered by each TCI Subsidiary and by TCI, L.P., and this Agreement and
the TCI Related Agreements constitute or will, when executed and delivered,
constitute the valid and legally binding obligations of each TCI Subsidiary and
TCI, L.P., enforceable against it in accordance with their respective terms,
except (i) as enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium or similar laws from time to time in effect affecting
the enforcement of creditors' rights generally and (ii) as the remedy of
specific performance and injunctive and other forms of equitable relief may be
subject to equitable defenses and to the discretion of the court before which
any proceeding therefor may be brought.
5.3. No Consents; Absence of Conflicting Agreements. Except for the
----------------------------------------------
TCI Required Consents listed on SCHEDULE 5.3, the Cox Required Consents and
compliance with the HSR Act, no consent, approval, permit or authorization of,
or declaration to or filing with any
16
Governmental Authority or any other third party is required to consummate this
Agreement and the TCI Related Agreements and the transactions contemplated
hereby and thereby, except that no representation or warranty is given with
respect to any consents required to enter into and perform in accordance with
the Management Agreement contemplated by Section 10 and except for any consent
the absence of which would not have a System Material Adverse Effect. Subject to
obtaining the TCI Required Consents listed on SCHEDULE 5.3 and compliance with
the HSR Act and the limitation regarding Section 10 hereof set forth in the
preceding sentence, the execution, delivery and performance of this Agreement by
TCI will not: (i) violate the Articles of Incorporation or Bylaws of any TCI
Subsidiary or the Partnership Agreement of TCI, L.P., (ii) violate any Legal
Requirement applicable to TCI with respect to the TCI Assets or the business or
operations of the TCI Systems or (iii) conflict with, constitute grounds for
termination of, result in a breach of, constitute a default under, accelerate or
permit the acceleration of any performance required by the terms of, or result
in the creation or imposition of any Encumbrance under, any agreement,
instrument, license or permit to which TCI is a party or may be bound and by
which the TCI Assets or the business or operations of the TCI Systems are
affected, excluding from the foregoing clauses (ii) and (iii) such violations,
conflicts, terminations, breaches, defaults and accelerations as would not,
individually or in the aggregate, have a System Material Adverse Effect or a
material adverse effect on the ability of TCI to perform its obligations under
this Agreement or the TCI Related Agreements.
5.4. Governmental Permits. SCHEDULE 5.4 includes a true and complete
--------------------
list of all TCI Franchises and all other material TCI Governmental Permits.
True and complete copies of the TCI Governmental Permits disclosed on SCHEDULE
5.4 (together with any and all amendments and any proposals or material
correspondence thereto) have been delivered to Cox. Except as set forth on
SCHEDULE 5.4, the TCI Franchises contain all of the commitments and obligations
of the TCI Subsidiaries and TCI, L.P. to the applicable Governmental Authorities
with respect to the construction, ownership and operation of the TCI Systems.
Except as set forth on SCHEDULE 5.4, the TCI Governmental Permits are valid
under all applicable Legal Requirements according to their terms and are
currently in full force and effect. Except as listed on SCHEDULE 5.4, there is
no legal action, governmental proceeding or investigation pending or, to the
knowledge of TCI, threatened, to terminate, suspend or modify any TCI
Governmental Permit and the TCI Subsidiaries and TCI, L.P. are, and to the
knowledge of TCI, each other party thereto is, in compliance with the terms and
conditions of all the TCI Governmental Permits and with other applicable
requirements of all Governmental Authorities relating to the TCI Governmental
Permits, including all requirements for notification, filing, reporting, posting
and maintenance of logs and records, except for such noncompliance which would
not, individually or in the aggregate, have a System Material Adverse Effect.
Except as set forth on SCHEDULE 5.4, no person (including any Governmental
Authority) has as of the date hereof any right to acquire any interest in any of
the TCI Systems or the TCI Assets (including any right of first refusal or
similar right), other than rights of condemnation or eminent domain afforded by
law or upon the termination of or default under any Franchise. The TCI
Franchises marked with an asterisk on SCHEDULE 5.4 constitute all of the
communities where the local franchising or other regulatory authority has
certified to regulate rates charged to customers of the TCI Systems pursuant to
the Cable Act or where a customer service rate complaint is pending before the
FCC.
17
5.5. Real Property. SCHEDULE 5.5 contains a list of all Real Property
-------------
owned, leased or occupied by the TCI Subsidiaries or TCI, L.P. with respect to
the TCI Systems and all easements or other interests in Real Property to which
any of the TCI Subsidiaries is a party as of the date hereof with respect to the
TCI Systems, except for those easements and other interests which if not held by
the TCI Subsidiaries or TCI, L.P. would not have a System Material Adverse
Effect. TCI has delivered to Cox true and complete copies of all deeds and
leases pertaining to such Real Property including leases by TCI as lessor. All
Real Property Leases, if any, that are leased from or to Affiliates of TCI are
identified as such on SCHEDULE 5.5. As to the Real Property which is designated
in SCHEDULE 5.5 as being owned in fee simple by the TCI Subsidiaries, except as
set forth in SCHEDULE 5.5, as of the date of this Agreement the TCI Subsidiaries
have and as of the Closing Date, TCI, L.P. will have, good and marketable title
in fee simple to such premises and all buildings, improvements and fixtures
thereon, free and clear of all Encumbrances, except for Permitted Encumbrances.
As to the Real Property which is designated in SCHEDULE 5.5 as being leased by a
TCI Subsidiary, except where the failure of the representations made in this
sentence to be true and correct would not have a System Material Adverse Effect,
as of the date of this Agreement such TCI Subsidiary is and as of the Closing
Date TCI, L.P. will be, the sole owner of the leasehold interest in such Real
Property, each such lease is valid and subsisting and in full force and effect
and, as of the date hereof, no other party to such lease has given written
notice to such TCI Subsidiary or TCI, L.P. of or made a written claim with
respect to any breach or default thereof and TCI is not aware of any fact giving
rise to a breach or default thereof. Subject to Permitted Encumbrances, except
as otherwise disclosed in SCHEDULE 5.5 and except where the failure of the
representations made in this sentence to be true and correct would not have a
System Material Adverse Effect, all Real Property listed on SCHEDULE 5.5
(including the improvements thereon) (i) is in reasonable operating condition
and repair (subject to normal wear and tear) consistent with its present use,
(ii) is available for immediate use in the conduct of the business or operations
of the TCI Systems, (iii) complies in all material respects with all applicable
building or zoning codes or restrictive covenants and the regulations of any
Governmental Authority having jurisdiction, (iv) has full legal and practical
access to public roads or streets and has all utilities and services necessary
for the proper and lawful conduct and operation of the TCI Systems as presently
utilized. Except where the failure of the representations made in this sentence
to be true and correct would not have a System Material Adverse Effect, all
buildings, towers, guy wires and anchors, earth-receiving dishes and related
facilities used in the operations of the TCI Systems are located entirely on the
TCI Real Property, and together with all pole attachments, cable plant and cable
installations, equipment and facilities used in connection with the TCI Systems
are maintained, placed and located in accordance with the provisions of all
applicable Legal Requirements, deeds, leases, licenses, permits or other legally
enforceable arrangements. No condemnation of any of the TCI Real Property has
occurred, is pending or, to the knowledge of TCI, threatened. Except as set
forth on SCHEDULE 5.5, each Person upon or under or across whose property any
of the TCI Assets are located, maintained, installed or operated (other than
drop lines to customer dwellings) has granted to the TCI Subsidiaries or TCI,
L.P. such easements, licenses or rights of way as are necessary for the
location, maintenance, installation and operation of such TCI Assets upon, over
or under such property (the "TCI Easements"), and subject to Permitted
Encumbrances, as of the date of this Agreement the TCI Subsidiaries have and as
of the Closing Date TCI, L.P. will have, a right to use the TCI Easements
18
except where the failure to have any such TCI Easements would not, individually
or in the aggregate, have a System Material Adverse Effect.
5.6. Tangible Personal Property. Except with respect to leased
--------------------------
property, the TCI Subsidiaries have and as of the Closing Date TCI, L.P. will
have good title to all TCI Tangible Personal Property, and as of the Closing
Date none of the TCI Tangible Personal Property will be subject to any
Encumbrance, except for Permitted Encumbrances. The principal items of TCI
Tangible Personal Property as of the date of this Agreement are listed on
SCHEDULE 5.6. Except as set forth in SCHEDULE 5.6, the TCI Tangible Personal
Property is in reasonable operating condition and repair (subject to normal wear
and tear), and is available for immediate use in the conduct of the business or
operations of the TCI Systems except for that which is subject to routine
maintenance or repair. All items of cable plant, earth station and headend
equipment included in the TCI Tangible Personal Property (i) have been
maintained in a manner consistent in all material respects with generally
accepted standards of good engineering practice and (ii) will permit the TCI
Systems to operate in all material respects in accordance with the terms of the
TCI Governmental Permits. The amount of the TCI Systems' inventory is
sufficient to permit the continued maintenance and operation of the TCI Systems
for at least a 30-day period.
5.7. Contracts. Except as described on SCHEDULE 5.7, neither the TCI
---------
Subsidiaries nor TCI, L.P. is party to any of the following that relate to the
TCI Systems other than Excluded Assets: (i) pole attachment or line agreements
and joint pole or line agreements, (ii) leases of personal property for a term
exceeding one year or requiring payments of more than $50,000, (iii) agreements
pursuant to which the TCI Systems receive or provide advertising sales
representation services, (iv) agreements pursuant to which a TCI System has
constructed or agreed to construct for third parties an institutional network or
otherwise provides to third parties telecommunications services other than one-
way video, (v) agreements with commercial customers or bulk-billed customers
pursuant to which such customers are charged in excess of $500 per month, (vi)
multiple dwelling unit access agreements, (vii) construction and development
agreements (other than agreements with installers and agreements where the
remaining amount payable thereunder will be less than $50,000 as of the Closing)
or (viii) noncompetition agreements or rights of first refusal that relate to
the TCI Systems and are in favor of TCI. SCHEDULE 5.7 contains a true and
correct list of all other TCI Contracts except for: (A) subscription agreements
for cable television services provided by the TCI Systems with residential
customers that are not bulk-billed, (B) oral employment contracts and
miscellaneous service contracts terminable at will or on no more than 30 days'
notice without penalty and (C) any other contract not required to be listed
pursuant to the first sentence of this Section 5.7 and not involving either
liabilities under such contract exceeding $50,000 per year or any material
nonmonetary obligation. Notwithstanding the foregoing, SCHEDULE 5.7 contains a
separate and complete list of all retransmission consent agreements relating to
the TCI Systems, other than those excluded pursuant to Section 4.2.5, showing
the expiration date of each. TCI has delivered to Cox true and complete copies
of all written TCI Contracts listed in SCHEDULE 5.7. All of the TCI Contracts
listed in SCHEDULE 5.7 are valid and binding and, to the knowledge of TCI, in
full force and effect and legally enforceable in accordance with their terms
upon the other parties thereto. There is not under any TCI Contract any default
by any of the TCI Subsidiaries or TCI, L.P. or, to the knowledge of the TCI
Subsidiaries or TCI, L.P., any other party
19
thereto or event which, after notice or lapse of time, or both, would constitute
such a default, except for such defaults which, individually or in the
aggregate, would not have a System Material Adverse Effect. Except as disclosed
on SCHEDULE 5.7, to the knowledge of TCI (x) there has not been any threatened
cancellation of any TCI Contracts (other than the cancellation of cable service
by customers at normal and customary levels), (y) there are no outstanding
disputes thereunder and (z) there is no basis for any claim of breach or default
thereunder. Other than where expressly noted in SCHEDULE 5.7, no Affiliate of
TCI (other than the TCI Subsidiaries) is a party to any of the personal property
leases disclosed on SCHEDULE 5.7.
5.8. Complete System. Except for those assets which are TCI Excluded
---------------
Assets, the TCI Assets comprise all of the assets (without material exception)
necessary to conduct the business and operations of the TCI Systems as presently
conducted.
5.9. Trademarks, Trade Names and Copyrights. SCHEDULE 5.9 contains a
--------------------------------------
true and complete list of all material trade names used by TCI in its operation
of the TCI Systems. Except as disclosed on SCHEDULE 5.9, TCI does not own or
use any patent, patent right, or copyright that is material to the operation of
any TCI System and TCI is not a party to any patent or copyright license or
royalty agreement with respect to its operation of any TCI System, except for
software licenses, licenses in respect of program material and obligations under
the Copyright Act of 1976 applicable to cable television systems generally.
Except as disclosed on SCHEDULE 5.9, TCI possesses or has the right to use all
Intangibles used in the operation and conduct of the business of the TCI Systems
without any conflicts with the rights of others that, individually or in the
aggregate, would have a System Material Adverse Effect. All of the Intangibles
are (a) either owned as of the date of this Agreement by the TCI Subsidiaries or
will as of the Closing Date be owned by TCI, L.P. free and clear of all
Encumbrances, except for Permitted Encumbrances or (b) as of the date of this
Agreement the TCI Subsidiaries have and as of the Closing Date TCI, L.P. will
have the valid and enforceable right to use such Intangibles. TCI is not aware
that any of the TCI Subsidiaries or TCI, L.P. is infringing upon or otherwise
acting adversely to any trademarks, trade names, copyrights, patents, patent
applications, know-how, methods or processes owned by any other person or
persons, and there is no claim or action pending, or to the knowledge of TCI,
threatened, with respect thereto, except for any infringement, claims or actions
that would not have a System Material Adverse Effect.
5.10. Information on TCI Systems.
--------------------------
5.10.1. SCHEDULE 5.10.1 lists for each of the TCI Systems as of
the date referenced in SCHEDULE 5.10.1 (i) the total number of miles of fully
completed and operational trunk and distribution cable, differentiating the
number of miles of aerial plant and the number of miles of underground plant,
(ii) the number of dwellings (as defined below) and commercial premises passed,
(iii) the total number of Equivalent Billing Units, the number of Equivalent
Billing Units that are residential and the number of Equivalent Billing Units
that are commercial or bulk-billed, (iv) the bandwidth capacity of each such
System specified in MHz, and (v) the number of channels activated throughout
each System (i.e., over 100% of the plant miles). SCHEDULE 5.10.1 also describes
for each of the TCI Systems in which an upgrade is in progress, the number of
miles and
20
percentage of the cable plant that has been upgraded, the bandwidth and channel
capacity of the upgraded plant and the anticipated rate of rebuild or expansion
for the next four quarters.
5.10.2. As used in this Section 5.10, "dwellings" means a home
or other residential unit that can be legally serviced by a System by using no
more than 300 feet of drop cable.
5.10.3. The rates charged to customers for each class of service
(including equipment, installation and late fees) for each of the TCI Systems
as of the date of this Agreement, are set forth in SCHEDULE 5.10.3.
5.10.4. The TCI Systems duly and properly carry and deliver the
channels indicated in SCHEDULE 5.10.4. The TCI Subsidiaries have obtained all
required FCC clearances for the operation of the TCI Systems in all necessary
aeronautical frequency bands.
5.10.5. Except as disclosed in SCHEDULE 5.10.5 and other than as
expressly stated in a TCI Contract disclosed in SCHEDULE 5.7, to the knowledge
of TCI, as of the date of this Agreement, none of the TCI Subsidiaries has and
as of the Closing Date TCI, L.P. will not have, any obligation or understanding
to pay third parties for the right to access multiple dwelling units, commercial
establishments or subdivision developments, which obligation or understanding
will extend beyond the Closing Date.
5.10.6. Except as described in SCHEDULE 5.10.6, there are no
franchise, construction, fidelity, performance, or other bonds, surety
instruments, letters of credit or other similar items posted or delivered by TCI
Subsidiaries or TCI, L.P. in connection with the TCI Systems or the TCI Assets.
5.10.7. Except as described in SCHEDULE 5.10.7, the TCI Assets
do not include any multi-point distribution system, multi-channel multi-point
distribution system or satellite master antenna system that is not connected to
a TCI System headend.
5.11. Financial Statements.
--------------------
5.11.1. SCHEDULE 5.11 contains true and complete copies of
unaudited statements of each TCI Subsidiary with respect to the TCI Systems
containing balance sheets and statements of income as, at and for the 12 months
ended December 31, 1994 and 1995 (collectively, the "TCI Financial Statements").
The TCI Financial Statements are prepared in accordance with GAAP consistently
applied, except for the absence of footnotes and except as specifically
described in SCHEDULE 5.11. The TCI Financial Statements are in accordance with
the books and records of each such TCI Subsidiary and present fairly the
operating income and financial condition of the TCI Systems as at their
respective dates and the results of operations for the periods then ended. Other
than as described in SCHEDULE 5.11, none of the TCI Financial Statements
understates the true costs and expenses of conducting the business or operations
of the TCI Systems or inflates the revenue
21
of the TCI Systems because of the provision of services or the bearing of costs
or expenses or the payment of fees by any other person or for any other reason.
5.12. Employee Benefit Plans.
----------------------
5.12.1. All Employee Plans and material Compensation
Arrangements currently providing benefits to employees, former employees or
independent contractors of the TCI Systems are listed and described in SCHEDULE
5.12 ("TCI System Plans"), and copies of any such written TCI System Plans (and
any related insurance policies, trusts, etc.) and written descriptions of any
unwritten TCI System Plans have been made available to Cox, along with copies of
any currently available employee handbooks and any other documents used to
describe such TCI System Plans to the covered individuals. Except as disclosed
in SCHEDULE 5.12, there is not now in effect or scheduled as of the date of this
Agreement to become effective after the date of this Agreement, any new TCI
System Plans or any amendment to an existing TCI System Plan which will
materially affect the benefits of employees, former employees or independent
contractors of the TCI Systems.
5.12.2. Each TCI System Plan has been adopted, amended and
administered in compliance with its own terms and, where applicable, ERISA, the
Code, the Age Discrimination in Employment Act and any other applicable Legal
Requirements, except for such noncompliance which would not, individually or in
the aggregate, have a System Material Adverse Effect.
5.12.3. Except as disclosed in Schedule 5.12, no Multiemployer
Plan provides or has ever provided benefits to any employee or former employee
of the TCI Systems.
5.12.4. Except as disclosed in Schedule 5.12, no TCI Subsidiary
nor any entity under common control with any of the TCI Subsidiaries (under
Sections 414(b), (c) (m) and (o) of the Code) is aware of the existence of any
governmental audit or examination of any TCI System Plan or of any facts which
would lead them to believe that any such audit or examination is pending or
threatened. There exists no action, suit or claim (other than routine claims
for benefits) with respect to any TCI System Plan pending, or to the knowledge
of TCI and each entity under common control with any of the TCI subsidiaries
(under Sections 414(b), (c), (m) and (o) of the Code), threatened against any
TCI System Plan.
5.13. Labor Relations. SCHEDULE 5.13 lists the names, positions and
---------------
dates of hire of all persons employed by the TCI Subsidiaries as of the date of
this Agreement directly and principally in connection with the operation of the
TCI Systems (the "TCI Employees"). No TCI Subsidiary or TCI, L.P. has any
written or oral contracts of employment with any TCI Employee, other than (i)
oral employment agreements terminable at will without penalty or (ii) those
listed in SCHEDULE 5.7. Each TCI Subsidiary in the operation of the TCI Systems
has complied with all applicable Legal Requirements relating to the employment
of labor, including those related to wages, hours, collective bargaining,
occupational safety, discrimination and the payment of social security and other
payroll-related taxes; except for such noncompliance which would not,
individually or in the aggregate, have a System Material Adverse Effect. Except
as described on SCHEDULE 5.13, no TCI Subsidiary or TCI, L.P. is a party to any
collective bargaining agreement
22
or other contract with any labor organization regarding any of the TCI
Employees, and no TCI Subsidiary or TCI, L.P. has recognized or agreed to
recognize and is not required to recognize any union or other collective
bargaining representative of the TCI Employees. Except as set forth in SCHEDULE
5.13, no union or other collective bargaining representative claims to represent
or has been certified as representing any of the TCI Employees, nor has any TCI
Subsidiary or TCI, L.P. received any requests from any party for recognition as
a representative of the TCI Employees for collective bargaining purposes. Except
as set forth in SCHEDULE 5.13, the TCI Employees are not engaged in or subject
to any organizing activity with respect to any labor organization and, to the
knowledge of TCI, no such activity is threatened. Except as set forth in
SCHEDULE 5.13, there is no strike, work slowdown, picketing or any other labor
disputes or controversies or proceedings pending or threatened between the TCI
Subsidiaries or TCI, L.P. and any of the TCI Employees or any labor union or
collective bargaining representative claiming to represent any of the TCI
Employees. No TCI Subsidiary or TCI, L.P. has any employment agreement of any
kind, oral or written, express or implied, that would require Cox to employ any
Person after the Closing Date.
5.14. Tax Returns; Other Reports. The TCI Subsidiaries and/or TCI,
--------------------------
L.P. have duly and timely filed in proper form all income, franchise, sales,
use, property, excise, payroll and other tax returns and all other reports
(whether or not relating to taxes) required to be filed with the appropriate
Governmental Authority with respect to the Systems. All taxes, fees and
assessments of whatever nature due and payable by the TCI Subsidiaries or TCI,
L.P. with respect to the Systems have been paid, except such amounts as are
being contested diligently and in good faith and are not in the aggregate
material. Except as set forth in SCHEDULE 5.14, there are no pending state or
local sales tax audits relating to the TCI Systems. Except as set forth in
SCHEDULE 5.14, neither TCI , L.P. nor any of the TCI Subsidiaries has received
any property, sales and use, or franchise fee or tax audit notice or any other
notice or assessment to the effect that there is any unpaid interest, penalty or
taxes due or claimed to be due from the TCI Subsidiaries with respect to the TCI
Assets or the business or operations of the TCI Systems.
5.15. Claims and Legal Actions. Except as set forth in SCHEDULE 5.15,
------------------------
except as may affect the cable industry generally, and except for suits being
defended by TCI's insurance carriers for which there is adequate coverage, there
is (i) no legal action, counterclaim, suit, arbitration, (ii) to the knowledge
of TCI, no claim or governmental investigation or (iii) no other legal,
administrative or tax proceeding, nor any order, decree or judgment, in progress
or pending, or to the knowledge of TCI, threatened against or relating to the
TCI Assets or business or operations of the TCI Systems.
5.16. Environmental Matters.
---------------------
5.16.1. The TCI Real Property is in compliance with and, to the
knowledge of TCI, has previously been operated in compliance with, all
Environmental Laws, except for such noncompliance which, individually or in the
aggregate, would not have a System Material Adverse Effect. Except as set forth
in SCHEDULE 5.16 and except where the failure of the representations made in
this sentence to be true and correct would not have a System Material Adverse
Effect, no TCI Subsidiary has generated, released, stored, used, treated,
handled, discharged or disposed of any
23
Hazardous Substances at, on, under, in or about, or in any other manner
affecting, any TCI Real Property, transported any Hazardous Substances to or
from any TCI Real Property or discharged any Hazardous Substances from any TCI
Real Property into any body of water, directly or indirectly, or undertaken or
caused to be undertaken any other activities relating to the TCI Real Property,
which would support a claim or cause of action under any Environmental Law, and,
to the knowledge of TCI, no other present or previous owner, tenant, occupant or
user of any TCI Real Property or any other Person has committed or suffered any
of the foregoing. Except where the failure of the representations made in this
sentence to be true and correct would not have a System Material Adverse Effect,
to the knowledge of TCI, no release of Hazardous Substances outside the TCI Real
Property has entered or threatens to enter any TCI Real Property nor is there
any pending or threatened claim based on Environmental Laws that arises from any
condition of the land surrounding any TCI Real Property. No claim or
investigation based on Environmental Laws which relates to any TCI Real Property
or any operations or conditions on it (i) has been asserted or conducted in the
past or is currently pending against or with respect to the TCI Subsidiaries or
TCI, L.P. or, to the knowledge of TCI, any other Person or (ii) to the knowledge
of TCI, is threatened or contemplated.
5.16.2. Except as set forth in SCHEDULE 5.16 and except where
the failure of the representations made in this sentence to be true and correct
would not have a System Material Adverse Effect, to the knowledge of TCI, (i) no
underground storage tanks are currently or have been located on any TCI Real
Property, (ii) no TCI 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, (iii) no building
or other structure on any TCI Real Property contains friable asbestos, and (iv)
there are no incinerators or cesspools on the TCI Real Property and all domestic
waste is discharged into a public sanitary sewer system.
5.16.3. TCI has provided Cox with complete and correct copies of
(i) all studies, reports, surveys or other materials in the possession of TCI,
L.P. or the TCI Subsidiaries relating to the presence or alleged presence of
Hazardous Substances at, on or affecting the TCI Real Property, (ii) all notices
or other materials in the possession of TCI, L.P. or the TCI Subsidiaries that
were received during the past two years from any Governmental Authority having
the power to administer or enforce any Environmental Laws relating to current or
past ownership, use or operation of the TCI Real Property or activities at the
TCI Real Property and (iii) all materials in the possession of TCI, L.P. or the
TCI Subsidiaries relating to any claim, allegation or action by any private
third party under any Environmental Law.
5.17. Compliance with Laws. The TCI Subsidiaries and TCI, L.P. have
--------------------
complied and are in compliance with all Legal Requirements applicable to the TCI
Systems in the operation of the business and the ownership of the TCI Assets,
except for such noncompliance which would not, individually or in the aggregate,
have a System Material Adverse Effect. Except as set forth in SCHEDULE 5.17,
neither the TCI Subsidiaries nor TCI, L.P. have received notice claiming a
violation by TCI of any Legal Requirement applicable to the TCI Systems as
currently conducted and to the knowledge of the TCI Subsidiaries, there is no
basis for any claim that such a violation exists. The representations and
warranties in this SECTION 5.17 do not apply to compliance with, or notices with
24
respect to, the Communications Act and the rules and regulations of the FCC, as
to which the representations and warranties in SECTION 5.19 will apply.
5.18. Conduct of Business in Ordinary Course. Except as set forth on
--------------------------------------
SCHEDULE 5.18, since December 31, 1995, (i) the TCI Subsidiaries and/or TCI,
L.P. have conducted the business and operations of the TCI Systems only in the
ordinary and usual course substantially in the same manner as previously
conducted, (ii) the liabilities incurred or accrued in the ordinary course of
business do not, individually or in the aggregate, have a System Material
Adverse Effect, and (iii) neither the TCI Subsidiaries nor TCI, L.P. have
suffered any changes, events or conditions which have had a System Material
Adverse Effect.
5.19. FCC and Copyright Compliance.
----------------------------
5.19.1. The operation of each of the TCI Systems has been, and
is, in compliance with the Communications Act and the rules and regulations of
the FCC, except for such noncompliance which would not, individually or in the
aggregate, have a System Material Adverse Effect and except for Legal
Requirements with respect to rates charged to customers as to which the
representations set forth in SECTION 5.19.2 shall apply. The TCI Subsidiaries
and/or TCI, L.P. have made all material filings required to be made with the FCC
(including cable television registration statements, annual reports and
aeronautical frequency usage notices) and have provided all material notices to
customers required under the Communications Act and the FCC's rules and
regulations. The TCI Subsidiaries and/or TCI, L.P. are and since 1988 have been
certified as in compliance with, the FCC's equal employment opportunity rules
and the TCI Systems are in material compliance with all signal leakage criteria
prescribed by the FCC. With respect to the TCI Systems, the TCI Subsidiaries
have complied in all material respects with the specifications set forth in Part
76, Subpart K of the rules and regulations of the FCC and other provisions of
the Communications Act or the rules and regulations of the FCC pertaining to
signal leakage, to utility pole make ready and to grounding and bonding of cable
television systems (in each case as the same is currently in effect).
5.19.2 The TCI Subsidiaries have complied in all material
respects with the must carry and retransmission consent provisions of the Cable
Act and the FCC rules and regulations promulgated thereunder as such provisions
relate to the TCI Systems. Except as set forth in SCHEDULE 5.19, no written
notices or demands have been received from the FCC, from any television station,
or from any other Person, station, Governmental Authority or unit challenging
the right of the TCI Systems to carry any signal or deliver the same. Except as
set forth on SCHEDULE 5.19, the TCI Subsidiaries have used commercially
reasonable efforts to establish rates charged to customers, effective since
September 1, 1993, that would be allowable under rules and regulations
promulgated by the FCC under the Cable Act, and any authoritative interpretation
thereof, whether or not such rates were subject to regulation by any
Governmental Authority, including the local franchising authority and/or the
FCC, and such rates as computed under the FCC's rules and regulations are
permitted rates except as set forth in SCHEDULE 5.19. TCI has delivered to Cox
complete and correct copies of all FCC 393 Forms and FCC 1200 Series Forms
provided to local franchising authorities or the FCC with respect to the TCI
Systems and copies of all material correspondence with any
25
Governmental Authority relating to rate regulation generally or specific rates
charged to customers with respect to the TCI Systems, including, without
limitation, copies of any complaints and responses filed with the FCC with
respect to any rates charged to customers of the TCI Systems and any other
documentation supporting an exemption from the rate regulation provisions of the
Cable Act claimed with respect to any of the TCI Systems. TCI makes no
representation or warranty with respect to the effect of the cable television
industry-wide dispute concerning music licensing fees. Except as set forth in
SCHEDULE 5.19, the TCI Subsidiaries have received no notice from any
Governmental Authority with respect to an intention to enforce customer service
standards pursuant to the Cable Act with respect to the TCI Systems and no TCI
Subsidiary has agreed with any Governmental Authority to establish customer
service standards for the TCI Systems that exceed the standards in the Cable
Act. No TCI Subsidiary has made any election with respect to any cost of service
proceeding conducted in accordance with Part 76.922 of Title 47 of the Code of
Federal Regulations or any similar proceeding (a "Cost of Service Election")
with respect to any of the TCI Systems.
5.19.3. The TCI Subsidiaries have deposited on a timely basis
with the U.S. Copyright Office all statements of account and other documents and
instruments, and paid all royalties, supplemental royalties, fees and other sums
to the U.S. Copyright Office under the Copyright Act of 1976, as amended (the
"Copyright Act"), with respect to the business and operations of the TCI Systems
as are required to obtain, hold and maintain the compulsory license for cable
television systems prescribed in Section 111 of the Copyright Act. The TCI
Subsidiaries and the TCI Systems are in compliance with the Copyright Act and
the rules and regulations of the U.S. Copyright Office, except as to potential
copyright liability arising from the performance, exhibition or carriage of any
music on the TCI Systems, and except for such noncompliance which would not,
individually or in the aggregate, have a System Material Adverse Effect. Except
as set forth in SCHEDULE 5.19, to the knowledge of TCI, there is no inquiry,
claim, action or demand pending before the U.S. Copyright Office or from any
other party which questions the copyright filings or payments made by the TCI
Subsidiaries with respect to the TCI Systems.
5.19.4. All necessary FAA approvals have been obtained with
respect to the height and location of towers used in connection with the
operation of the TCI Systems and are listed in SCHEDULE 5.19. The towers are
being operated in compliance in all material respects with applicable FCC and
FAA rules.
5.19.5. A valid request for renewal has been timely filed
pursuant to Section 626(a) of the Cable Act with the proper Governmental
Authority with respect to any TCI Franchise expiring within 30 months after the
date of this Agreement.
5.20. Accounts Receivable. All of the accounts receivable which are
-------------------
the subject of the adjustments provided in Section 3.2.4 and 3.2.5 have arisen
from bona fide transactions in the ordinary course of TCI's business consistent
with past practice.
5.21. Competitive Activity. To the knowledge of TCI, as of the date of
--------------------
this Agreement, except as set forth on SCHEDULE 5.21, (i) there are no third
parties (as to TCI and Cox)
26
operating cable television systems or overbuilds in the TCI Service Areas, and
(ii) no Franchise or other operating authority for a cable television system has
been granted to any third party (as to TCI and Cox) by the appropriate
Governmental Authority in the TCI Service Areas, and, to the knowledge of TCI,
no third party (as to TCI and Cox) is seeking such a Franchise or other
operating authority. To the knowledge of the TCI Subsidiaries, no third party
(as to TCI and Cox) intends to construct or operate any of the foregoing or is
seeking to construct or operate any of the foregoing.
5.22. Cure. For all purposes under this Agreement, the existence or
----
occurrence of any events or circumstances that constitute or cause a breach of a
representation or warranty of TCI made in this Agreement (including, without
limitation, the schedules hereto) on the date such representation or warranty is
made shall not constitute a breach of such representation or warranty if such
event or circumstance is cured within 30 days of its existence or occurrence,
but in no event later than 10 days prior to the date scheduled for Closing.
6. Representations and Warranties of Cox . To induce the TCI
--------------------------------------
Subsidiaries and TCI, L.P. to enter into this Agreement, Cox represents and
warrants to TCI regarding the business and operations of the Cox Systems and Cox
Assets, as of the date of this Agreement and as of the Closing Date, as follows:
6.1 Organization, Standing and Authority. Cox is a corporation duly
------------------------------------
organized, validly existing and in good standing under the laws of the state of
its incorporation, and is qualified to conduct business as a foreign corporation
in each jurisdiction in which the property owned, leased or operated by it
requires it to be so qualified, except where the failure to be so qualified
would not have a System Material Adverse Effect. The jurisdiction of
incorporation of Cox is disclosed on SCHEDULE 6.1. Cox has the requisite
corporate power and authority (i) to own, lease and use the Cox Assets as
presently owned, leased and used by it and (ii) to conduct the business and
operations of the Cox Systems owned by it as presently conducted by it. Except
as set forth in either Exhibit C or SCHEDULE 6.1, Cox is not a participant in
---------
any joint venture or partnership with any other person or entity with respect to
any part of the business or operations of the Cox Systems or the Cox Assets,
including advertising sales joint ventures or partnerships that relate
exclusively to the Cox Systems.
6.2 Authorization and Binding Obligation. Cox has the corporate
------------------------------------
power and authority to execute and deliver this Agreement and all other
agreements, instruments and certificates contemplated hereby and thereby to be
executed by it (collectively, the "Cox Related Agreements") and to carry out and
perform all of its other obligations under the terms of this Agreement and the
Cox Related Agreements. All corporate action by Cox necessary for the
authorization, execution, delivery and performance by Cox of this Agreement and
the Cox Related Agreements has been taken and such corporate action has not been
rescinded, repealed or amended. This Agreement has been duly executed and
delivered by Cox and this Agreement and the Cox Related Agreements constitute or
will, when executed and delivered, constitute the valid and legally binding
obligations of Cox, enforceable against it in accordance with their respective
terms, except (i) as enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium or similar laws from time to time in effect affecting
the enforcement of creditors' rights generally and (ii) as the remedy of
specific performance and injunctive and other forms of equitable relief may be
27
subject to equitable defenses and to the discretion of the court before which
any proceeding therefor may be brought.
6.3. No Consents; Absence of Conflicting Agreements. Except for the
----------------------------------------------
Cox Required Consents listed on SCHEDULE 6.3, the TCI Required Consents and
compliance with the HSR Act, no consent, approval, permit or authorization of,
or declaration to or filing with any Governmental Authority or any other third
party is required to consummate this Agreement and the Related Agreements and
the transactions contemplated hereby and thereby, except that no representation
or warranty is given with respect to any consents required to enter into and
perform in accordance with the Management Agreement contemplated by Section 10
and except for any consent the absence of which would not have a System Material
Adverse Effect. Subject to obtaining the Cox Required Consents listed on
SCHEDULE 6.3 and compliance with the HSR Act and the limitations regarding
Section 10 hereof set forth in the preceding sentence, the execution, delivery
and performance of this Agreement by Cox will not: (i) violate the Articles of
Incorporation or Bylaws of Cox, (ii) violate any Legal Requirement applicable to
Cox with respect to the Cox Assets or the business or operations of the Cox
Systems or (iii) conflict with, constitute grounds for termination of, result in
a breach of, constitute a default under, accelerate or permit the acceleration
of any performance required by the terms of, or result in the creation or
imposition of any Encumbrance under, any agreement, instrument, license or
permit to which Cox is a party or may be bound and by which the Cox Assets or
the business or operations of the Cox Systems are affected, excluding from the
foregoing clauses (ii) and (iii) such violations, conflicts, terminations,
breaches, defaults and accelerations as would not, individually or in the
aggregate, have a System Material Adverse Effect or a material adverse effect on
the ability of Cox to perform its obligations under this Agreement or the Cox
Related Agreements.
6.4. Governmental Permits. SCHEDULE 6.4 includes a true and complete
--------------------
list of all Cox Franchises and all other material Cox Governmental Permits.
True and complete copies of the Cox Governmental Permits disclosed in SCHEDULE
6.4 (together with any and all amendments and any proposal or material
correspondence relating thereto) have been delivered to TCI. Except as set
forth on SCHEDULE 6.4, the Cox Franchises contain all of the commitments and
obligations of Cox to the applicable Governmental Authorities with respect to
the construction, ownership and operation of the Cox Systems. Except as set
forth on SCHEDULE 6.4, the Cox Governmental Permits are valid under all
applicable Legal Requirements according to their terms and are currently in full
force and effect. Except as listed in SCHEDULE 6.4, there is no legal action,
governmental proceeding or investigation pending or, to the knowledge of Cox,
threatened, to terminate, suspend or modify any Cox Governmental Permit and Cox
is, and to the knowledge of Cox, each other party thereto is, in compliance with
the terms and conditions of all the Cox Governmental Permits and with other
applicable requirements of all Governmental Authorities relating to the Cox
Governmental Permits, including all requirements for notification, filing,
reporting, posting and maintenance of logs and records, except for such
noncompliance which would not, individually or in the aggregate, have a System
Material Adverse Effect. Except as set forth in SCHEDULE 6.4, no person
(including any Governmental Authority) has as of the date hereof any right to
acquire any interest in any of the Cox Systems or the Cox Assets (including any
right of first refusal or similar right), other than the rights of condemnation
or eminent domain afforded by law or upon the termination of or default under
any
28
Franchise. The Cox Franchises marked with an asterisk on SCHEDULE 6.4
constitute all of the communities where the local franchising or other
regulatory authority has certified to regulate rates charged to customers of the
Cox Systems pursuant to the Cable Act or where a customer service rate complaint
is pending before the FCC.
6.5. Real Property. SCHEDULE 6.5 contains a list of all Real Property
-------------
owned, leased or occupied by Cox with respect to the Cox Systems and all
easements or other interests in Real Property to which Cox is a party as of the
date hereof with respect to the Cox Systems, except for those easements and
other interests which if not held by Cox would not have a System Material
Adverse Effect. Cox has delivered to TCI true and complete copies of all deeds
and leases pertaining to such Real Property including Leases by Cox as lessor.
All Real Property leases, if any, that are leased from or to Affiliates of Cox
are identified as such on SCHEDULE 6.5. As to the Real Property which is
designated in SCHEDULE 6.5 as being owned in fee simple by Cox, except as set
forth in SCHEDULE 6.5, as of the date of this Agreement Cox has and as of the
Closing Date, will have, good and marketable title in fee simple to such
premises and all buildings, improvements and fixtures thereon, free and clear of
all Encumbrances, except for Permitted Encumbrances. As to the Real Property
which is designated in SCHEDULE 6.5 as being leased by Cox, except where the
failure of the representations made in this sentence to be true and correct
would not have a System Material Adverse Effect, as of the date of this
Agreement Cox is and as of the Closing Date, will be, the sole owner of the
leasehold interest in such Real Property, each such lease is valid and
subsisting and in full force and effect and, as of the date hereof, no other
party to such lease has given written notice to Cox of or made a written claim
with respect to any breach or default thereof and Cox is not aware of any fact
giving rise to a breach or default thereof. Subject to Permitted Encumbrances,
except as otherwise disclosed in SCHEDULE 6.5 and except where the failure of
the representations made in this sentence to be true and correct would not have
a System Material Adverse Effect, all Real Property listed on SCHEDULE 6.5
(including the improvements thereon) (i) is in reasonable operating condition
and repair (subject to normal wear and tear) consistent with its present use,
(ii) is available for immediate use in the conduct of the business or operations
of the Cox Systems, (iii) complies in all material respects with all applicable
building or zoning codes or restrictive covenants and the regulations of any
Governmental Authority having jurisdiction (iv) has full legal and practical
access to public roads or streets and has all utilities and services necessary
for the proper and lawful conduct and operation of the Cox Systems as presently
utilized. Except where the failure of the representations made in this sentence
to be true and correct would not have a System Material Adverse Effect, all
buildings, towers, guy wires and anchors, earth-receiving dishes and related
facilities used in the operations of the Cox Systems are located entirely on the
Cox Real Property, and together with all pole attachments, cable plant and cable
installations, equipment and facilities used in connection with the Cox Systems
are maintained, placed and located in accordance with the provisions of all
applicable Legal Requirements, deeds, leases, licenses, permits or other legally
enforceable arrangements. No condemnation of any of the Cox Real Property has
occurred, is pending or, to the knowledge of Cox, threatened. Except as set
forth on SCHEDULE 6.5, each Person upon or under or across whose property any of
the Cox Assets are located, maintained, installed or operated (other than drop
lines to customer dwellings) has granted to Cox such easements, licenses or
rights of way as are necessary for the location, maintenance, installation and
operation of such Cox Assets upon, over or under such property (the "Cox
Easements"), and subject to Permitted
29
Encumbrances, as of the date of this Agreement Cox has and as of the Closing
Date will have, a right to use the Cox Easements except where the failure to
have any such Cox Easements would not, individually or in the aggregate, have a
System Material Adverse Effect.
6.6. Tangible Personal Property. Except with respect to leased
--------------------------
property, Cox has and as of the Closing Date Cox will have, good title to all
Cox Tangible Personal Property, and as of the Closing Date none of the Cox
Tangible Personal Property will be subject to any Encumbrance, except for
Permitted Encumbrances. The principal items of Cox Tangible Personal Property
as of the date of this Agreement are listed on SCHEDULE 6.6. Except as set forth
in SCHEDULE 6.6, the Cox Tangible Personal Property is in reasonable operating
condition and repair (subject to normal wear and tear), and is available for
immediate use in the conduct of the business or operations of the Cox Systems
except for that which is subject to routine maintenance or repair. All items of
cable plant, earth station and headend equipment included in the Cox Tangible
Personal Property (i) have been maintained in a manner consistent in all
material respects with generally accepted standards of good engineering practice
and (ii) will permit the Cox Systems to operate in all material respects in
accordance with the terms of the Cox Governmental Permits. The amount of the
Cox Systems' inventory is sufficient to permit the continued maintenance and
operation of the Cox Systems for at least a 30-day period.
6.7. Contracts. Except as described on SCHEDULE 6.7, Cox is not a
---------
party to any of the following that relate to the Cox Systems other than the
Excluded Assets: (i) pole attachment or line agreements and joint pole or line
agreements, (ii) leases of personal property for a term exceeding one year or
requiring payments of more than $50,000, (iii) agreements pursuant to which the
Cox Systems receive or provide advertising sales representation services, (iv)
agreements pursuant to which a Cox System has constructed or agreed to construct
for third parties an institutional network or otherwise provides to third
parties telecommunication services other than one-way video (v) agreements with
commercial customers or bulk-billed customers pursuant to which such customers
are charged in excess of $500 per month, (vi) multiple dwelling unit access
agreements, (vii) construction and development agreements (other than agreements
with installers and agreements where the remaining amount payable thereunder
will be less than $50,000 as of the Closing) or (viii) noncompetition agreements
or rights of first refusal that relate to the Cox Systems and are in favor of
Cox . SCHEDULE 6.7 contains a true and correct list of all other Cox Contracts
except for: (A) subscription agreements for cable television services provided
by the Cox Systems with residential customers that are not bulk-billed, (B) oral
employment contracts and miscellaneous service contracts terminable at will or
on no more than 30 days notice without penalty and (C) any other contract not
required to be listed pursuant to the first sentence of this Section 5.7 and not
involving either liabilities under such contract exceeding $50,000 per year or
any material nonmonetary obligation. Notwithstanding the foregoing, SCHEDULE
6.7 contains a separate and complete list of all retransmission consent
agreements relating to the Cox Systems, other than those excluded pursuant to
Section 4.2.5, showing the expiration date of each. Cox has delivered to TCI
true and complete copies of all written Cox Contracts listed in SCHEDULE 6.7.
All of the Cox Contracts listed in SCHEDULE 6.7 are valid and binding and, to
the knowledge of Cox, in full force and effect and legally enforceable in
accordance with their terms upon the other parties thereto. There is not under
any Cox Contract any default by Cox or, to the knowledge of Cox, any other
30
party thereto or event which, after notice or lapse of time, or both, would
constitute such a default, except for such defaults which, individually or in
the aggregate, would not have a System Material Adverse Effect. To the knowledge
of Cox (x) there has not been any threatened cancellation of any Cox Contracts
(other than the cancellation of cable service by customers at normal and
customary levels), (y) there are no outstanding disputes thereunder and (z)
there is no basis for any claim of breach or default thereunder. Other than
where expressly noted in SCHEDULE 6.7, no Affiliate of Cox is a party to any of
the personal property leases disclosed on SCHEDULE 6.7.
6.8. Complete System. Except for those assets which are Cox Excluded
---------------
Assets, the Cox Assets comprise all of the assets (without material exception)
necessary to conduct the business and operations of the Cox Systems as presently
conducted.
6.9. Trademarks, Trade Names and Copyrights. SCHEDULE 6.9 contains a
--------------------------------------
true and correct list of all material trade names used by Cox in its operation
of the Cox Systems. Except as disclosed on SCHEDULE 6.9, Cox does not own or use
any patent, patent right, or copyright that is material to the operation of any
Cox System and Cox is not a party to any patent or copyright license or royalty
agreement with respect to its operation of any Cox System, except for software
licenses, licenses in respect of program material and obligations under the
Copyright Act of 1976 applicable to cable television systems generally. Except
as disclosed on SCHEDULE 6.9, Cox possesses or has the right to use all
Intangibles used in the operation and conduct of the business of the Cox Systems
without any conflicts with the rights of others that, individually or in the
aggregate, would have a System Material Adverse Effect. All of the Intangibles
are (a) either owned as of the date of this Agreement by Cox or will as of the
Closing Date be owned by Cox free and clear of all Encumbrances, except for
Permitted Encumbrances or (b) as of the date of this Agreement Cox has, and as
of the Closing Date will have the valid and enforceable right to use such
Intangibles. Cox is not aware that it is infringing upon or otherwise acting
adversely to any trademarks, trade names, copyrights, patents, patent
applications, know-how, methods or processes owned by any other person or
persons, and there is no claim or action pending, or to the knowledge of Cox,
threatened, with respect thereto, except for any infringement, claims or actions
that would not have a System Material Adverse Effect.
6.10. Information on Cox Systems.
--------------------------
6.10.1. SCHEDULE 6.10.1 lists for each of the Cox Systems as of
the date referenced in SCHEDULE 6.10.1 (i) the total number of miles of fully
completed and operational trunk and distribution cable, differentiating the
number of miles of aerial plant and the number of miles of underground plant;
(ii) the number of dwellings (as defined below) and commercial premises passed,
(iii) the total number of Equivalent Billing Units, the number of Equivalent
Billing Units that are residential and the number of Equivalent Billing Units
that are commercial or bulk-billed, (iv) the bandwidth capacity of each such
System specified in MHz, and (v) the number of channels activated throughout
each System (i.e., over 100% of the plant miles). SCHEDULE 6.10.1 also describes
- -
for each of the Cox Systems in which an upgrade is in progress, the number of
miles and percentage of the cable plant that has been upgraded, the bandwidth
and channel capacity of the upgraded plant and the anticipated rate of rebuild
or expansion for the next four quarters.
31
6.10.2. As used in this Section 5.10, "dwellings" means a home
or other residential unit that can be legally serviced by a System by using no
more than 300 feet of drop cable.
6.10.3. The rates charged to customers for each class of
service (including equipment, installation and late fees) for each of the Cox
Systems as of the date of this Agreement, are set forth in SCHEDULE 6.10.3.
6.10.4. The Cox Systems duly and properly carry and deliver the
channels indicated in SCHEDULE 6.10.4. Cox has obtained all required FCC
clearances for the operation of the Cox Systems in all necessary aeronautical
frequency bands.
6.10.5. Except as disclosed in SCHEDULE 6.10.5 and other than
as expressly provided for in a Cox Contract disclosed in SCHEDULE 6.7, to the
knowledge of Cox as of the date of this Agreement, Cox does not have and as of
the Closing Date will not have, any obligation or understanding to pay third
parties for the right to access multiple dwelling units, commercial
establishments or subdivision developments, which obligation or understanding
will extend beyond the Closing Date.
6.10.6. Except as described in SCHEDULE 6.10.6 there are no
franchise, construction, fidelity, performance, or other bonds, surety
instruments, letters of credit or other similar items posted or delivered by Cox
in connection with the Cox Systems or the Cox Assets.
6.10.7. Except as described in SCHEDULE 6.10.7, the Cox Assets
do not include any multi-point distribution system, multi-channel multi-point
distribution system or satellite master antenna system that is not connected to
a Cox System headend.
6.11. Financial Statements.
--------------------
6.11.1. SCHEDULE 6.11 contains true and complete copies of
unaudited financial statements of Cox with respect to the Cox Systems containing
balance sheets and statements of income as, at and for the 12 months ended
December 31, 1993, 1994 and 1995 (collectively, the "Cox Financial Statements").
The Cox Financial Statements are prepared in accordance with GAAP consistently
applied, except for the absence of footnotes and except as specifically
described on Schedule 6.11. The Cox Financial Statements are in accordance with
the books and records of Cox and present fairly the operating income and
financial condition of the Cox Systems as at their respective dates and the
results of operations for the periods then ended. Other than as described in
SCHEDULE 6.11, none of the Cox Financial Statements understates the true costs
and expenses of conducting the business or operations of the Cox Systems or
inflates the revenue of the Cox Systems because of the provision of services or
the bearing of costs or expenses or the payment of fees by any other person or
for any other reason.
32
6.12. Employee Benefit Plans.
----------------------
6.12.1. All Employee Plans and material Compensation
Arrangements currently providing benefits to employees, former employees or
independent contractors of the Cox Systems are listed and described in SCHEDULE
6.12, (the "Cox System Plans") and copies of any such written Cox System Plans
(and any related insurance policies, trusts, etc.) and written descriptions of
any unwritten Cox System Plans have been made available to TCI, along with
copies of any currently available employee handbooks and any other documents
used to describe such Cox System Plans to the covered individuals. Except as
disclosed in SCHEDULE 6.12, there is not now in effect or scheduled as of the
date of this Agreement, to become effective after the date of this Agreement,
any new Cox System Plan or any amendment to an existing Cox System Plan which
will materially affect the benefits of employees, former employees or
independent contractors of the Cox Systems.
6.12.2. Each Cox System Plan has been adopted, amended and
administered in compliance with its own terms and, where applicable, ERISA, the
Code, the Age Discrimination in Employment Act and any other applicable Legal
Requirements, except for such noncompliance which would not, individually or in
the aggregate, have a System Material Adverse Effect.
6.12.3. Except as disclosed in SCHEDULE 6.12, no
Multiemployer Plan provides or has ever provided benefits to any employee or
former employee of the Cox Systems.
6.12.4. Except as disclosed in Schedule 6.12, neither Cox nor
any entity under common control with Cox (under Sections 414(b),(c),(m) and (o)
of the Code) is aware of the existence of any governmental audit or examination
of any Cox System Plan or of any facts which would lead them to believe that any
such audit or examination is pending or threatened. There exists no action, suit
or claim (other than routine claims for benefits) with respect to any Cox System
Plan pending, or to the knowledge of Cox and each entity under common control
with Cox (under Sections 414(b), (c), (m) and (o) of the Code), threatened
against any Cox System Plan.
6.13. Labor Relations. SCHEDULE 6.13 lists the names, positions and
---------------
dates of hire of all persons employed by Cox as of the date of this Agreement
directly and principally in connection with the operation of the Cox Systems
(the "Cox Employees"). Cox has no written or oral contracts of employment with
any Cox Employee, other than (i) oral employment agreements terminable at will
without penalty or (ii) those listed in SCHEDULE 6.7. Cox in the operation of
the Cox Systems, has complied with all applicable Legal Requirements relating to
the employment of labor, including those related to wages, hours, collective
bargaining, occupational safety, discrimination and the payment of social
security and other payroll related taxes; except for such noncompliance which
would not, individually or in the aggregate, have a System Material Adverse
Effect. Except as described in SCHEDULE 6.13, Cox is not a party to any
collective bargaining agreement or other contract with any labor organization
regarding any of the Cox Employees, and Cox has not recognized or agreed to
recognize and is not required to recognize any union or other collective
bargaining representative of the Cox Employees. Except as set forth in SCHEDULE
6.13, no union or other collective bargaining representative claims to represent
or has been certified as representing any of the Cox Employees, nor has Cox
received any requests from any party for
33
recognition as a representative of the Cox Employees for collective bargaining
purposes. Except as set forth in SCHEDULE 6.13, the Cox Employees are not
engaged in or subject to any organizing activity with respect to any labor
organization and, to the knowledge of Cox, no such activity is threatened.
Except as set forth in SCHEDULE 6.13, there is no strike, work slowdown,
picketing or any other labor disputes or controversies or proceedings pending or
threatened between Cox and any of the Cox Employees or any labor union or
collective bargaining representative claiming to represent any of the Cox
Employees. Cox does not have any employment agreement of any kind, oral or
written, express or implied, that would require the TCI Subsidiaries to employ
any Person after the Closing Date.
6.14. Tax Returns; Other Reports. Cox has duly and timely filed in
--------------------------
proper form all income, franchise, sales, use, property, excise, payroll and
other tax returns and all other reports (whether or not relating to taxes)
required to be filed with the appropriate Governmental Authority with respect to
the Systems. All taxes, fees and assessments of whatever nature due and payable
by Cox with respect to the Systems have been paid, except such amounts as are
being contested diligently and in good faith and are not in the aggregate
material. Except as set forth in SCHEDULE 6.14, there are no pending state or
local sales tax audits relating to the Cox Systems. Except as set forth in
SCHEDULE 6.14, Cox has not received any property, sales and use, or franchise
fee or tax audit notice or any other notice or assessment to the effect that
there is any unpaid interest, penalty or taxes due or claimed to be due from Cox
with respect to the Cox Assets or the business or operations of the Cox Systems.
6.15. Claims and Legal Actions. Except as set forth in SCHEDULE 6.15,
------------------------
as may affect the cable industry generally, and except for suits being defended
by ▇▇▇'▇ insurance carriers for which there is adequate coverage, there is (i)
no legal action, counterclaim, suit, arbitration, (ii) to the knowledge of Cox,
no claim or governmental investigation or (iii) no other legal, administrative
or tax proceeding, nor any order, decree or judgment, in progress or pending, or
to the knowledge of Cox, threatened against or relating to the Cox Assets or
business or operations of the Cox Systems.
6.16. Environmental Matters.
---------------------
6.16.1. The Cox Real Property is in compliance with and, to the
knowledge of Cox, has previously been operated in compliance with, all
Environmental Laws, except for such noncompliance which, individually or in the
aggregate, would not have a System Material Adverse Effect. Except as set forth
in SCHEDULE 6.16 and except where the failure of the representations made in
this sentence to be true and correct would not have a System Material Adverse
Effect, Cox has not generated, released, stored, used, treated, handled,
discharged or disposed of any Hazardous Substances at, on, under, in or about,
or in any other manner affecting, any Cox Real Property, transported any
Hazardous Substances to or from any Cox Real Property or discharged any
Hazardous Substances from any Cox Real Property into any body of water, directly
or indirectly, or undertaken or caused to be undertaken any other activities
relating to the Cox Real Property, which would support a claim or cause of
action under any Environmental Law, and, to the knowledge of Cox, no other
present or previous owner, tenant, occupant or user of any Cox Real
34
Property or any other Person has committed or suffered any of the foregoing.
Except where the failure of the representations made in this sentence to be true
and correct would not have a System Material Adverse Effect, to the knowledge of
Cox, no release of Hazardous Substances outside the Cox Real Property has
entered or threatens to enter any Cox Real Property, nor is there any pending or
threatened claim based on Environmental Laws that arises from any condition of
the land surrounding any Cox Real Property. No claim or investigation based on
Environmental Laws which relates to any Cox Real Property or any operations or
conditions on it (i) has been asserted or conducted in the past or is currently
pending against or with respect to Cox or, to the knowledge of Cox, any other
Person or (ii) to the knowledge of Cox, is threatened or contemplated.
6.16.2. Except as set forth in SCHEDULE 6.16 and except where
the failure of the representations made in this sentence to be true and correct
would not have a System Material Adverse Effect, to the knowledge of Cox, (i) no
underground storage tanks are currently or have been located on any Cox Real
Property, (ii) no Cox 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, (iii) no building
or other structure on any Cox Real Property contains friable asbestos, and (iv)
there are no incinerators or cesspools on the Cox Real Property and all domestic
waste is discharged into a public sanitary sewer system.
6.16.3. Cox has provided TCI with complete and correct copies of
(i) all studies, reports, surveys or other materials in the possession of Cox
relating to the presence or alleged presence of Hazardous Substances at, on or
affecting the Cox Real Property, (ii) all notices or other materials in the
possession of Cox that were received during the past two years from any
Governmental Authority having the power to administer or enforce any
Environmental Laws relating to current or past ownership, use or operation of
the Cox Real Property or activities at the Cox Real Property and (iii) all
materials in the possession of Cox relating to any claim, allegation or action
by any private third party under any Environmental Law.
6.17. Compliance with Laws. Cox has complied and is in compliance
--------------------
with all Legal Requirements applicable to the Cox Systems in the operation of
the business and the ownership of the Cox Assets, except for such noncompliance
which would not, individually or in the aggregate, have a System Material
Adverse Effect. Except as set forth in SCHEDULE 6.17, Cox has not received
notice claiming a violation by Cox of any Legal Requirement applicable to the
Cox Systems as it is currently conducted and to the knowledge of Cox, there is
no basis for any claim that such a violation exists. The representations and
warranties in this SECTION 6.17 do not apply to compliance with, or notices with
respect to, the Communications Act and the rules and regulations of the FCC, as
to which the representations and warranties in SECTION 6.19 will apply.
6.18. Conduct of Business in Ordinary Course. Except as set forth on
--------------------------------------
SCHEDULE 6.18, since December 31, 1995, (i) Cox has conducted the business and
operations of the Cox Systems only in the ordinary and usual course
substantially in the same manner as previously conducted, (ii) the liabilities
incurred or accrued in the ordinary course of business do not, individually or
in the aggregate, have a System Material Adverse Effect, and (iii) Cox has not
suffered any changes, events or conditions which have had a System Material
Adverse Effect.
35
6.19. FCC and Copyright Compliance.
----------------------------
6.19.1. The operation of each of the Cox Systems has been, and
is, in compliance with the Communications Act and the rules and regulations of
the FCC, except for such noncompliance which would not, individually or in the
aggregate, have a System Material Adverse Effect and except for Legal
Requirements with respect to rates charged to customers as to which the
representations set forth in SECTION 6.19.2 shall apply. Cox has made all
material filings required to be made with the FCC (including cable television
registration statements, annual reports and aeronautical frequency usage
notices) and has provided all material notices to customers required under the
Communications Act and the FCC's rules and regulations. Cox is and since 1988
has been certified as in compliance with, the FCC's equal employment opportunity
rules and the Cox Systems are in material compliance with all signal leakage
criteria prescribed by the FCC. With respect to the Cox Systems, Cox has
complied in all material respects with the specifications set forth in Part 76,
Subpart K of the rules and regulations of the FCC and other provisions of the
Communications Act or the rules and regulations of the FCC pertaining to signal
leakage, to utility pole make ready and to grounding and bonding of cable
television systems (in each case as the same is currently in effect).
6.19.2. Cox has complied in all material respects with the must
carry and retransmission consent provisions of the Cable Act and the FCC rules
and regulations promulgated thereunder as such provisions relate to the Cox
Systems. Except as set forth in SCHEDULE 6.19, no written notices or demands
have been received from the FCC, from any television station, or from any other
Person, station, Governmental Authority or unit challenging the right of the Cox
Systems to carry any signal or deliver the same. Except as set forth on SCHEDULE
6.19, Cox has used commercially reasonable efforts to establish rates charged to
customers, effective since September 1, 1993, that would be allowable under
rules and regulations promulgated by the FCC under the Cable Act, and any
authoritative interpretation thereof, whether or not such rates were subject to
regulation by any Governmental Authority, including the local franchising
authority and/or the FCC, and such rates as computed under the FCC's rules and
regulations are permitted rates except as set forth in SCHEDULE 6.19. Cox has
delivered to TCI complete and correct copies of all FCC 393 Forms and FCC 1200
Series Forms provided to local franchising authorities or the FCC with respect
to the Cox Systems and copies of all material correspondence with any
Governmental Authority relating to rate regulation generally or specific rates
charged to customers with respect to the Cox Systems, including, without
limitation, copies of any complaints and responses filed with the FCC with
respect to any rates charged to customers of the Cox Systems and any other
documentation supporting an exemption from the rate regulation provisions of the
Cable Act claimed with respect to any of the Cox Systems. Cox makes no
representation or warranty with respect to the effect of the cable television
industry-wide dispute concerning music licensing fees. Except as set forth in
SCHEDULE 6.19, Cox has received no notice from any Governmental Authority with
respect to an intention to enforce customer service standards pursuant to the
Cable Act with respect to the Cox Systems and Cox has not agreed with any
Governmental Authority to establish customer service standards for the Cox
Systems that exceed the standards in the Cable Act. Cox has made no Cost of
Service Election with respect to any of the Cox Systems.
36
6.19.3. Cox has deposited on a timely basis with the U.S.
Copyright Office all statements of account and other documents and instruments,
and paid all royalties, supplemental royalties, fees and other sums to the U.S.
Copyright Office under the Copyright Act of 1976, as amended (the "Copyright
Act"), with respect to the business and operations of the Cox Systems as are
required to obtain, hold and maintain the compulsory license for cable
television systems prescribed in Section 111 of the Copyright Act. Cox and the
Cox Systems are in compliance with the Copyright Act and the rules and
regulations of the U.S. Copyright Office, except as to potential copyright
liability arising from the performance, exhibition or carriage of any music on
the Cox Systems, and except for such noncompliance which would not, individually
or in the aggregate, have a System Material Adverse Effect. Except as set forth
in SCHEDULE 6.19, to the knowledge of Cox, there is no inquiry, claim, action or
demand pending before the U.S. Copyright Office or from any other party which
questions the copyright filings or payments made by Cox with respect to the Cox
Systems.
6.19.4. All necessary FAA approvals have been obtained with
respect to the height and location of towers used in connection with the
operation of the Cox Systems and are listed in SCHEDULE 6.19. The towers are
being operated in compliance in all material respects with applicable FCC and
FAA rules.
6.19.5. A valid request for renewal has been timely filed
pursuant to Section 626(a) of the Cable Act with the proper Governmental
Authority with respect to any Cox Franchise expiring within 30 months of the
date of this Agreement.
6.20. Accounts Receivable. All of the accounts receivable which are
-------------------
the subject of the adjustments provided in Sections 3.2.4 and 3.2.5 have arisen
from bona fide transactions in the ordinary course of ▇▇▇'▇ business consistent
with past practice.
6.21. Competitive Activity. To the knowledge of Cox, as of the date
--------------------
of this Agreement, except as set forth on SCHEDULE 6.21, (i) there are no third
parties (as to TCI and Cox) operating cable television systems or overbuilds in
the Cox Service Areas, and (ii) no Franchise or other operating authority for a
cable television system has been granted to any third party (as to Cox and TCI)
by the appropriate Governmental Authority in the Cox Service Areas, and, to the
knowledge of Cox, no third party (as to Cox and TCI) is seeking such a Franchise
or other operating authority. To the knowledge of Cox, no third party (as to Cox
and TCI) intends to construct or operate any of the foregoing or is seeking to
construct or operate any of the foregoing.
6.22. Cure. For all purposes under this Agreement, the existence or
----
occurrence of any events or circumstances that constitute or cause a breach of a
representation or warranty of Cox made in this Agreement (including, without
limitation, the schedules hereto) on the date such representation or warranty is
made shall not constitute a breach of such representation or warranty if such
event or circumstance is cured within 30 days of its existence or occurrence,
but in no event later than 10 days prior to the date scheduled for Closing..
37
6.23. Additional System(s). The representations and warranties made
--------------------
by Cox in this Article 6 relate to Cox and to the Cox Systems only and Cox does
not make and shall not be deemed to have made any representations or warranties
with respect to the Additional System(s).
7. Pre-Closing Covenants.
---------------------
7.1. Access to Premises and Records. Between the date of execution
------------------------------
and delivery of this Agreement and the Closing Date, each of TCI and Cox will
provide to the other and its representatives full access at reasonable times to
all the premises, employees and books and records of the business and operations
of the Systems and to all the Assets and will furnish to the other and its
representatives all information regarding the business and operations of the
Systems, including without limitation, the personnel records of the employees
engaged in the operations of the Systems and the Assets as the other may from
time to time reasonably request. Notwithstanding any investigation that TCI or
Cox may conduct of the business and operations of the Systems and the Assets to
be transferred to it, each of TCI and Cox, may fully rely on the other's
representations, warranties, covenants and indemnities, which will not be waived
or affected by or as a result of such investigation. For a period of three years
after the Closing, upon prior notice and during normal business hours, each
party will provide the other party and its successors or permitted assigns
reasonable assistance with and access to all of the books, records, reports,
Contracts and other information from files and records transferred from such
party at the Closing, for purposes of examining, preparing extracts and
photocopying such materials.
7.2. Continuity and Maintenance of Operations. Except as disclosed
----------------------------------------
in SCHEDULE 7.2A (TCI) and SCHEDULE 7.2B (Cox), or as Transferee may otherwise
agree in writing, during the period from the date of this Agreement until the
Closing:
7.2.1. Each TCI Subsidiary and Cox will continue to operate the
Systems owned by it in the ordinary course consistent with past practices
(including taking budgeted or planned rate increases, continuing to make
budgeted marketing, advertising and promotional expenditures with respect to the
Systems and including completing line extensions, placing conduit or cable in
new developments, fulfilling installation requests and continuing work on
existing construction projects) and will use its commercially reasonable efforts
to keep available the services of its employees employed in connection with the
Systems and to preserve any beneficial business relationships with franchising
authorities, customers, suppliers and others having business dealings with it
relating to the Systems. Notwithstanding the foregoing, once a TCI Subsidiary
or Cox, as applicable, has expended for the purposes described in Section 7.20
the amount set forth in SCHEDULE 3.2.6 for a System, such party shall have no
obligation to complete line extensions, place conduit or cable in new
developments, or fulfill installation requests if the applicable project
involves (A) passing on average fewer than 20 residential dwellings, multiple
dwelling units and/or commercial establishments per mile or (B) the expenditure
of more than $50,000, unless requested or consented to by Transferee of such
System pursuant to Section 7.20. Without limiting the generality of the
foregoing, each TCI Subsidiary and Cox will maintain (i) the Assets of its
Systems in reasonable operating condition and repair, (ii) insurance as in
effect on the date of this Agreement, (iii) inventories of equipment and
supplies at levels sufficient to support operations for 30 days, and (iv)
38
all of its business books, records and files in the ordinary course of business
in accordance with past practices. Each TCI Subsidiary and Cox will not itself,
and will not permit any of its officers, directors, shareholders, agents or
employees or Affiliates to, pay any of its customer accounts receivable (other
than for their own residences) prior to the Closing Date. Each TCI Subsidiary
and Cox will continue to implement its procedures for disconnection and
discontinuance of service to customers whose accounts are delinquent in
accordance with those procedures in effect on the date of this Agreement.
7.2.2. Except to the extent required by law (of which Transferor
shall give notice to Transferee) after the date of this Agreement, each TCI
Subsidiary and Cox will not, without the prior written consent of Transferee
(which will not be unreasonably withheld or delayed): (i) change customer rates
for any tier of service or charges for remotes or installation except to the
extent required under the Cable Act or any other Legal Requirement, provided,
however, that if it changes such rates in order to so comply, it will provide
Transferee with copies of any FCC forms used to determine the new rates; (ii)
make channel additions, channel substitutions, change the channel lineups or
implement any retiering or repackaging of cable television programming offered
by any of its Systems; (iii) make any Cost of Service Election or filing based
on the "effective competition" provisions of the Cable Act with respect to any
of its Systems or change billing, collection, installation, disconnection,
marketing or promotional practices; (iv) sell, transfer, lease, assign or
otherwise dispose of any of the Assets (except for assets consumed in the
ordinary course of business or in conjunction with the acquisition of
replacement property of equivalent kind and value); (v) create, assume or permit
to exist any Encumbrance on any Asset, except for Permitted Encumbrances; (vi)
amend, terminate or renew (other than on the same or substantially similar terms
and conditions) any of the Governmental Permits, Contracts, Real Property
interests or any other contract or agreement (other than those constituting
Excluded Assets) which affects or is related to its Systems or the business;
(vii) enter into any contract or commitment (including any renewal of an
existing Governmental Permit, Contract or Real Property interest other than on
the same terms and conditions) or incur any indebtedness or other liability or
obligation of any kind relating to the Systems or the Business which will be an
Assumed Liability of Transferee involving an expenditure in excess of $50,000;
or (viii) engage in any selling or marketing campaigns or promotional activities
not in the ordinary course of business, consistent with past practice; (ix) take
or omit to take any commercially reasonable action that would cause it to be in
breach of any of its representations or warranties in this Agreement; (x) make
any material increase in compensation payable or to become payable to its
employees employed at the Systems or make any material change in personnel
policies; (xi) enter into any agreement with or commitment to any competitive
access provider with respect to the Systems, or (xii) enter into any proposed
resolution with the FCC regarding or relating to rates charged or chargeable for
cable television services on the Systems.
7.2.3. No TCI Subsidiary or Cox shall, without the prior written
consent of Transferee (which shall not be unreasonably withheld or delayed)
enter into any new contract or amendment or renewal of any existing contract
with any broadcaster concerning retransmission consents relating to the Systems;
provided, however, that Transferee's consent shall not be required for
retransmission consent agreements that (i) Transferee will not be obligated or
required for
39
operational reasons to assume at Closing, or (ii) are on substantially the same
terms as the expiring retransmission consent agreement being replaced or
renewed.
7.2.4. For purposes of this Section 7.2, in each case where
Transferor requests Transferee's consent for a proposed action, Transferee shall
respond as soon as practicable, but in any event within five Business Days of
Transferee's receipt of the request for consent; provided however if the action
proposed by Transferor requiring Transferee's consent requires a quicker
decision by Transferee, then Transferee shall use every effort to reach a
decision on the proposed action within the time frame required for such action.
7.3. Employee Benefit Matters.
------------------------
7.3.1. Transferee has no obligation to employ any of
Transferor's employees employed at the Systems. TCI or Cox, as applicable, in
its capacity as Transferor agrees that it will provide Transferee with notice at
least 90 days before the Closing Date of any employees of the Systems that
Transferor intends to retain and reassign on or prior to Closing. TCI or Cox, as
applicable, in its capacity as Transferee agrees that it will provide Transferor
with notice of which employees of the Systems Transferee intends to hire at
least 75 days before the Closing Date .
7.3.2. As of the Closing Date, TCI or Cox, as applicable, in its
capacity as Transferor shall terminate the employment of all employees of
Transferor engaged in the operations of the Systems. TCI or Cox, as applicable,
in its capacity as Transferor shall be responsible for and shall cause to be
discharged and satisfied in full all amounts owed to any of its employees,
including without limitation, any wages, salaries, sick pay, accrued vacation in
excess of the amount Transferee assumes pursuant to Section 7.3.4 below,
payments under any employment, incentive, compensation or bonus agreements,
benefits under any Employee Plan or Compensation Arrangement or any other
payments on account of termination. TCI or Cox, as applicable, in its capacity
as Transferor shall assume full responsibility and liability for offering and
providing "continuation coverage" to any "qualified beneficiary" who is covered
by a "group health plan" sponsored or contributed to by Transferor and who has
experienced a "qualifying event" or is receiving "continuation coverage" on or
prior to the Closing Date. "Continuation coverage," "qualified beneficiary,"
"qualifying event" and "group health plan" all shall have the meanings given
such terms under Section 4980B of the Code and Section 601 et seq. of ERISA.
-- ---
7.3.3. TCI or Cox, as applicable, in its capacity as Transferee
shall offer health plan coverage, on terms and conditions determined by
Transferee, to all of the full-time employees of the Systems which Transferee
elects to hire as of the Closing Date. For purposes of providing such coverage,
TCI or Cox, as applicable, in its capacity as Transferee shall waive all
preexisting condition limitations for all employees of the Systems, which are
covered by the Transferor's health care plan as of the Closing Date (other than
known preexisting conditions which were excluded by Transferor's health care
plan) and shall provide such health care coverage effective as of the Closing
Date without the application of any eligibility period for coverage. In
addition, TCI or Cox, as applicable, in its capacity as Transferee shall credit
all payments made by employees of Transferor toward deductible, co-payment and
out-of-pocket limits under Transferor's health care
40
plans for the plan year which includes the Closing Date as if such payments had
been made for similar purposes under Transferee's health care plans during the
plan year which includes the Closing Date, with respect to employees of the
Systems employed by Transferee as of the Closing Date.
7.3.4 For each employee of Transferor whom Transferee hires on
the Closing Date, TCI, L.P. or Cox, as applicable, in its capacity as Transferee
shall (i) provide to such employee the same amount of paid vacation as that
employee had accrued but not taken as an employee of Transferor as of the
Closing Date; provided, that the amount of accrued vacation provided to such
employee by Transferee under this Section 7.3.4 shall be limited to the maximum
amount of vacation permitted to be accrued by employees of the Transferee in
accordance with Transferee's standard practices; (ii) permit such employee to
participate in Transferee's employee benefit plans to the same extent as
similarly situated employees of Transferee and their dependants; and (iii) give
such employee credit for his or her past service with Transferor as of the
Closing Date (including past service with any prior owner or operator of
Transferor's Systems to the extent data with respect to such past service credit
is provided to Transferee within a reasonably practicable period of time after
the Closing) for purposes of eligibility and vesting, but not for benefit
accrual purposes, under Transferee's Employee Plans and Compensation
Arrangements in accordance with Transferee's standard practices; provided, that
no past service credits shall be required with respect to the Transferee's post-
retirement medical benefits.
7.3.5 If the parties mutually agree to an asset transfer, TCI or
Cox, as applicable, in its capacity as Transferor shall cooperate with
Transferee in arranging transfers from Transferor's 401(k) plan to Transferee's
401(k) plan with respect to those employees of the Systems who become employed
by Transferee following the Closing in accordance with this Section 7.3.
7.3.6 If TCI or Cox, as applicable, in its capacity as
Transferee discharges within 90 days of Closing any former employees of
Transferor hired by Transferee at Closing, and such employees would have been
entitled to severance payments pursuant to Transferor's severance benefits plan
if such employees had been discharged without cause by Transferor in accordance
with Section 7.3.2 and not been hired by Transferee as of Closing, then TCI or
Cox, as applicable, in its capacity as Transferee shall pay severance benefits
to such employees in accordance with Transferor's severance benefit plan listed
on SCHEDULE 5.12 (TCI SYSTEMS) OR SCHEDULE 6.12 (COX SYSTEMS) to the extent such
plan would have paid severance to any such employees if they had not been hired
by Transferee at Closing.
7.3.7 This Section 7.3 shall operate exclusively for the benefit
of Transferor and Transferee and not for the benefit of any other person
including, without limitation, any current, former or retired employee of
Transferor or Transferee.
7.4 Broker's Fees. Each party hereto represents and warrants to the
-------------
other that neither it nor any Person acting on its behalf has incurred any
liability for any finders' or brokers' fees or commissions in connection with
the transaction contemplated by this Agreement, except for
41
▇▇▇▇▇▇▇ & Associates whose fee shall be borne equally by TCI on the one hand and
by Cox on the other. Each party agrees to indemnify and hold harmless the other
against any fee, commission, loss or expense arising out of any claim by any
other broker or finder employed or alleged to have been employed by it.
7.5 Required Consents and Estoppel Certificates.
-------------------------------------------
7.5.1 TCI or Cox, as applicable, in its capacity as Transferor
will use its commercially reasonable efforts to obtain, as soon as possible and
at its expense, all the Required Consents, in form and substance reasonably
satisfactory to Transferee; provided that Transferor's commercially reasonable
efforts shall not require Transferor to make any payments to any person from
whom such Required Consents are sought (other than normal or customary filing
fees, administrative costs or professional fees and expenses related to
obtaining such consents). TCI or Cox, as applicable, in its capacity as
Transferee will cooperate with Transferor to obtain all Required Consents, but
Transferee will not be required to (i) make any payment to any Person from whom
such Required Consent is sought, or (ii) accept any changes in, or the
imposition of any adverse condition to, any Contract or Governmental Permit as a
condition to obtaining any Required Consent other than changes to any Contract
or Governmental Permit that do not impose any (A) monetary obligations (except
for increased Franchise fee payments to the maximum extent permitted by
applicable law) or (B) material nonmonetary obligations upon Transferee or (C)
significant expansion of the rights of the other contracting party or the
franchising authority from whom such consent is sought. Transferee agrees that
it will not, without the prior written consent of Transferor (which may be
withheld at Transferor's sole discretion), seek amendments or modifications to
existing Franchises or Contracts. Transferee will, at Transferor's request,
promptly furnish Transferor with copies of such documents and information with
respect to Transferee, including financial information and information relating
to the cable and other operations of Transferee and any of its Affiliates or
related companies, as Transferor may reasonably request in connection with the
obtaining of any consents to the transactions contemplated by this Agreement or
as may be reasonably requested by any Person in connection with any consent or
approval of such Person to the transactions contemplated by this Agreement.
Transferor also will use its commercially reasonable efforts to obtain, at its
expense, a nondisturbance agreement (in a form mutually agreeable to Transferor
and Transferee) from the lessor's lenders for each Real Property leasehold
interest indicated with an asterisk on SCHEDULE 5.5 (where Transferor is TCI)
and SCHEDULE 6.5 (where Transferor is Cox), and such estoppel certificates or
similar documents from lessors who are parties to Contracts as Transferee may
reasonably request or which are necessary to effect a transfer.
7.5.2 Notwithstanding the foregoing, TCI or Cox, as applicable,
in its capacity as Transferor will have no further obligation to obtain Required
Consents: (i) with respect to license agreements relating to pole attachments
where the licensing party will not, after Transferor's exercise of commercially
reasonable efforts, consent to an assignment of such license agreement but
requires that Transferee enter into a new agreement with such licensing
authority, in which case Transferee shall use its reasonable efforts to enter
into such agreement as soon as possible and Transferor will cooperate with and
assist Transferee in obtaining such agreements; provided however that
Transferee's commercially reasonable efforts shall not require Transferee to
42
take any action of the type that Transferor is not required to take pursuant to
Subsection 7.5.1 hereof; and (ii) for any business radio license which
Transferor reasonably expects can be obtained within 120 days after the Closing
and so long as a temporary authorization is available to Transferee under FCC
rules with respect thereto.
7.5.3 As soon as practicable after the date of this Agreement,
but in any event not later than 45 days after the date of this Agreement the
parties will each cooperate with the other to assist in completing and will
complete and file, or cause to be completed and filed with the appropriate
Governmental Authority, an FCC Form 394 with respect to each System as to which
such Form 394 is required.
7.5.4. TCI or Cox, as applicable, in its capacity as Transferee
shall take all commercially reasonable action, and execute and deliver all
reasonably necessary documents to ensure that on the Closing Date Transferee has
delivered such bonds, letters of credit, indemnity agreements and similar
instruments in such amounts and in favor of such franchisors or other persons
requiring the same in connection with the Franchises and Contracts being assumed
by Transferee at Closing.
7.6 Title Commitments and Surveys. Within 60 days after the
-----------------------------
execution of this Agreement, TCI or Cox, as applicable, in its capacity as
Transferee will order (i) commitments for owner's title insurance policies on
all Real Property owned by Transferor, (ii) commitments for lessee's title
insurance policies for all Real Property leased by Transferor which is used for
headend or tower sites and (c) an ALTA survey on each parcel of owned Real
Property for which a title insurance policy is to be obtained. The title
commitment will evidence a commitment to issue an ALTA title insurance policy
from a nationally recognized title insurance company such as First American
Title Company or Chicago Title Insurance Company, insuring good, marketable and
indefeasible fee simple (or leasehold, if applicable) title to each parcel of
the Real Property contemplated above for such amount as Transferee directs and
will contain no exceptions except for items which in Transferee's reasonable
opinion do not adversely affect (other than in an immaterial way as to any
individual parcel) the good, marketable and indefeasible title to or
Transferee's access or quiet use or enjoyment of such Real Property in the
manner such Real Property is presently used or in the normal conduct of the
Business. At the Closing, TCI or Cox, as applicable, in its capacity as
Transferor will cause Transferee to receive, at Transferor's expense, title
commitments with respect to owned Real Property redated to the date and time of
Closing.
7.7 Environmental Investigations.
----------------------------
7.7.1 As soon as practicable after the date of this Agreement
(but in no event more than 90 days after the date of this Agreement), TCI and
Cox, as applicable, in its capacity as Transferee will obtain a Phase I
environmental audit of the Real Property (which shall include a limited asbestos
survey) to be transferred to Transferee at Closing, or on such parcels of the
Real Property as Transferee may determine. Transferee shall engage a nationally
known environmental auditing company to perform the aforesaid audit. Transferor
will comply with any reasonable request for information made by Transferee or
its agents in connection with any such investigation
43
and shall afford Transferee and its agents access to all operations of the
Systems, including without limitation all areas of the Real Property, at
reasonable times and in a reasonable manner in connection with any such
investigation.
7.7.2 In the event that as a result of any of the environmental
investigations, a nationally known environmental auditing company determines
that remedial action is required by law, Transferee shall promptly notify
Transferor. If Transferee's environmental expert determines that remedial
action is required, Transferor shall have the right to engage a nationally known
environmental auditing company to provide a second opinion, in which case the
parties agree to use an average of the two estimates for purposes of this
Section 7.7.2. Subsequent to the determination of the estimates of the
remediation costs and subject to Transferee's prior written consent (which
consent shall not be unreasonably withheld), Transferor may acquire or lease (as
applicable) a substantially similar parcel of real property to substitute for
the Real Property that is subject to the environmental problem, in which case
(A) Transferor shall bear all costs and expenses (direct, indirect and
consequential) in any way related to the identification and acquisition of such
real property, and the construction and relocation of System plant and
facilities resulting from such substitution of the Real Property, and (B) the
Real Property with the environmental problem shall be deemed an Excluded Asset.
In the event Transferor does not promptly propose such a substitution or
Transferor and Transferee do not agree on any material aspect of a proposed
substitution, then the parties shall proceed as follows: (i) Transferor shall
cause such remedial action to be performed in accordance with all applicable
Environmental Laws, if the aggregate cost thereof is $1,000,000 or less for a
single parcel of Real Property and $10,000,000 or less for all parcels of Real
Property; and (ii) if the cost of such remedial action exceeds $1,000,000 for a
single parcel of Real Property or $10,000,000 for all parcels of Real Property
and Transferor does not elect to cause remedial action to be performed in
accordance with applicable Environmental Laws, Transferee may elect either to
terminate this Agreement, or to accept a transfer of the Assets without such
remedial action having been taken, subject to an adjustment to the Cash
Consideration paid at Closing equal to the required remediation costs but in no
event more than $1,000,000 for each parcel of Real Property for which the
estimated remediation exceeds $1,000,000 and an aggregate of $10,000,000. If
Transferor remediates or Transferee accepts the transfer of the Assets subject
to an adjustment in Cash Consideration pursuant to clause (ii), then Transferee
shall not be entitled to rely for any purpose on the representations and
warranties of Transferor or to seek indemnification to the extent they relate to
the specific environmental problem requiring remediation and the specific
property subject to the remediation requirement.
7.8 HSR Notification. As soon as practicable, but not later than 30
----------------
days after the date of this Agreement, each party will complete and file, or
cause to be completed and filed, any notification and report required to be
filed under the HSR Act with respect to the transactions contemplated hereby.
Each of the parties will cooperate to prevent inconsistencies between their
respective filings and will furnish to each other such necessary information and
reasonable assistance as the other may reasonably request in connection with its
preparation of necessary filings or submissions under the HSR Act. The parties
shall use commercially reasonable efforts to respond as promptly as reasonably
practicable to any inquiries received from the Federal Trade Commission (the
"FTC") and the Antitrust Division of the Department of Justice (the "Antitrust
Division") for
44
additional information or documentation and to respond as promptly as reasonably
practicable to all inquiries and requests received from any other Governmental
Authority in connection with antitrust matters. The parties shall use their
respective commercially reasonable efforts to overcome any objections which may
be raised by the FTC, the Antitrust Division or any other Governmental Authority
having jurisdiction over antitrust matters. Notwithstanding anything to the
contrary in this Agreement, if either party, in its reasonable business
judgment, considers the imposition of a condition upon the transactions by a
governmental agency to be materially adverse to such party, such party may
terminate this Agreement. Each Transferee will pay the filing fees payable by
such Transferee in connection with Transferee's filing under the HSR Act.
7.9 No Shop. Neither TCI nor Cox nor any of their respective
-------
Affiliates or any agent or representative of any of them will, during the period
commencing on the date of this Agreement and ending with the earlier to occur of
the Closing or the termination of this Agreement, directly or indirectly (i)
solicit or initiate the submission of proposals or offers from any Person for,
(ii) participate in any discussions pertaining to or (iii) furnish any
information to any Person other than the other party hereto relating to, any
direct or indirect acquisition or purchase of all or any portion of the Assets,
the Systems or its stock.
7.10. Notification of Certain Matters. TCI or Cox, as applicable, in
-------------------------------
its capacity as Transferor will promptly notify Transferee of any fact, event,
circumstance or action (i) which, if known on the date of this Agreement, would
have been required to be disclosed to Transferee pursuant to this Agreement or
(ii) the existence or occurrence of which would cause any of Transferor's
representations or warranties under this Agreement not to be correct and
complete, including, without limitation, any fact, event, circumstance or action
that would have been required to be disclosed on SCHEDULE 5.13 (TCI) or 6.13
(Cox).
7.11. Risk of Loss; Condemnation.
--------------------------
7.11.1. Transferor will bear the risk of any loss or damage to
the Assets resulting from fire, theft or other casualty (except reasonable wear
and tear) at all times prior to the Closing. If any such loss or damage is so
substantial as to prevent normal operation of any material portion of any of the
Systems or the replacement or restoration of the lost or damaged property prior
to Closing, Transferor will immediately notify Transferee of that fact and
Transferee, at any time within 10 days after receipt of such notice, may elect
by written notice to Transferor either to (i) waive such defect and proceed
toward consummation of the acquisition of the Assets in accordance with the
terms of this Agreement or (ii) terminate this Agreement. If Transferee elects
so to terminate this Agreement, Transferee and Transferor will be discharged of
any and all obligations hereunder. If Transferee elects to consummate the
transactions contemplated by this Agreement notwithstanding such loss or damage
and does so, all insurance proceeds payable as a result of the occurrence of the
event resulting in such loss or damage will be delivered by Transferor to
Transferee, or the rights to such proceeds will be assigned by Transferor to
Transferee if not yet paid over to Transferor, and Transferor will pay to
Transferee an amount equal to the difference between the amount of such
insurance proceeds and the full replacement cost of the damaged or lost Assets
as reasonably agreed to by the parties.
45
7.11.2. If, prior to the Closing, all or any part of or interest
in the Assets is taken or condemned as a result of the exercise of the power of
eminent domain, or if a Governmental Authority having such power informs
Transferor or Transferee that it intends to condemn all or any part of or
interest in the Assets and such taking is so substantial as to prevent normal
operation of any material portion of any of the Systems (such event being
called, in either case, a "Taking"), then subject to Transferee's prior written
consent (which consent shall not be unreasonably withheld), Transferor may
acquire or lease (as applicable) substantially similar property to substitute
for the Assets that are subject to the Taking, in which case (A) Transferor
shall bear all costs and expenses (direct, indirect and consequential) in any
way related to the identification and acquisition of such Assets, and any
construction and/or relocation of System plant and facilities resulting from the
substitution of the property. If Transferor does not promptly propose such a
substitution, or Transferor and Transferee do not reach agreement on any
material aspect of such substitution of the Assets subject to a Taking then (Y)
Transferee may terminate this Agreement or (Z) if Transferee does not elect to
terminate this Agreement, then (i) Transferee will have the sole right, in the
name of Transferor, if Transferee so elects, to negotiate for, claim, contest
and receive all damages with respect to the Taking, (ii) Transferor will be
relieved of its obligation to convey to Transferee the Assets or interests that
are the subject of the Taking, (iii) at the Closing, Transferor will assign to
Transferee all of Transferor's rights to all damages payable with respect to
such Taking and will pay to Transferee all damages previously paid to Transferor
with respect to the Taking and (iv) following the Closing, Transferor will give
Transferee such further assurances of such rights and assignment with respect to
the taking as Transferee may from time to time reasonably request.
7.12. Lien and Judgment Searches. TCI or Cox, as applicable, in its
--------------------------
capacity as Transferor will deliver to Transferee, not more than 60 days after
the date of this Agreement, the results of a lien search conducted by a
professional search company of records in the offices of the secretaries of
state in each state and county clerks in each county where there exist tangible
Assets, and in the state and county where Transferor's principal offices are
located, including copies of all financing statements or similar notices or
filings (and any continuation statements) discovered by such search company.
7.13. Transfer Taxes, Fees and Expenses. TCI or Cox, as applicable, in
---------------------------------
its capacity as Transferor will be responsible for the payment of any federal,
state or local sales, income, use, transfer, excise, documentary or license
taxes or fees or any other charge (including filing fees) imposed by any
Governmental Authority with respect to the transfer of its Assets pursuant to
this Agreement. Except as otherwise provided in this Agreement, each party shall
pay its own expenses incurred in connection with the authorization, preparation,
execution and performance of this Agreement, including all fees and expenses of
counsel, accountants, agents and other representatives.
7.14. Noncompetition; Nonsolicitation. TCI or Cox, as applicable, in
-------------------------------
its capacity as Transferor covenants to execute and deliver at Closing a
noncompetition and nonsolicitation agreement substantially in the form attached
hereto as Exhibit D (the "Noncompetition and Nonsolicitation Agreement").
---------
46
7.15. Cooperation; Satisfaction of Conditions. Each party shall
---------------------------------------
cooperate fully with the other and their respective counsel, accountants and
other business personnel in connection with any action required to be taken as
part of their respective obligations under this Agreement, and each party shall
execute such other documents as may be necessary and desirable to the
implementation and consummation of this Agreement, and otherwise use diligent
efforts to consummate the transaction contemplated hereby and to fulfill their
obligations hereunder. Except as otherwise expressly provided herein, each
party will use its commercially reasonable efforts to satisfy, or to cause to be
satisfied, the conditions to the obligations of the other party to consummate
the transactions contemplated by this Agreement, as set forth in Section 9,
provided that Transferee will not be required to agree to any increase in the
amount payable with respect to, or any modification that makes more burdensome
in any material respect, any of the Assumed Liabilities.
7.16. Confidentiality. Each party shall keep secret and hold in
---------------
confidence for a period of two years following the date hereof, any and all
information relating to the other party that is confidential to such other party
(it being understood and agreed that all proprietary information of Transferor
that is included among the Assets shall become the proprietary information of
Transferee upon Closing), other than the following: (i) information that has
become generally available to the public other than as a result of a disclosure
by such party; (ii) information already known to Transferee prior to its
disclosure by Transferor, (iii) information that becomes available to such party
or an agent of such party on a nonconfidential basis from a third party having
no obligation of confidentiality to a party to this Agreement; (iv) information
that is required to be disclosed by applicable law, judicial order or pursuant
to any listing agreement with, or the rules or regulations of, any securities
exchange on which securities of such party or any such affiliate are listed or
traded; and (v) disclosures made by any party as shall be reasonably necessary
in connection with obtaining the Required Consents; provided, however, in
connection with disclosure of confidential information under (iv) and (v)
hereof, the disclosing party shall give the other party hereto timely prior
notice of the anticipated disclosure and the parties shall cooperate in
designing reasonable procedural and other safeguards to preserve, to the maximum
extent possible, the confidentiality of such material. Each party may also
disclose such information to employees, consultants, advisors, agents and actual
or potential lenders whose knowledge is necessary to facilitate the consummation
of the transactions contemplated by this Agreement. Each party's obligation to
hold information in confidence will be satisfied if it exercises the same care
with respect to such information as it would exercise to preserve the
confidentiality of its own similar information.
7.17. Publicity. No party hereto will issue any press release or
---------
otherwise make any public statement with respect to this Agreement and the
transactions contemplated hereby without the prior consent of the other party
(which consent shall not be unreasonably withheld), except as may be required by
applicable Legal Requirements, in which event the party required to make the
release or announcement shall, if possible, allow the other party reasonable
time to comment on such release or announcement or obtain a protective order at
its own expense in advance of such issuance.
7.18. Billing Services. At Closing, TCI, L.P. and Cox will execute and
----------------
deliver an Agreement to Provide Billing Services in a form mutually agreeable to
the parties. The Agreement
47
to Provide Billing Services will provide that TCI or Cox, as applicable, in its
capacity as Transferor or its agent will perform billing services for Transferee
with respect to the Systems received by Transferee for the 180-day period
immediately following Closing and Transferee will pay Transferor a fee of 70c
per customer per month for such services.
7.19. Delivery of Financial Information. TCI or Cox, as applicable,
---------------------------------
in its capacity as Transferor shall deliver to Transferee within 30 days after
the end of each month ending between the date of this Agreement and the Closing
Date a statement of income and expense for the month previously ended and such
other financial information (including information on payables and receivables)
as Transferee may reasonably request. The income statements delivered by
Transferor to Transferee pursuant to this Section shall be in accordance with
the books and records of the Systems and shall present fairly in all material
respects the results of operations of the Systems for the year-to-date periods
then ended. Promptly after the preparation thereof, Transferor shall deliver to
Transferee copies of any other financial statements, subscriber counts and other
operational data regularly prepared by Transferor for its internal use; provided
that Transferor shall not be required to make and shall not be deemed to make
any representation or warranty concerning any such information delivered to
Transferee (other than that the information furnished to Transferee is a true
and complete copy of the information prepared by Transferor for its internal
use).
7.20. Capital Expenditures. From the date of this Agreement until
--------------------
Closing, TCI or Cox, as applicable, in its capacity as Transferor agrees to make
capital expenditures for purposes of completing line extensions, placing conduit
or cable in new developments, fulfilling installation requests, and upgrading
cable plant and converters in each of Transferor's Systems in the amounts set
forth on SCHEDULE 3.2.6. Without limiting the foregoing, Cox agrees to complete
the Quad Cities Rebuild prior to Closing. Transferee may request Transferor to
make capital expenditures in excess of the budgeted amounts set forth in
SCHEDULE 3.2.6, provided, however, that any capital expenditures that Transferor
may agree to make at Transferee's request prior to Closing in excess of the
budgeted amounts indicated in SCHEDULE 3.2.6, shall be credited to Transferor
for purposes of adjusting the Cash Consideration as provided in Section 3.2.6
hereof. Notwithstanding the foregoing, the consent of Transferee shall not be
required for Transferor to complete line extensions, place conduit or cable in
new developments, or fulfill installation requests if the applicable project (A)
passes on average 20 or more residential dwellings, multiple dwelling units
and/or commercial establishments per mile and (B) involves the expenditure of
less than $50,000, and Transferor shall receive a credit pursuant to Section
3.2.6 for the cost of any such projects to the extent Transferor has then
expended at least the amount set forth on SCHEDULE 3.2.6 for such System.
7.21. Franchise Renewals. TCI or Cox, as applicable, in its capacity
------------------
as Transferor shall file all requests for renewal under Section 626(a) of the
Cable Act with the proper Governmental Authority with respect to any Franchise
at least 30 months prior to the expiration of any such Franchise, provided that
Transferor shall consult with Transferee prior to the filing of any such renewal
requests. Transferor shall use commercially reasonable efforts to pursue all
requests for renewal in consultation with Transferee.
48
7.22. Use of Transferor's Name. For a period of 90 days after the
------------------------
Closing Date, TCI or Cox, as applicable, in its capacity as Transferee may
continue (but only to the extent reasonably necessary) to operate the System
using Transferor's name and all derivations and abbreviations of such name and
related trade names and marks in use in the Systems on the Closing Date, such
use to be in a manner consistent with the way in which Transferor has used the
marks. Within 90 days after the Closing Date, Transferee will discontinue using
and will dispose of all items of stationery, business cards and literature
bearing such names or marks. Notwithstanding the foregoing, Transferee will not
be required to remove or discontinue using any such name or ▇▇▇▇ that is affixed
to converters or other items in or to be used in customer homes or properties,
or as are used in similar fashion making such removal or discontinuation
impracticable for Transferee. Transferor will be entitled to indemnification (as
provided in Section 12.3) with respect to Transferee's misuse of such names and
marks.
7.23. Completion of the Contribution. TCI shall complete the
------------------------------
Contribution prior to Closing.
7.24. Certain Post-Closing Covenants. Each of TCI, L.P. and Cox
------------------------------
shall maintain ownership of sufficient cable television assets to maintain a
positive Net Worth of not less than $50,000,000 at all times during the period
beginning on the Closing Date and ending on the last day of the fourth full
calendar quarter immediately following the Closing Date. Each of TCI, L.P. and
Cox shall deliver to the other within 75 days after the end of each of the four
full calendar quarters immediately following the Closing Date a certificate (a
"Cash Flow Certificate") signed by an officer of such entity (without personal
liability) certifying compliance with this minimum Net Worth standard for the
preceding calendar quarter. For purposes of this Section 7.24, "Net Worth" shall
mean the amount obtained by multiplying such party's Annualized Cash Flow by 10
and subtracting from the product thereof, the amount of such party's liabilities
(determined in accordance with GAAP and including both reported liabilities and
pledges) as of the last day of the calendar quarter immediately preceding the
date of delivery of the Cash Flow Certificate.
7.25. Updated Schedules. Not less than five Business Days prior to
-----------------
Closing, each of TCI and Cox will deliver to the other revised copies of each of
the Schedules applicable to it or its System which shall have been updated to
the date of delivery and marked to show any changes occurring between the date
of this Agreement and the date of delivery (but not copies of Schedules where no
changes need to be reflected).
7.26. Leased Vehicles. Each of TCI and Cox will, at or prior to the
---------------
Closing, pay the remaining balances on any leases for vehicles included in its
Tangible Personal Property and will deliver title to such vehicles, free and
clear of all Encumbrances other than Permitted Encumbrances, to the other party
at the Closing.
7.27. DCR/DMX. Each of TCI and Cox shall (i) use commercially
-------
reasonable efforts to obtain authorization for the other party to utilize DMX
and DCR respectively for a period of 90 days after Closing pending conversion of
such music services from one programmer to the other, and (ii) permit Transferee
to utilize the DMX or DCR music converter boxes for a period of
49
90 days after Closing. Upon the earlier of the conversion of music services or
the termination of such 90-day period, Transferee shall return the music
converter boxes to Transferor.
7.28. Additional System(s).
--------------------
7.28.1. Cox agrees to acquire and will cooperate with TCI in
acquiring one or more cable television systems which are identified, designated
and valued by TCI (the "Additional System"). If such Additional System is
identified and designated by TCI on or within 45 days after the Closing Date and
acquired on or before the Outside Additional System Closing, then such
Additional System shall be transferred to TCI effective as of the Closing Date.
If Cox acquires or will acquire the Additional System on or prior to the
Additional System Outside Closing date, TCI and Cox will cooperate with each
other to make such amendments or changes to this Agreement or enter into such
other agreements or execute such other documents necessary or desirable to
consummate the transactions contemplated by this Section.
7.28.2. Cox shall reasonably cooperate with TCI and each shall
consult with the other with respect to the negotiation of the Additional System
Agreement to be entered into by TCI. TCI shall assign its rights to acquire the
Additional System assets to Cox and the Additional System assets shall be
exchanged with TCI as provided herein. TCI shall bear all costs and expenses
incurred by Cox or TCI in connection with the acquisition of the Additional
System(s), including, without limitation, all fees and expenses of any
investment banker, investment advisor, broker, finder or agent employed by TCI
or Cox in connection with the transactions contemplated in the Additional System
Agreement.
7.29. Interim Financial Statements. Each of TCI and Cox shall
----------------------------
deliver unaudited quarterly financial statements for each of the Systems owned
by it for each calendar quarter ending between the date of this Agreement and
the Closing Date (the "Interim Financial Statements"). The Interim Financial
Statements shall contain balance sheets and statements of income as, at and for
the three months then ended. The Interim Financial Statements shall be prepared
in accordance with GAAP consistently applied, except for the absence of
footnotes. The Interim Financial Statements shall be in accordance with the
books and records of TCI and Cox, as the case may be, and present fairly the
operating income and financial condition of the TCI Systems and the Cox Systems,
as the case may be, as at their respective dates and the results of operations
for the periods then ended. None of the Interim Financial Statements shall
understate the true costs and expenses of conducting the business or operations
of the TCI Systems or the Cox Systems, as the case may be, or inflate the
revenue of the TCI Systems or the Cox Systems, as the case may be, because of
the provision of services or the bearing of costs or expenses or the payment of
fees by any other person or for any other reason.
7.30. Iowa Microwave Interconnect. For a period of 90 days beginning
---------------------------
on the Closing Date, TCI, L.P. agrees to deliver to the Council Bluffs headend,
those signals currently being delivered to that headend via the Iowa microwave
path.
50
8. Closing.
-------
The Closing of the transactions contemplated by this Agreement will be
held on a date acceptable to the parties that is within 30 days after all
conditions to the Closing contained in this Agreement (other than those based on
acts to be performed at the Closing) have been satisfied or waived. The Closing
will be held at 10:00 a.m. local time at the offices of Dow, ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇
located at ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇, or will be
conducted by mail or at such place and time as the parties may agree.
9. Conditions to Closing.
---------------------
9.1. Conditions to the Obligations of Transferee and Transferor. The
----------------------------------------------------------
obligations of each party to consummate the transactions contemplated by this
Agreement to take place at the Closing are subject to the satisfaction or waiver
by both parties in writing, to the extent permitted by applicable Legal
Requirements, at or prior to the Closing Date of each of the following
conditions:
9.1.1. All filings under the HSR Act have been made and the
applicable waiting period has expired or been earlier terminated without the
receipt of any objection or the commencement of any threat of litigation by any
Governmental Authority of competent jurisdiction to restrain the consummation of
the transactions contemplated by this Agreement.
9.1.2. No action, suit or proceeding is pending or threatened
by or before any Governmental Authority and no Legal Requirement has been
enacted, promulgated or issued or deemed applicable to any of the transactions
contemplated by this Agreement the result of which is to enjoin, restrain,
prohibit or obtain substantial damages in respect of any of the transactions
contemplated by this Agreement, or which would (i) prohibit Transferee's
ownership or operation of all or a material portion of the business or
operations of the Systems or the Assets, (ii) compel Transferee to dispose of or
hold separate all or a material portion of the Systems, the business or
operations of the Systems or the Assets as a result of any of the transactions
contemplated by this Agreement or (iii) otherwise prevent or make illegal the
consummation of any transactions contemplated by this Agreement.
9.1.3. The Contribution shall have been consummated and
evidence thereof provided to Cox.
9.2 Conditions to the Obligations of Transferee. The obligations
-------------------------------------------
of each party in its capacity as Transferee to consummate the transactions
contemplated by this Agreement to take place at the Closing are subject to the
satisfaction or waiver by such party in writing, to the extent permitted by
applicable Legal Requirements, at or prior to the Closing Date, of each of the
following conditions:
9.2.1. All representations and warranties of the other party
contained in this Agreement are, if specifically qualified by materiality, true
and correct in all respects and, if not so
51
qualified, are true and correct in all material respects on and as of the
Closing Date with the same effect as if made on and as of the Closing Date
except for changes permitted or contemplated by this Agreement.
9.2.2. The other party in all material respects has performed
and complied with each obligation, agreement, covenant and condition required by
this Agreement to be performed or complied with by it at or prior to the
Closing.
9.2.3. Between the date of this Agreement and the Closing
Date, there shall have been no changes, events or conditions which have had a
Material Adverse Effect or a System Material Adverse Effect on the Systems to be
acquired by such party; provided, however, that the status of the Franchise
granted by St. ▇▇▇▇▇▇▇, Louisiana shall not be considered in determining a
"System Material Adverse Effect" of the St. ▇▇▇▇▇▇▇ System for purposes of the
condition precedent contained in this Section 9.2.3.
9.2.4. The other party has executed (or caused to be executed)
and delivered to such party in its capacity as Transferee each of the following
items with respect to the Assets to be acquired by such party:
(i) duly executed warranty bills of sale, motor
vehicle titles, assignments and other transfer
documents which shall be sufficient to vest good
title to the Assets in the name of Transferee or
its permitted assignees, free and clear of any
Encumbrances other than Permitted Encumbrances;
(ii) a limited or special warranty deed in a form
reasonably acceptable to such party in its
capacity as Transferee (and complying with
applicable state laws) with respect to each
parcel of owned Real Property, duly executed and
acknowledged and in recordable form, warranting
good and marketable fee simple title to such
Real Property against all persons claiming by,
through or under the other party in its capacity
as Transferor, subject only to Permitted
Encumbrances, and in form sufficient to permit
the title company to issue the title policy
described in Section 7.6 to Transferee with
respect to such Real Property;
(iii) an affidavit of the other party in its capacity
as Transferor, under penalty of perjury, that
such party is not a "foreign person" (as defined
in the Foreign Investment in Real Property Tax
Act and applicable regulations) and that
Transferee is not required to withhold any
portion of the consideration payable under this
Agreement under the provisions of such Act; and
52
(iv) such other transfer instruments as such party in
its capacity as Transferee may deem necessary or
advisable to transfer the Assets to such party
and to perfect such party's rights in the
Assets.
9.2.5. Subject to Article 10 below, the other party has
delivered to such party evidence, in form and substance satisfactory to such
party as described in Section 7.5.1, that all of the Required Consents noted
with an asterisk (*) on SCHEDULE 5.3 or SCHEDULE 6.3, as applicable, have been
obtained or given and are in full force and effect.
9.2.6. As of Closing, the other party shall have no fewer than
the number of Equivalent Billing Units in the aggregate indicated on SCHEDULE
9.2.6.
9.2.7. Where the Transferee is TCI, Cox shall have (i) paid
the Cash Consideration required to be paid at the Closing to TCI, (ii) Cox shall
have paid the Cash Consideration in full or in part to the seller of an
Additional System and paid the remainder, if any, to TCI, or (iii) Cox shall
have deposited the Cash Consideration into an escrow account as provided in
Section 3.4.
9.2.8. Where the Transferee is Cox, Transferee shall have
received the opinion of TCI's General Counsel, dated the Closing Date, in the
form set forth in Exhibit E.
---------
9.2.9. Where the Transferee is TCI, L.P., Transferee shall
have received the opinion of Dow, ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇, counsel for Cox, dated the
Closing Date, in the form set forth in Exhibit F.
---------
9.2.10. The other party has delivered releases, in form
satisfactory to such party, of all Encumbrances affecting any of the Assets
other than Permitted Encumbrances.
9.2.11. Such party has received the title insurance commitments
described in Section 7.6.
9.2.12. The other party has delivered to such party the
following: (i) a certificate, dated the Closing Date, signed by an executive
officer of each of the entities comprising the other party, without personal
liability, stating that to his or her knowledge, the conditions set forth in
Sections 9.2.1 and 9.2.2 are satisfied; and (ii) the total number of Equivalent
Billing Units for all of Transferor's Systems, estimated in good faith as of the
Closing Date.
9.2.13. The other party has delivered to such party a
certificate, dated as of the Closing Date, executed by the Secretary of each of
the entities comprising the other party, without personal liability: (i)
certifying that the resolutions, as attached to such certificate, were duly
adopted by such Transferor's Board of Directors and stockholders (if required),
authorizing and approving the execution of this Agreement and the consummation
of the transaction contemplated hereby and that such resolutions remain in full
force and effect; and (ii) certifying as to the
53
incumbency of each signatory to this Agreement and any ancillary agreements
executed by the other party.
9.2.14. The other party has executed and delivered a
Noncompetition and Nonsolicitation Agreement.
9.2.15. The Quad Cities Rebuild shall have been completed and
TCI, L.P. shall have received a certificate, dated on or before the Closing
Date, executed by an officer of Cox, without personal liability, stating that
the Quad Cities Rebuild has been completed.
9.3. Conditions to Obligations of Transferor. The obligations of
---------------------------------------
each party in its capacity as Transferor to consummate the transactions
contemplated by this Agreement to take place at the Closing are subject to the
satisfaction or waiver by such party in writing to the extent permitted by
applicable Legal Requirements at or prior to the Closing Date, of each of the
following conditions:
9.3.1. All representations and warranties of the other party
contained in this Agreement are true and correct in all material respects on and
as of the Closing Date with the same effect as if made on and as of the Closing
Date, except for changes permitted or contemplated by this Agreement.
9.3.2. The other party in all material respects has performed
and complied with each obligation, agreement, covenant and condition required by
this Agreement to be performed or complied with by it at or prior to the
Closing.
9.3.3. The other party has executed and delivered to such
party in its capacity as Transferor an assumption agreement in the form set
forth in Exhibit G.
---------
9.3.4. The other party has delivered to such party the
following: (i) a certificate dated the Closing Date, signed by an executive
officer of each of the entities comprising the other party without personal
liability, stating that to his or her knowledge, the conditions set forth in
Sections 9.3.1 and 9.3.2, are satisfied and (ii) such other documents as such
party may reasonably request in connection with the transactions contemplated by
this Agreement.
9.4. Waiver of Conditions. Any party may waive in writing any or
--------------------
all of the conditions to its obligations under this Agreement.
10. Primary and Secondary Transfers.
-------------------------------
10.1. Primary Transfer. In order to avoid the situation where the
----------------
entire like-kind exchange of assets contemplated by this Agreement is delayed
pending the receipt of a small number of Franchise Required Consents, the
parties agree that if after 180 days following the date of this Agreement (i)
the aggregate number of Equivalent Billing Units covered by TCI Franchises that
either do not require consent or as to which Required Consents have been
obtained shall equal 95%
54
of the number of Equivalent Billing Units for each TCI System as indicated on
SCHEDULE 3.2.7; (ii) the aggregate number of Equivalent Billing Units covered by
Cox Franchises that either do not require consent or as to which Required
Consents have been obtained shall equal 95% of the number of Equivalent Billing
Units for each Cox System as indicated on SCHEDULE 3.2.7; (iii) all conditions
precedent to Closing contained in Article 9 (other than the condition contained
in Section 9.2.5 as it relates to Franchise Required Consents) above have been
satisfied or waived, and (iv) the franchise agreements for which consents are
not obtained do not in the reasonable judgment of the party transferring such
Franchise hereunder prohibit the actions contemplated by this Article 10, TCI,
L.P. and Cox shall transfer, convey and assign (the "Primary Transfer") all of
the TCI Assets and all of the Cox Assets, with the exception of those Franchises
as to which Required Consents have not been obtained (such Franchises referred
to herein as "Retained Franchises").
10.2. Subsequent Transfers. Following the Primary Transfer the
--------------------
parties shall continue to use commercially reasonable efforts to obtain Required
Consents for Retained Franchises. Within 10 Business Days of obtaining a
Required Consent for a Retained Franchise, the Transferor shall assign and
transfer such Retained Franchise to Transferee (a "Subsequent Transfer") free
and clear of all Encumbrances other than Permitted Encumbrances.
10.3. Management Agreements. Concurrent with the Primary Transfer,
---------------------
each party retaining Retained Franchises shall enter into a management agreement
substantially in the form of Exhibit H attached hereto (the "Management
---------
Agreement") with respect to each area served by a Retained Franchise. The
Management Agreement shall require the Transferee to manage that portion of the
Service Area within the Retained Franchise and shall provide that Transferee
shall bear the expenses relating to such operations and retain the revenues
relating thereto, the net operating cash flow from those areas being
Transferee's sole compensation for managing the Retained Franchise areas. The
Management Agreement shall further provide that the Management Agreement shall
no longer apply to a Retained Franchise upon a Subsequent Transfer thereof.
10.4. Construction. For purposes of the Primary Transfer, all
------------
references in this Agreement to the Closing shall refer to the Primary Transfer
and all references in this Agreement to the Closing Date shall refer to the date
of the Primary Transfer and all provisions contained herein shall be applied
with respect to the Assets and Systems conveyed in the Primary Transfer in the
same manner as the exchange of all of the TCI Assets and Systems for all of the
Cox Assets and Systems consummated simultaneously.
10.5. Cash Consideration. In the event the Closing is consummated as
------------------
contemplated by this Article 10, the Cash Consideration shall be adjusted in
accordance with Section 3.2 and paid in full at the time of the Primary
Transfer. For purposes of the Closing, the number of Equivalent Billing Units
shall be determined and the calculation of the adjustment pursuant to Section
3.2.7 hereof shall be made at the time of the Primary Transfer, and such
determination and such calculation shall take into account Equivalent Billing
Units in Systems that are being transferred and Equivalent Billing Units in
Systems that are being retained.
55
10.6. Termination of Management Agreement or Revocation of Retained
-------------------------------------------------------------
Franchise. If a Retained Franchise is revoked as a result of the Management
---------
Agreement or a court orders the termination of a Management Agreement anytime
prior to the second anniversary of the Closing Date, the parties acknowledge
that the Transferee providing cable service to the area covered by a Retained
Franchise will suffer a loss, and the Transferor retaining the Retained
Franchise shall compensate the Transferee for the fair value of such loss. The
parties shall use their best efforts to determine the fair value represented by
such loss. If a Retained Franchise is revoked or a court orders the termination
of a Management Agreement on or after the second anniversary of the Closing
Date, there shall be no compensation paid by the Transferor to the Transferee.
The Transferor retaining a Retained Franchise shall be responsible for and bear
the expense of defending any legal challenges alleging the premature, unlawful
or invalid transfer of a Retained Franchise.
11. Termination.
-----------
11.1. Events of Termination. This Agreement may be terminated and
---------------------
the transactions contemplated by this Agreement may be abandoned at any time
prior to the Closing:
11.1.1. by the mutual written consent of the parties;
11.1.2. by any party, if the transactions contemplated by this
Agreement to take place at the Closing have not been consummated by the first
anniversary of this Agreement for any reason other than (i) a material breach or
material default by such party in the performance of any of its obligations
under this Agreement, or (ii) the failure of any representation or warranty of
such party to be accurate in all material respects; or
11.1.3. by Transferee under the conditions described in Section
7.7 or Section 7.11.
11.2. Liabilities in Event of Termination. The termination of this
-----------------------------------
Agreement will in no way limit any obligation or liability of any party based on
or arising from a breach or default by such party with respect to any of its
representations, warranties, covenants or agreements contained in this
Agreement, except that Transferee will have no liability in any event upon
exercise of its right to terminate pursuant to Section 11.1.3.
11.3. Procedure Upon Termination. In the event of the termination of
--------------------------
this Agreement by Transferee or Transferor pursuant to this Section 11, notice
of such termination will promptly be given by the terminating party to the
other.
12. Survival; Indemnification.
-------------------------
12.1. Survival of Representations and Warranties. All
------------------------------------------
representations and warranties contained in this Agreement and all covenants and
agreements (which covenants and agreements by their terms are to be performed
and completed prior to Closing) contained in this Agreement or in documents or
instruments delivered pursuant hereto shall be deemed continuing
56
representations, warranties, covenants and agreements, and shall survive the
Closing Date for a period ending on the first anniversary of the Closing Date
(the "Survival Period") unless a longer period of survival is otherwise provided
for in this Agreement; provided, however, that the representations and
warranties regarding tax and environmental matters contained in Sections 5.14,
5.16, 6.14 and 6.16 and the representations and warranties regarding ERISA,
employment matters and copyright matters shall survive for the period of the
applicable statute of limitations and the representations and warranties
regarding title to the Assets contained in Sections 5.5, 5.6, 5.9, 6.5, 6.6, and
6.9 shall survive indefinitely. The written assertion of any claim by Transferor
or Transferee against the other hereunder with respect to the breach or alleged
breach of any representation, warranty, covenant or agreement shall extend the
period during which such representation, warranty, covenant or agreement
survives through the date such claim is conclusively resolved. The covenants and
agreements contained in this Agreement or in documents or instruments delivered
pursuant hereto which by their terms are to be performed after Closing shall
survive the Closing and continue in effect in accordance with their terms.
12.2 Indemnification by Transferor. Each of TCI, L.P., and Cox in
-----------------------------
its capacity as Transferor will indemnify, defend and hold harmless the other
party in its capacity as Transferee and its shareholders and its and their
respective Affiliates, and the shareholders, partners, directors, officers,
employees, agents, successors and assigns of any of such Persons, from and
against:
12.2.1. all losses, damages, liabilities, deficiencies or
obligations of or to the other party in its capacity as Transferee or any such
other indemnified Person resulting from or arising out of (i) any breach of any
representation or warranty made by such party in its capacity as Transferor or
by its Affiliates in this Agreement, (ii) any breach of any covenant, agreement
or obligation of such party in its capacity as Transferor or of its Affiliates
contained in this Agreement, (iii) any act or omission of such party in its
capacity as Transferor or of its Affiliates with respect to, or any event or
circumstance related to, the ownership or operation of the Assets or the conduct
of the business and operations of the Systems, which act, omission, event or
circumstance occurred or existed prior to the Closing Date, without regard to
whether a claim with respect to such matter is asserted before or after the
Closing Date, including any matter described on SCHEDULE 5.15 (TCI) or SCHEDULE
6.15 (Cox), (iv) any claimed violation by such party in its capacity as
Transferor or by its Affiliates of any bulk transfer or fraudulent conveyance
laws of any jurisdiction arising out of the transactions contemplated by this
Agreement, (v) any Employee Plans or Compensation Arrangements of such party or
its Affiliates; (vi) any act or omission of such party or its Affiliates which
relates to "continuation coverage" (as defined in Section 7.3.2) or because the
other party in its capacity as Transferee or its Affiliates is deemed to be a
successor employer to such party or (vii) any other liabilities of such party or
its Affiliates, including rate refund liability, that are not Assumed
Liabilities; (viii) the presence, generation, removal or transportation of a
Hazardous Substance on or from any of the Real Property of such party or its
Affiliates prior to the Closing Date, including the costs of removal or clean-up
of such Hazardous Substances and other compliance with the provisions of any
Environmental Laws (whether before or after Closing) or (ix) any liability or
obligation of such party in its capacity as Transferor or of its Affiliates with
respect to the Systems to the extent not included in the Assumed Liabilities
assumed by the other party in its capacity as Transferee; and
57
12.2.2. all claims, actions, suits, proceedings, demands,
judgments, assessments, fines, refunds, interest, penalties, costs and expenses
(including, without limitation, settlement costs and reasonable legal,
accounting, experts' and other fees, costs and expenses) incident or relating to
or resulting from any of the foregoing.
In the event that an indemnified item arises under both clause (i) and under one
or more of clauses (ii) through (vii) of Section 12.2.1, a party's right to
pursue its claim in its capacity as Transferee under clauses (ii) through (ix),
as applicable, will exist notwithstanding the expiration of the Survival Period
applicable to such claim under clause (i).
12.3. Indemnification by Transferee. Each of TCI, L.P., and Cox in
-----------------------------
its capacity as Transferee will indemnify, defend and hold harmless the other
party in its capacity as Transferor and its and their respective Affiliates, and
the shareholders, partners, directors, officers, employees, agents, successors
and assigns of any such Persons, from and against:
12.3.1 all losses, damages, liabilities, deficiencies or
obligations of or to the other party in its capacity as Transferor or any such
other indemnified Person resulting from or arising out of (i) any breach of any
representation or warranty, covenant, agreement or obligation of such party in
its capacity as Transferee contained in this Agreement or (ii) the failure by
such party in its capacity as Transferee to perform any of its obligations in
respect of the Assumed Liabilities after Closing; and
12.3.2. all claims, actions, suits, proceedings, demands,
judgments, assessments, fines, interest, penalties, costs and expenses
(including, without limitation, settlement costs and reasonable legal,
accounting, experts' and other fees, costs and expenses) incident or relating to
or resulting from any of the foregoing.
In the event that an indemnified item arises under both clause (i) and under
clause (ii) of Section 12.3.1, a party's right to pursue its claim in its
capacity as Transferor under clause (ii) will exist notwithstanding the
expiration of the Survival Period applicable to such claim under clause (i).
12.4. Procedure for Indemnification. The procedure for
-----------------------------
indemnification shall be as follows:
12.4.1. The party claiming indemnification (the "Claimant")
shall promptly give notice to the party from whom indemnification is claimed
(the "Indemnifying Party") of any claim, whether between the parties or brought
by a third party, specifying (i) the factual basis for such claim and (ii) the
amount of the claim. If the claim relates to an action, suit or proceeding filed
by a third party against Claimant, such notice shall be given by Claimant within
ten days after written notice of such action, suit or proceeding was given to
Claimant; provided, however, that failure of the Claimant to give the
Indemnifying Party notice as provided herein shall not relieve the Indemnifying
Party of its obligations hereunder, except to the extent that such failure to
give notice shall prejudice any defense or claim available to the Indemnifying
Party.
58
12.4.2. Following receipt of notice from the Claimant of a
claim, the Indemnifying Party shall have 30 days to make such investigation of
the claim as the Indemnifying Party deems necessary or desirable. For the
purposes of such investigation, the Claimant agrees to make available to the
Indemnifying Party and/or its authorized representative(s) the information
relied upon by the Claimant to substantiate the claim. If the Claimant and the
Indemnifying Party agree at or prior to the expiration of said 30-day period (or
any mutually agreed upon extension thereof) to the validity and amount of such
claim, the Indemnifying Party shall immediately pay to the Claimant the full
amount of the claim subject to the terms and in accordance with the procedures
set forth herein. If the Claimant and the Indemnifying Party do not agree within
said period (or any mutually agreed upon extension thereof), the Claimant may
seek appropriate legal remedy.
12.4.3. With respect to any claim by a third party as to which
the Claimant is entitled to indemnification hereunder, the Indemnifying Party
shall have the right at its own expense, to participate in or assume control of
the defense of such claim, and the Claimant shall cooperate fully with the
Indemnifying Party. If the Indemnifying Party elects to assume control of the
defense of any third-party claim, the Claimant shall have the right to
participate in the defense of such claim at its own expense. If the Indemnifying
Party does not elect to assume control or otherwise participate in the defense
of any third party claim, it shall be bound by the results obtained by the
Claimant with respect to such claim.
12.4.4. If a claim, whether between the parties or by a third
party, requires immediate action, the parties will make every effort to reach a
decision with respect thereto as expeditiously as possible.
12.5. Limitations on Liability.
------------------------
12.5.1. Neither TCI, L.P. nor Cox shall be required to
indemnify the other under Section 12.2.1(i) and 12.2.2 (to the extent it applies
to 12.2.1(i)) in the case of TCI, L.P. or under Section 12.3.1(i) and 12.3.2,
(to the extent it applies to 12.3.1(i)) in the case of Cox until the aggregate
amount of Claimant's claims exceeds $500,000 (the "Threshold Amount"), and if
such claims exceed the Threshold Amount, the party shall be entitled to recover
all of its losses, including, without limitation, the amount of the Threshold
Amount.
12.5.2. A party's liability under this Article 12 shall be
limited to losses or damages not exceeding in the aggregate $50,000,000.
12.5.3. In the absence of fraud, the sole and exclusive remedy
of any party for any misrepresentation or any breach of a warranty or covenant
set forth in or made pursuant to this Agreement shall be a claim for
indemnification under and pursuant to this Article 11; provided, that the
foregoing limitation shall not apply to a claim by any party with respect to the
failure of any other party to fulfill its obligations to consummate the
transactions contemplated by this Agreement.
12.5.4. Notwithstanding the foregoing, the limitations
contained in this Section 12.5 shall not apply to indemnification claims brought
by Transferee relating to liabilities
59
of Transferor (including, without limitation, rate
refund liability) that are not Assumed Liabilities or to indemnification claims
brought by TCI, L.P. or Cox against the other party alleging the failure by such
party to perform any of its obligations in respect of the Assumed Liabilities.
12.6. Special Indemnification relating to the Additional System(s).
------------------------------------------------------------
TCI shall indemnify Cox against all losses, damages, liabilities, deficiencies
or obligations arising from any claims brought by seller of the Additional
System or any other third party relating to the Additional System or the
Additional System Agreement. The limitations set forth in Sections 12.1 and
12.5 hereto shall not apply to the obligation of TCI set forth in this Section
12.6.
12.7. Release of TCI Subsidiaries. From and after the Closing Date,
---------------------------
the TCI Subsidiaries shall be released, without further action on the part of
any party hereto, from all liabilities and obligations under this Agreement.
13. Miscellaneous.
-------------
13.1. Parties Obligated and Benefitted. Subject to the limitations
--------------------------------
set forth below, this Agreement will be binding upon the parties and their
respective assigns and successors in interest and will inure solely to the
benefit of the parties and their respective assigns and successors in interest,
and no other Person will be entitled to any of the benefits conferred by this
Agreement. Without the prior written consent of the other parties, no party will
assign any of its rights under this Agreement or delegate any of its duties
under this Agreement except pursuant to the Contribution (but any assignment in
connection with the Contribution shall not release the assignor from its
obligations hereunder except as specified in Section 12.7).
13.2. Notices. Any notice, request, demand, waiver or other
-------
communication required or permitted to be given under this Agreement will be in
writing and will be deemed to have been duly given only if delivered in person
or by first class, prepaid, registered or certified mail, or sent by courier or,
if receipt is confirmed, by telecopier:
If to TCI:
c/o Tele-Communications, Inc.
▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attn: ▇▇. ▇▇▇▇▇ ▇. ▇'▇▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
and
Attn: Legal Department
c/o Tele-Communications, Inc.
▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
60
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to:
▇▇▇▇▇▇ ▇▇▇▇▇▇, Esq.
▇▇▇▇▇▇▇ & ▇▇▇▇▇▇, LLC
First Interstate Tower North
▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
If to Cox:
c/o Cox Communications, Inc.
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇, ▇.▇.
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇. ▇▇▇▇ ▇. ▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to:
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
Dow, ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇.▇.
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇.▇. ▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Any party may change the address to which notices are required to be sent by
giving notice of such change in the manner provided in this Section 13.2. All
notices will be deemed to have been received on the date of delivery or on the
third Business Day after mailing in accordance with this Section, except that
any notice of a change of address will be effective only upon actual receipt.
13.3. Right to Specific Performance; Remedies. The parties recognize
---------------------------------------
that in the event a party hereto should refuse to perform under the provisions
of this Agreement, monetary damages alone will not be adequate. The
nonbreaching party shall therefore be entitled, in addition to any other
remedies which may be available, including money damages, to obtain specific
performance of the terms of this Agreement. In the event of any action to
enforce this Agreement, the breaching party hereby waives the defense that there
is an adequate remedy at law. In the event of a breach or default which results
in the filing of a lawsuit for damages, specific performance or other remedy,
the nonbreaching party shall be entitled to reimbursement by the breaching party
of reasonable legal fees and expenses actually incurred by the nonbreaching
party.
61
13.4. Waiver. This Agreement or any of its provisions may not be
------
waived except in writing. The failure of any party to enforce any right arising
under this Agreement on one or more occasions will not operate as a waiver of
that or any other right on that or any other occasion.
13.5. Captions. The article and section captions of this Agreement
--------
are for convenience only and do not constitute a part of this Agreement.
13.6. Choice of Law. This agreement and the rights of the parties
-------------
under it will be governed by and construed in all respects in accordance with
the laws of the State of Delaware without regard to the conflicts of law
principles of such State.
13.7. Terms. Terms used with initial capital letters will have the
-----
meanings specified, applicable to both singular and plural forms, for all
purposes of this Agreement. The word "include" and derivatives of that word are
used in this Agreement in an illustrative sense rather than limiting sense.
13.8. Rights Cumulative. All rights and remedies of each of the
-----------------
parties under this Agreement will be cumulative, and the exercise of one or more
rights or remedies will not preclude the exercise of any other right or remedy
available under this Agreement or applicable law.
13.9. Further Actions. Transferor and Transferee will execute and
---------------
deliver to the other, from time to time at or after the Closing, for no
additional consideration and at no additional cost to the requesting party, such
further assignments, certificates, instruments, records, or other documents,
assurances or things as may be reasonably necessary to give full effect to this
Agreement and to allow each party fully to enjoy and exercise the rights
accorded and acquired by it under this Agreement.
13.10. Time of the Essence. Time is of the essence under this
-------------------
Agreement. If the last day permitted for the giving of any notice or the
performance of any act required or permitted under this Agreement falls on a day
that is not a Business Day, the time for the giving of such notice or the
performance of such act will be extended to the next succeeding Business Day.
13.11. Late Payments. If either party fails to pay the other any
-------------
amounts when due under this Agreement, the amounts due will bear interest from
the due date to the date of payment at the annual rate publicly announced from
time to time by Bank of New York as its prime rate (the "Prime Rate") plus 3%,
adjusted as and when changes in the Prime Rate are made.
13.12. Counterparts. This Agreement may be executed in one or more
------------
counterparts, each of which will be deemed an original.
13.13. Entire Agreement. This Agreement amends and restates the Asset
----------------
Exchange Agreement dated August 16, 1996, to which the parties hereto are
parties. With the exception of the Schedules referenced herein, this Agreement
(including the Exhibits referred to in this Agreement, which are incorporated in
and constitute a part of this Agreement) contains the entire agreement of
62
the parties and supersedes all prior oral or written agreements and
understanding with respect to the subject matter, including the August 16, 1996
Asset Exchange Agreement. All references herein to the Schedules shall for all
purposes be deemed to refer to the Schedules delivered with the Asset Exchange
Agreement dated August 16, 1996, as updated and amended pursuant to Section
7.25, which Schedules, as amended, are incorporated in and constitute a part of
this Agreement. This Agreement may not be amended or modified except by a
writing signed by the parties.
13.14. Severability. Any term or provision of this Agreement which is
------------
invalid or unenforceable will be ineffective to the extent of such invalidity or
unenforceability without rendering invalid or unenforceable the remaining rights
of the Person intended to be benefited by such provision or any other provisions
of this Agreement; provided however that the economic and legal substance of the
transactions contemplated by this Agreement is not affected in any manner that
is materially adverse to any party affected by such invalidity or
unenforceability.
13.15. Construction. This Agreement has been negotiated by Transferee
------------
and Transferor 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 will not
apply in any construction or interpretation of this Agreement.
63
The parties have dated this Agreement as of the day and year first above
written
HERITAGE CABLEVISION OF SOUTH EAST
MASSACHUSETTS, INC.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: Vice President
HERITAGE CABLEVUE, INC.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: Vice President
TCI CABLEVISION OF ST. ▇▇▇▇▇▇▇, INC.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: Vice President
TCI OF COUNCIL BLUFFS, INC.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: Vice President
TCI OF VIRGINIA, INC.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: Vice President
64
UA-COLUMBIA CABLEVISION OF
MASSACHUSETTS, INC.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: Vice President
UNITED CABLE TELEVISION OF SARPY
COUNTY, INC.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: Vice President
UNITED CABLE TELEVISION OF
SCOTTSDALE, INC.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: Vice President
TCI AMERICAN CABLE HOLDINGS, L.P.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: Vice President
COXCOM, INC.
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇
------------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇
Title: Vice President
65
