Exhibit 99.1
ASSET PURCHASE AGREEMENT
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This Asset Purchase Agreement ("Agreement") is made effective as of
September 9, 1998, by and between XXXXX CABLE INCOME FUND 1-B/C VENTURE, a
Colorado partnership (Federal Tax I.D. No. 00-0000000), with offices at 0000 X.
Xxxxxxx Xxxxxx, Xxxxxxxxx, Xxxxxxxx 00000 ("Seller"); XXXXX INTERCABLE, INC., a
Colorado corporation (for the limited purposes hereinbelow set forth); and
FALCON COMMUNITY VENTURES I LIMITED PARTNERSHIP, a California limited
partnership, with offices at 00000 Xxxxxxxx Xxxxxxxxx, 00xx Xxxxx, Xxx Xxxxxxx,
Xxxxxxxxxx 00000 ("Buyer").
WHEREAS, Seller owns and operates cable television systems located in the
cities of Myrtle Creek, Winston, Riddle, and Canyonville, and in certain
unincorporated areas of Xxxxxxx County, all in the State of Oregon (all cable
television systems owned and operated by Seller in such locations collectively
referred to herein as "the System"); and
WHEREAS, Buyer desires to buy and Seller desires to sell all those assets,
tangible and intangible, of Seller, used or useful in the operation of the
System, pursuant to the terms hereof;
NOW, THEREFORE, in consideration of these premises, and the mutual
covenants, conditions, and promises hereinafter set forth, the parties hereto
represent, warrant, and agree as follows:
1.0 Sale and Purchase of Assets.
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1.1 Assets to be Sold. Subject to the terms and conditions hereof,
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Seller, in consideration of Buyer's payment of the Purchase Price (as defined in
Section 2.0), shall sell, transfer, convey, assign, and deliver to Buyer at the
Closing (as defined in Section 3.0), free and clear of all liabilities, liens,
conditions, and encumbrances (except for those allowed in Section 5.7 below),
and Buyer shall purchase from Seller at the Closing, all of the tangible and
intangible assets of Seller used or useful in connection with the System (other
than those contracts and other intangibles expressly excluded from assumption
hereunder), including but not limited to the following:
1.1.1 Personal Property. Except for any items that are
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excluded from assignment pursuant to Section 1.2, below, all machinery,
equipment (including all equipment on each headend site, receivers, processors,
modulators, trunk amplifiers, taps, scramblers, converter/decoders and stand-by
power), tools, vehicles, furniture, fixtures, leasehold improvements, office
equipment, plant, subscriber installations, inventory (including but not limited
to traps, test equipment, converters, tools, and other materials and supplies),
and other tangible personal property relating to or used by the System,
including but not limited to all of the assets identified and described in
Schedule 1.1.1 hereto, plus such additions thereto and less any deletions
therefrom as arise in the ordinary course of business between the date of this
Agreement and the Closing Date (all of the foregoing hereinafter collectively
referred to as the "Personal Property");
1.1.2 Real Property. All leasehold interests in real
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property ("Leases"), except for any that are excluded from assumption pursuant
to Section 1.3.1, below, and all other interests in real property, including all
easements and rights of way, and all improvements, buildings, structures,
towers, and fixtures located thereon, which are used or useful in the operation
of the System at all locations of the System, including but not limited to all
real property interests described in Schedule 1.1.2 hereto, and specifically
including the property on which the System's headend equipment is located and
any easements related thereto (all of the foregoing hereinafter collectively
referred to as the "Real Property");
1.1.3 Governmental Licenses. Except for any that are
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excluded from assignment pursuant to Section 1.2, below, all municipal, state,
and federal licenses or franchises to provide cable television service,
applications for such licenses or franchises (if any), domestic satellite, CARS,
business radio, and other licenses granted by the Federal Communications
Commission (hereinafter "FCC"), the Federal Aviation Administration (hereinafter
"FAA"), or any other administrative agency, and all authorizations and permits
relating to the System granted to Seller by any governmental instrumentality,
including but not limited to those described in Schedule 1.1.3 hereto (all of
the foregoing hereinafter collectively referred to as the "Licenses");
1.1.4 Contracts. Except for any that are excluded from
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assumption pursuant to Section 1.3.1, below, all contracts, personal property
leases, pole attachment agreements, purchase orders, commitments, and other
agreements relating to the System, whether written or oral, including but not
limited to those described in Schedule 1.1.4 hereto, and all subscriber service
agreements and such additional contracts and agreements as Seller may have
relating to the operation of the System made in the ordinary course of business
(all of the foregoing hereinafter collectively referred to as the "Contracts");
1.1.5 Miscellaneous Documentation. All warranties (to the
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extent they can be assigned to Buyer), maps, plans, diagrams, blueprints,
schematics, and books and records relating to the System, and personnel files
for employees of the System (other than those books and records described in
Section 1.2.1 hereof);
1.1.6 Subscriber and Customer Lists. All subscriber and
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customer lists relating to the System;
1.1.7 Intellectual Property. All patents, patent
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applications, patent licenses, and all other information and intangible assets
relating to the System, including but not limited to the items listed on
Schedule 1.1.7 hereto, but excluding those matters set forth in Section 1.2.4
below;
1.1.8 Accounts Receivable. All accounts receivable from
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subscribers (although such accounts receivable have not been taken into account
in setting the Purchase Price, and their inclusion in the Assets will result in
the adjustment to the Purchase Price set forth in Section 4.1.1 below); and
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All of such assets described in Sections 1.1.1 through 1.1.9 are
hereinafter collectively referred to as the "Assets". Between the effective
date hereof and the Closing, Seller will not dispose of any of the Assets unless
such disposition is specifically permitted by the express terms of this
Agreement or approved in advance by Buyer in a separate writing.
1.2 Excluded Assets. The Assets shall not include the following:
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1.2.1 Organization Records. Seller's books and records that
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pertain to the organization, existence, or capitalization of Seller; provided,
however, that if there are any books and records of Seller as to which Buyer can
demonstrate a need for access, Seller shall provide such access in a reasonable
manner;
1.2.2 Cash. Cash or cash equivalents, such as demand
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deposits, certificates of deposit, treasury bills, and other marketable
securities. However, certain adjustments to the Purchase Price as set forth in
Section 4.1 may require Seller to transfer to Buyer cash or cash equivalents in
an amount equal to subscriber deposits and prepayments and any interest due
thereon as of the Closing Date;
1.2.3 Correspondence. Correspondence not relating to the
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prior operation of the System;
1.2.4 Trade Names. All right, title, and interest in or to
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the corporate or trade names, service marks, service names, logos, symbols, and
similar proprietary rights, or any variants thereof, belonging or relating to
Seller or used in connection with the operation of the System;
1.2.5 Tax Refunds. All claims, rights, and interests in and
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to any refunds for federal, state, or local income or other taxes or fees,
including franchise fees, of any nature whatsoever for periods prior to the
Closing Date, including, without limitation, fees paid to the U.S. Copyright
Office;
1.2.6 Other Accounts Receivable. Accounts receivable other
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than those from subscribers; and
1.2.7 Bonds. Bonds, letters of credit, surety instruments
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and other similar items.
1.3 Assumption of Obligations and Liabilities. As of the Closing
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(as defined in Section 3.0), Buyer shall only assume and pay, discharge, and
perform:
1.3.1 Insofar as they relate to the time period after the
Closing Date, the obligations and liabilities of Seller under the Leases,
Licenses, and Contracts listed in Schedules 1.1.2, 1.1.3 and 1.1.4,
respectively, or under Contracts relating to the operation of the System made in
the ordinary course of business, but expressly excluding:
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1.3.1.1 Any employee pension benefit plan or profit
sharing plan, employee welfare benefit plan, employment agreement, or similar
arrangement for the benefit of employees, whether for selected individuals or
otherwise, of Seller or to which Seller has contributed or is under an
obligation to contribute to or fund;
1.3.1.2 Any insurance policies (notwithstanding any
assignment of insurance proceeds pursuant to Section 16 hereof);
1.3.1.3 Any programming contracts or affiliation
agreements for the provision of any programming or other services exhibited to
all or part of the System, including but not limited to satellite and
subscription services, retransmission consent or equivalent agreements which are
used or useful in the operation of the System (except those which Buyer elects
to assume, as specifically designated on Schedule 1.1.4, which shall be deemed
to be a part of the Assets and be subject to all rights and obligations related
thereto hereunder);
1.3.1.4 Except as provided in Section 1.3.2 below, any
Contract not listed in the Schedules hereto which (i) is not terminable at will
or upon not more than thirty (30) days notice, or (ii) imposes monetary
obligations of more than Twenty-Five Thousand Dollars ($25,000.00) or any
material non-monetary obligations, notwithstanding its having been made in the
ordinary course of business; and
1.3.1.5 Seller's rights under any Contract for
subscriber billing and equipment.
1.3.2 Insofar as they relate to the time period after the
Closing Date, any written or oral Leases, Licenses, Contracts, personal property
leases, pole attachment agreements, purchase orders, commitments, or other
agreements relating to the System not described on Schedule 1.1.2, 1.1.3, or
1.1.4, but which, at Buyer's sole option, are specifically assumed by Buyer by
notice in writing to Seller after Buyer has been notified of the existence of
any such agreement.
1.3.3 Any obligation or liability with respect to subscriber
deposits or prepayments (to the extent Buyer receives a credit for same under
Section 4.1 of this Agreement).
1.3.4 All obligations, liabilities, and claims arising out of
Buyer's ownership of the Assets or its operation of the System after the Closing
Date.
All other obligations, liabilities, and claims of any nature
whatsoever of Seller including any lawsuits shall remain and be the sole
obligation of Seller. Except as specifically provided in this Section 1.3 or in
the Assumption Agreement described in Section 10.6 hereof, Buyer will not assume
or be deemed to have assumed or be bound by or subject to any duties,
responsibilities, obligations, or liabilities of Seller or of any other person
or entity, or which are related to the System or any of the Assets, whether
known, unknown, contingent, or otherwise.
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2.0 Purchase Price.
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The purchase price (the "Purchase Price") payable to Seller, subject
to any adjustments pursuant to Section 4.1, shall be Ten Million Dollars
($10,000,000.00), payable as follows:
2.1 Deposit. Five Hundred Thousand Dollars ($500,000.00) shall be
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delivered by Buyer to U.S. Bank, Denver Colorado (the "Deposit Escrow Holder")
as a deposit (the "Deposit") upon execution of this Agreement and execution by
Seller, Buyer, and the Deposit Escrow Holder of an escrow agreement containing
the terms set forth in Exhibit 2.1 attached hereto (the "Deposit Escrow
Instructions"), along with any standard and reasonable general provisions
required by the Deposit Escrow Holder. The Deposit shall, upon the Closing, be
delivered to Seller and credited against the Purchase Price to be paid by Buyer.
The Deposit shall be placed in a federally insured interest bearing account
approved by Buyer, and interest on the Deposit shall be retained by Buyer except
as set forth below. Should the Closing not occur for any reason, the following
shall apply:
2.1.1 Failure to Close Without Fault. If: (a) each party
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hereto shall have satisfied in full all of the obligations of such party under
this Agreement which were to have been satisfied by such party prior to the
Closing and neither party shall have breached any representation, warranty,
covenant, or agreement of such party contained in this Agreement, but (b) the
Closing shall nevertheless fail to take place (without any fault on the part of
either party) because one or more conditions to the Closing shall not have been
satisfied or waived, then this Agreement shall terminate without any liability
or obligation on the part of either party to the other arising out of the
failure of the Closing to take place, and the Deposit, plus any interest accrued
thereon, shall be returned to Buyer.
2.1.2 Failure to Close When Only Seller Performs. If all of
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the conditions set forth in Sections 9.1 through 9.21 below are satisfied at or
as of the Closing (or, in the case of any condition which is to be satisfied at
the Closing, Seller or the applicable third party shall have demonstrated a
willingness and ability to satisfy such condition if the Closing were to take
place), and Buyer shall nevertheless fail to purchase the System in accordance
herewith, Seller shall have the right to retain the Deposit, plus any interest
accrued thereon. Nothing contained in this section shall be construed to limit
Seller's right to damages in the event of Buyer's breach of this Agreement
provided that Seller shall have performed all of the terms and conditions of
this Agreement to be performed by it (except to the extent prevented by Buyer's
breach).
2.1.3 Failure to Close When Only Buyer Performs. If all of
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the conditions set forth in Section 10.0 below are satisfied at or as of the
Closing (or, in the case of any condition which is to be satisfied at the
Closing, Buyer or the applicable third party shall have demonstrated a
willingness and ability to satisfy such condition if the Closing were to take
place), and Seller shall nevertheless fail to sell the System to Buyer in
accordance herewith, Buyer shall be entitled to the return of the Deposit, plus
any interest accrued thereon. Nothing contained in this section shall be
construed to limit Buyer's right to damages in the event of Seller's breach of
this Agreement provided that Buyer shall have performed all of the terms and
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conditions of this Agreement to be performed by it (except to the extent
prevented by Seller's breach).
2.2 Closing Date Payment. Nine Million Dollars ($9,000,000.00) of
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the Purchase Price, as adjusted, will be paid directly to Seller on the Closing
Date by bank or certified check or federal funds wire transfer or other means
mutually satisfactory to Buyer and Seller.
2.3 Holdback. Five Hundred Thousand Dollars ($500,000.00) (the
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"Holdback") shall, on the Closing Date, be deposited by Buyer in a federally
insured interest bearing account with Union Bank of California (the "Holdback
Escrow Holder"). Prior to or on the Closing Date, Seller, Buyer, and the
Holdback Escrow Holder shall sign an escrow agreement containing the terms set
forth in Exhibit 2.3 attached hereto (the "Holdback Escrow Instructions"), along
with any standard and reasonable general provisions required by the Holdback
Escrow Holder. The Holdback shall apply against:
2.3.1 Third Party Claims. Any claims made by Seller's
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creditors, or claims filed by other third parties as a result of acts by Seller,
which have not been assumed by Buyer; and
2.3.2 Claims By Buyer. Any claims made by Buyer as a result
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of unsatisfied net prorations or Purchase Price adjustments in Buyer's favor, or
as a consequence of the failure of Seller to deliver the Assets as represented
by Seller in this Agreement, including but not limited to any reduction in the
Purchase Price occasioned by Seller's failure to deliver at least six thousand
six hundred fifty (6,650) Basic Subscribers, as provided for in Section 4.1 of
this Agreement.
Any claims made by Buyer shall be submitted to Seller for
review and approval, and any claims made by Seller's creditors shall be
submitted to both Buyer and Seller for review and approval, prior to the release
of funds to Buyer and/or such creditors by the Holdback Escrow Holder. Notice of
any such claims may be delivered by Buyer or Seller to the Holdback Escrow
Holder. Upon receipt of such notice, the Holdback Escrow Holder may segregate
the amount of the claims on its books, but shall only release funds to Buyer
and/or to a creditor in the event that both Buyer and Seller instruct the
Holdback Escrow Holder, in writing, that a claim is approved and should be paid
as designated in such instruction, or upon the receipt by the Holdback Escrow
Holder of an order by a court of competent jurisdiction setting forth the manner
in which such funds are to be disbursed. The Holdback shall be invested in the
manner provided in Exhibit 2.3. Interest earned on any amounts disbursed to
Buyer shall be paid to Buyer, and interest earned on all other amounts, whether
disbursed to Seller or third parties, shall belong to Seller, except to the
extent such interest is required to pay Buyer or Seller's creditors as provided
herein. All moneys in excess of those paid to creditors or to Buyer or retained
by the Holdback Escrow Holder pursuant to the Holdback Escrow Instructions or
any further joint instructions of Seller and Buyer shall be disbursed to Seller
on the later of (a) one (1) year after the Closing Date or (b) the date of
settlement of prorations and adjustments pursuant to Section 4.1.
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3.0 Closing and Closing Date.
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The "Closing" pursuant to this Agreement shall take place on January
29, 1999, or as soon thereafter as practicable after all of the necessary
consents have been obtained and all other conditions precedent to the parties'
obligations hereunder have been satisfied. As used herein, the term "Closing
Date" shall refer to the date of the Closing. The parties may by mutual written
agreement establish a different Closing Date. Unless the Closing can take place
by mail (i.e., by Seller delivering all of its closing deliveries in trust to
the offices of counsel for Buyer, Xxxxxxx & Kagon Law Corporation, 0000 Xxxxxxx
Xxxx Xxxx, Xxxxx 0000, Xxx Xxxxxxx, Xxxxxxxxxx, with such deliveries to be held
by said counsel pending (a) the receipt by Seller and the Holdback Escrow Holder
of the respective components of the Purchase Price to be paid to each of them on
the Closing Date, and (b) the delivery to Seller's counsel of all of the other
closing deliveries to be made by Buyer hereunder), the Closing shall take place
at the offices of said counsel for Buyer, or such other place as the parties
shall mutually agree in writing.
4.0 Prorations and Adjustments to Purchase Price.
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4.1 Items Subject to Proration and Adjustment and Payment Thereof.
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All expenses arising from the operation of the System (to the extent applicable
by reason of assignment and/or assumption hereunder), including but not limited
to power and utility charges, real and personal property taxes, salesperson
advances, payroll and other employment related taxes or other charges, the value
of accrued vacation pay (but not to exceed one week for any employee of the
System), pole attachment fees and other rentals and charges, applicable
franchise fees and copyright royalty payments, sales and service charges, and
other similar prepaid and deferred items, and all revenues arising from the
operation of the System (other than payments from subscribers, which are treated
separately below, and revenues relating to items which are excluded from the
Assets as provided in Section 1.2), shall be prorated between Buyer and Seller
as of 11:59 p.m. on the Closing Date so that Seller receives the benefit of such
revenues and bears such expenses which relate to the operation of the System for
the period through the Closing Date and Buyer receives the benefit of such
revenues and bears such expenses relating to the operation of the System after
the Closing Date. The Purchase Price shall be adjusted in accordance with such
prorations. The following adjustments in the Purchase Price shall also take
place:
4.1.1 The Purchase Price shall be increased by an amount
equal to (a) ninety-five percent (95%) of the accounts receivable owed as of the
close of business on the Closing Date by Basic Subscribers (as defined in
Section 4.2, below) for services rendered through the Closing Date which (i)
arose out of bona fide sales of services in the ordinary course of business,
(ii) are not the subject of dispute, (iii) are not owed by a person who has
sought the protection of any state or federal bankruptcy or insolvency law, and
(iv) are thirty (30) days or less in arrears as of the Closing Date (arrearage
to be determined as provided in Section 4.2, below); and (b) eighty percent
(80%) of the accounts receivable owed as of the close of business on the Closing
Date by Basic Subscribers for services rendered through the Closing Date which
satisfy subclauses (i), (ii), and (iii) of clause (a) of this paragraph (1), and
which are more than thirty (30) days but less than sixty (60) days in arrears as
of the Closing Date.
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4.1.2 The Purchase Price shall be reduced by an amount equal
to subscriber deposits and unearned subscriber payments and any interest due
thereon as of the Closing;
4.1.3 The Purchase Price shall be reduced by any accounts
payable and accrued expenses for which Seller would otherwise be liable under
this Agreement, but for which the responsibility for payment is assumed by
Buyer; and
4.1.4 The Purchase Price shall be reduced by the sum of One
Thousand Five Hundred Seven Dollars ($1,507.00) for each Basic Subscriber less
than six thousand six hundred fifty (6,650) as of the Closing.
In the event Buyer is owed an amount as a result of these prorations
and adjustments, the Purchase Price shall be reduced accordingly. In the event
Seller is owed an amount as a result of these prorations and adjustments, the
Purchase Price shall be increased accordingly. The initial statement of
prorations and adjustments ("the Initial Settlement Statement") will be prepared
by Seller and delivered to Buyer not later than a date Seller reasonably
believes is at least 10 days prior to the expected Closing Date. The Initial
Settlement Statement shall be certified as to completeness and accuracy by
Seller and will show in detail the preliminary determination of the adjustments
referred to in Section 4.1, calculated as of the Closing Date (or as of any
other date agreed to by the parties) and will be accompanied by any documents
necessary to substantiate the adjustments proposed in the Initial Settlement
Statement. Following receipt of the Initial Settlement Statement and supporting
information, Buyer will have five business days to review the Initial Settlement
Statement and to notify Seller of any disagreements with Seller's estimates. If
Buyer provides a notice of disagreement with Seller's estimates of the
adjustments referred to in Section 4.1 within such five business day period,
Buyer and Seller shall negotiate in good faith to resolve any such dispute and
to reach an agreement prior to the Closing Date on such estimated adjustments as
of the Closing Date. The basis for determining the adjusted Purchase Price to
be paid at Closing will be either (a) if no notice of disagreement is provided,
the estimate of such adjustments set forth in the Initial Settlement Statement,
or (b) if a notice of disagreement is provided, only those adjustments set forth
in the Initial Settlement Statement upon which the parties agree prior to the
Closing Date.
Within ninety (90) days after the Closing Date, Seller shall deliver
to Buyer a report (the "Final Settlement Statement"), similarly certified by
Seller, showing in detail the final determination of all adjustments which were
not calculated as of the Closing Date and containing any corrections to the
Initial Settlement Statement, together with any documents substantiating the
adjustments proposed in the Final Settlement Statement. Buyer will provide
Seller with reasonable access to all records which Buyer has in its possession
and which are necessary for Seller to prepare the Final Settlement Statement.
Within thirty (30) days after receipt of the Final Settlement Statement, Buyer
shall give Seller written notice of Buyer's objection, if any, to the Final
Settlement Statement. If Buyer makes any such objections, the parties shall
agree on the amount, if any, which is not in dispute within 30 days after
Seller's receipt of Buyer's notice of objections to the Final Settlement
Statement. Any disputed amounts shall be determined within 120 days after the
Closing Date by an accounting firm reasonably acceptable to Buyer and Seller,
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whose determination shall be binding on Buyer and Seller. Each party shall bear
the fees and expenses of its own representatives, including its independent
accountants, if any, and the fees and expenses of any firm selected to resolve
any disagreement between the parties shall be borne equally by Buyer and Seller.
Within ten (10) business days following a final determination (whether as a
result of Buyer failing to give timely written notice of its disagreement with
the Final Settlement Statement, a resolution by Buyer and Seller of any such
disagreement, or a determination by an accounting firm selected to resolve any
disagreement between the parties), Buyer shall pay to Seller the amount of any
underpayment, or Seller shall refund to Buyer the amount of any overpayment, as
the case may be, of the Purchase Price (as adjusted to reflect such
determination). In the event Seller does not prepare the Final Settlement
Statement and submit it to Buyer for Buyer's approval within the period set
forth above, Buyer shall have the right to prepare such statement and such
statement shall be final and binding on both Buyer and Seller. If any item of
revenue or expense subject to proration or adjustment hereunder cannot be
ascertained or the proration or adjustment cannot be calculated within the time
limits set forth above, then it shall be separately prorated or adjusted as soon
as possible thereafter and, subject to the same method for resolving
disagreements discussed above, appropriate payment in satisfaction thereof shall
be made within five (5) days after its determination.
4.2 Definition of Basic Subscriber. The term "Basic Subscriber"
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shall mean a subscriber of the System receiving at least basic cable service who
has paid any applicable deposit and installation fee, who has been a subscriber
for at least one (1) month prior to the Closing Date and paid the full non-
discounted rate for at least one (1) month of service for all services
subscribed to, who has been regularly billed pursuant to Seller's normal billing
practices since becoming a subscriber and whose account is not sixty (60) days
or more in arrears as of the Closing Date (except for past due amounts of $5.00
or less, provided such account is otherwise current), and who has not requested
disconnection on or prior to the Closing Date. For purposes of determining
arrearages, it shall be assumed that a subscriber's payment is due on the first
day of the period for which the applicable billing relates. Forgiveness of a
past due balance will not be considered a payment for purposes of calculating
any arrearage. Seller shall use commercially reasonable efforts to invoice its
subscribers, prior to the Closing Date, in a manner consistent with past billing
practices. Any subscriber who has received any inducement in connection with
his subscription, other than inducements described on Schedule 4.2 offered in
the normal course of business ("Permitted Inducements"), shall not be counted as
a Basic Subscriber unless all of his payment obligations for the three (3)
months prior to the month in which the Closing Date occurs have been at the full
non-discounted rate applicable to all services subscribed for and no part of the
inducement is to be in effect after the Closing Date. Notwithstanding the
foregoing, subscribers who are part of a bulk or commercial account or who
otherwise pay other than the full non-discounted rate in effect in the System
(pursuant to regularly discounted rates disclosed on Schedule 5.11 hereto,
including senior discounts) shall be included in the number of Basic Subscribers
(provided they meet all other requirements) according to the following formula:
the monthly xxxxxxxx to all such subscribers for the month in which Closing
occurs solely for the delivery of the basic and tier, if applicable, cable
service they receive (i.e., excluding any xxxxxxxx for installation or
reconnection, additional outlets, pay services, cable guides, or other premium
services or special items, and any separately identified taxes and other pass-
through charges) shall be divided by the monthly non-discounted rate for
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such basic and tier cable service (inclusive of any taxes and other pass-through
charges not separately identified). Notwithstanding any of the foregoing, any
subscribers added to the System between the date hereof and the Closing Date as
a result of Seller extending its cable plant after the date hereof to any homes
passed by plant owned or leased by persons or entities operating one or more
cable television systems other than the System shall not be deemed to be Basic
Subscribers for any purpose under this Agreement.
5.0 Representations and Warranties of Seller and Xxxxx Intercable, Inc.
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As an inducement to Buyer to enter into this Agreement and to
consummate the transactions contemplated hereby, Seller and Xxxxx Intercable,
Inc. (collectively, "the Warranting Parties") jointly and severally represent
and warrant to Buyer as follows:
5.1 Organization and Standing. Seller is a partnership duly
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organized and validly existing under the laws of the State of Colorado, and is
duly qualified to do business in the State of Oregon. Seller has all requisite
power and authority to own, lease, and use its properties and assets and is
entitled to carry on its business of operating the System at and in the places
where such properties and assets are now owned, leased, or operated and such
business is now conducted. Schedule 5.1 sets forth the names and present
positions of all of Seller's general partners, the names and present positions
of all directors and officers of any corporate general partner, and any
fictitious or assumed business names or trade names (other than the name of
Seller set forth on page 1 of this Agreement) under which Seller has operated
any part of the System or owned or leased any of the Assets.
5.2 Partnership and Other Authorizations. Seller has full power
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and authority to enter into this Agreement and to consummate the transactions
contemplated hereby. Subject to approval by the Board of Directors of Xxxxx
Intercable, Inc., the sole general partner of the general partners of Seller,
and the limited partners of each of the general partners of Seller, this
Agreement and all transactions contemplated hereby have been duly and validly
authorized and approved by all necessary actions on the part of Seller and
constitutes a legal, valid, and binding obligation of Seller enforceable in
accordance with its terms. Upon the receipt of the consents described in
Schedule 5.3, neither the execution, delivery, and performance of this Agreement
nor the consummation of the transactions contemplated hereby by Seller will,
with or without the giving of notice or the passage of time, or both, in any
material respect, conflict with, result in a default or loss of rights under,
give rise to any rights of termination, cancellation, or acceleration under, or
result in the creation of any lien, charge, or encumbrance pursuant to, (1) any
provision of its partnership agreement, franchise, or any other document
regulating the actions of Seller; (2) any note, bond, indenture, mortgage, deed
of trust, contract, agreement, lease, license, or other instrument or obligation
to which Seller is a party or by which it may be bound or affected; or (3) any
law, order, judgment, franchise, ordinance, or decree to which Seller is a party
or by which it may be bound or affected.
5.3 Consents. Except as described in Schedule 5.3, no permit,
--------
consent, approval, or authorization of, or declaration to or filing with, any
governmental or regulatory authority, and no consent or approval from any other
party, is required prior to the Closing in
10
connection with the execution and delivery of this Agreement by Seller or the
consummation by Seller of the transactions contemplated hereby, nor, to Seller's
knowledge after due inquiry, except as described in Schedule 5.3, is any permit,
consent, approval, or authorization of, or declaration to or filing with, any
governmental or regulatory authority, and no consent or approval from any other
party, required to (1) render this Agreement or the transactions contemplated
hereby valid and effective with respect to the parties hereto, (2) enable Buyer
to operate the System in essentially the same manner as the System is presently
operated, or (3) permit Seller to assign or transfer any Lease, Contract or
License to Buyer.
5.4 Conduct of Business in Ordinary Course. Since March 31, 1998,
--------------------------------------
Seller has conducted its business relative to the System only in the ordinary
course and has not:
5.4.1 Sold, transferred, leased to others, or otherwise
disposed of any of the Assets which are, in the aggregate, material to the
operation or maintenance of the System except for inventory and/or services sold
in the ordinary course of business or for assets sold or disposed of and
replaced by other assets in the ordinary course of business; canceled or
compromised any debts owed to, or claims relating to, the System which are, in
the aggregate, of material value; or waived, compromised, or released any rights
which are, in the aggregate, of material value;
5.4.2 Suffered any damage, destruction, or loss, whether or
not covered by insurance, which, when aggregated with all such damage,
destruction, or losses, have a material adverse impact on the System or the
Assets or their respective business prospects;
5.4.3 Transferred or granted any right under, or entered into
any settlement regarding the breach or infringement of, any license, patent,
copyright, trademark, trade name, invention, franchise, or similar rights, or
modified, in any material sense, any existing right with respect thereto
relating to the System;
5.4.4 Instituted, been named as a party to, settled, or
agreed to settle any litigation, action, or proceeding before any court or
governmental body relating to the System or the Assets which, when aggregated
with all such litigation, actions, or proceedings, have a material adverse
impact on the System or the Assets;
5.4.5 Suffered any changes, events, or conditions (other than
changes, events or conditions affecting the U.S. cable industry as a whole,
including any change, event or condition arising from (i) legislation,
litigation, rulemaking or regulation or (ii) competition caused by or arising
from direct broadcast satellite services) which, in the aggregate, materially
and adversely affect the condition (financial or otherwise), properties, assets,
liabilities, of business of Seller or the System; or
5.4.6 Made any general uniform increase in the compensation
of employees of Seller employed at the System except for increases made in the
ordinary course of business consistent with Seller's past practices.
11
5.5 Claims or Legal Actions. Except as disclosed in Schedule 5.5,
-----------------------
and excluding matters relating to the cable television industry in general,
there is no claim, legal action, counterclaim, suit, arbitration, governmental
investigation, or other legal, administrative, or tax proceeding, nor any order,
decree, or judgment (all collectively referred to as "Claims") in progress or
pending, nor to the best knowledge of the Warranting Parties, after due inquiry,
are any material Claims threatened, against or relating to Seller with respect
to the System, its properties, the Assets, or the business of the System or the
transactions contemplated by this Agreement, nor do either of the Warranting
Parties know or have reason to be aware of any basis for the same.
5.6. Compliance with Laws. Seller has complied in all material
--------------------
respects with the Licenses, with the National Electric Code and the National
Electrical Safety Code, and with all other laws, rules, regulations, and
ordinances, including but not limited to laws, rules, orders, regulations, and
ordinances of the State of Oregon, the FCC (including but not limited to the
Cumulative Leakage Index ("CLI") rules), and all local governmental
jurisdictions in which the System is located (hereinafter collectively "Laws"),
and to the best of the Warranting Parties' knowledge, after due inquiry, neither
the ownership nor use of the Assets nor the conduct of Seller's business
conflicts in any material respect with the rights of any other person,
corporation, or entity. Without limiting the foregoing, the Warranting Parties
represent and warrant that:
5.6.1 Seller has not offered or given any bribe or special
favor or otherwise violated any Laws in connection with processing or
maintaining any license or a rate for any customer service charge, hookup, or
installation fee, or other customer charge.
5.6.2 Seller has complied with its obligations and has not
violated any Laws or any duty or obligation with regard to protecting the
privacy rights of any past or present customers of the System.
5.6.3 Seller owns and makes available to customers of the
System all equipment and facilities required under any Laws or any of the
Licenses, which equipment and facilities are part of the Personal Property
transferred hereunder.
5.6.4 Seller has conducted or caused to be conducted, in all
material respects, all system and microwave performance tests and all CLI
related tests, and has maintained all leakage logs, required with respect to the
System by the rules and regulations of the FCC, and the leakage logs and other
records pertaining to such tests and standards for the past three (3) years, all
of which accurately and completely reflect in all material respects the results
of such tests, all FCC Forms 320 and 325, all current microwave licenses and
TVRO licenses, and all aeronautical frequency clearances, have been delivered to
Buyer, or will be so delivered at least thirty (30) days prior to the Closing.
5.6.5 Seller has obtained all required current Proofs of
Compliance with OSHA Safety Standards for all vehicles and vehicle safety
equipment.
12
5.6.6 Seller has filed all required FCC Forms 395-A for all
periods during which Seller has owned the System, and has received FCC/EEO
compliance certificates for all periods during which Seller has owned the
System.
5.6.7 Seller has filed all required FCC Forms 393 (and/or
Forms 1200/1205/1210/1240) relating to the System, all such Forms 393 (and/or
Forms 1200/1205/1210/1240) completely and accurately list all information
required to be contained therein, and the System is in compliance in all
material respects with all applicable subscriber rate regulations.
5.6.8 Seller is not in violation of, or in default under, any
terms or provisions of any lien, mortgage, lease, license, deed of trust,
agreement, instrument, order, judgment, or decree related to and material to the
operation of the System.
5.7 Title to and Condition of Assets. At and as of the Closing,
--------------------------------
Seller will have good and marketable title to the Assets to be transferred
hereunder, free and clear of all mortgages, deeds of trust, pledges, liens,
charges, security interests, encumbrances, restrictions, installment purchase
obligations, leases, licenses, easements, liabilities, or claims of any nature
whatsoever, direct or indirect, whether accrued, absolute, contingent, or
payable, except for "Permitted Encumbrances", which shall mean those minor
imperfections of title and encumbrances, if any, which do not detract from the
value of the properties subject thereto and which do not interfere with the
present and continued use of the Assets or with the conduct of Seller's normal
operations. Without limiting the foregoing, the Warranting Parties represent
and warrant that:
5.7.1 All of the Real Property used for Seller's office and
headend has unfettered access to public roads or streets and has (or will have
as of the Closing) all utilities and services necessary for the proper conduct
and operation of the System.
5.7.2 To the best of the Warranting Parties' knowledge, the
leased Real Property described in Schedule 1.1.2 is being held under valid,
subsisting, and enforceable leases subject only to such exceptions to title as
do not impair the use of the properties for the purposes for which they are
leased.
5.7.3 All towers, earth receiving dishes and facilities, pole
attachments, cable, and other installations, equipment, and facilities utilized
in connection with the System are maintained, placed, and located in accordance
in all material respects with the provisions of all applicable leases, licenses,
permits, or other arrangements.
5.7.4 The Assets are in good working condition (normal wear
and tear excepted), meet all FCC technical requirements in all material
respects, and are adequate and sufficient for all of the current operations of
the System, and to the best of the Warranting Parties' knowledge, and without
either of them having been informed to the contrary by any governmental agency
or body, conform with all current applicable Laws.
13
5.7.5 None of the cables, lines, or other facilities of the
System require, or, to the best of the Warranting Parties' knowledge, after due
inquiry, may require in the future, relocation or removal.
5.7.6 To the best of the Warranting Parties' knowledge, there
are no violations of any regulations relating to pole attachments in the System.
5.7.7 To the best of the Warranting Parties' knowledge, none
of the communities or other areas served by the System has taken any action to
cause the local regulation of rates charged for the provision of cable service.
5.8 Financial Statements. Schedule 5.8 contains copies of the
--------------------
Seller's audited Balance Sheets and Income Statements for its most recently
completed fiscal year, as well as its most recent interim unaudited Income
Statements relating solely to the System (the "Financial Statements"). The
Financial Statements are true, complete, and correct in all material respects,
have been prepared in accordance with generally accepted accounting principles
consistently applied from the books and records of Seller, and present fairly
the financial condition of Seller and the System as of the respective dates of
such Financial Statements.
5.9 Validity of Leases, Licenses, and Contracts. All of the
-------------------------------------------
Leases, Licenses, and Contracts, as well as any other contract material to the
operation of the System to which Seller is a party and which is otherwise
assigned to or assumed by Buyer, are valid and binding, and in full force and
effect. There is not, under any Lease, License, Contract, or any other
agreement that may be assigned to or assumed by Buyer and material to the
operation of the System, any default by any party thereto or event which, after
notice or lapse of time, or both, would constitute such a default as a result of
which any party would have the right to terminate such Lease, Contract, License,
or other agreement. Seller has complied with all material promises or
commitments on the part of Seller with respect to the System, including any
relating to capital improvements required under any License or otherwise,
insofar as such promises or commitments are to be fulfilled on or prior to the
effective date hereof, and Seller will substantially comply with all such
promises or commitments insofar as they are to be fulfilled on or prior to the
Closing Date. Except as disclosed on Schedule 5.9, no promises or commitments
other than as reflected in the Licenses which are to be fulfilled after the
Closing Date have been made with respect to capital improvements relating to the
System. Pursuant to subsections (a) through (g) of Section 626 of the Cable
Communications Policy Act of 1984 (47 U.S.C. Section 546), as amended, Seller
has caused the commencement of proceedings that will allow it to submit timely
proposals for renewal of all franchises having a remaining term of thirty-six
(36) months or less as of the effective date hereof, and has provided Buyer with
copies of all proposals for renewal, preliminary assessments, and franchisor
determinations described in subsection (c) of said Section 626. True and
complete copies of each of the Leases, Contracts, and Licenses listed in
Schedule 1.1.2, 1.1.3, or 1.1.4 (together with any and all amendments thereto)
have been delivered to Buyer. All reports of Seller to the FCC and to municipal
authorities are true and correct and have been duly filed. Other than (i)
subscriber service agreements, (ii) contracts made in the ordinary course of
business and not excluded from assumption pursuant to Section 1.3.1.4 hereof,
(iii) contracts and other intangibles which have been disclosed by Seller to
Buyer and which are expressly excluded from assumption
14
hereunder pursuant to Subsections 1.3.1.1, 1.3.1.2, 1.3.1.3, and 1.3.1.5 above,
and (iv) the Leases, Contracts, and Licenses described in Schedules 1.1.2,
1.1.3, and 1.1.4 hereto, Seller is not a party to any contract, agreement,
license, franchise, or permit relating to the System, and no contract,
agreement, license, franchise, or permit is necessary or material to the
operation of the System, or is required to enable it to carry on its business as
presently conducted. The Warranting Parties shall disclose to Buyer any
requirement for any such other contract or license, to the extent either of them
becomes aware of any such other requirement at any time prior to the Closing.
None of the Leases, Contracts, or Licenses would be breached by virtue of the
transactions contemplated hereby or by virtue of the assignment thereof by
Seller to Buyer, provided any consents referred to in Schedule 5.3 are obtained.
5.10 Licenses and Copyrights. Without material exception, Seller
-----------------------
owns or possesses adequate licenses or other rights to use all copyrights,
trademarks, service marks, service names, trade names, and patents necessary to
operate the System as presently operated. To the best of the Warranting
Parties' knowledge, Seller is not infringing upon or otherwise acting adversely
to any copyright, trademark, trademark right, service xxxx, service name, trade
name, patent, patent right, trade secret, or license owned by any person or
persons, and there is no such claim or action pending, or to the knowledge of
the Warranting Parties threatened, with respect thereto.
5.11 Signal Carriage, Rates, and Technical Profile. Schedule 5.11
---------------------------------------------
accurately sets forth the channels and applicable MHz at which the System
delivers programming to its customers. The System's provision of reception on
such channels is in compliance with the requirements of all licenses and the FCC
in all material respects, and Seller has the legal right and authority,
including but not limited to all necessary authorizations from the FCC, to carry
and to continue to carry and use in the conduct of the business of the System
all of the channels now being utilized to deliver programming to subscribers.
Such channels comprise all of the stations or signals required to be carried by
the System pursuant to any license, law, rule, regulation, or ordinance.
Schedule 5.11 also accurately provides the following information:
5.11.1 A rate summary identifying each separate service
offered to subscribers, the number of subscribers to each service, the regular
rate charged for each service and the initial effective date for each such rate,
and any promotional or other discounted rates and the initial effective date for
each such rate;
5.11.2 A package summary identifying each package of services
offered to subscribers, the number of subscribers to each package, and the rate
for each package;
5.11.3 A bulk subscriber summary identifying the number of
subscribers comprising each bulk or commercial billing account, and the per
subscriber rate for each such account;
5.11.4 A listing of the names of all seasonal subscribers,
including the number of months they receive service and the manner in which they
are billed (if other than the standard monthly rates for each month they receive
service); and
15
5.11.5 The type and number of miles of plant and the number of
channels.
Except as set forth in Schedule 5.11, (i) no notices or demands (oral
or written) have been received from the FCC, from any television station,
governmental agency or unit, or from any other person or entity claiming to have
a right to object to or challenge the right of Seller to carry any signal or
deliver the same; and (ii) there are no pending or threatened administrative or
judicial proceedings involving the conduct of Seller's business or the right to
carry and deliver such signals.
5.12 Copyright Filings. Seller has timely filed with the U.S.
-----------------
Copyright Office all notices, Statements of Account, Supplements, Declarations
of Gross Receipts, and Gross Receipts Adjustment Schedules (collectively,
"Copyright Filings"), and has paid all royalty fees and other fees required
pursuant to the rules and regulations of the Copyright Office and copyright acts
and amendments, relating to the System.
5.13 Franchise Fees. The current franchise fees being charged under
--------------
each of the System's franchises are disclosed in Schedule 5.13 hereto. All
franchise fees due and payable under the Licenses as of the Closing have been or
will be paid prior to the Closing.
5.14 Pole Attachment Agreements. For all pole attachment agreements
--------------------------
relating to the System, the current rates being charged as pole attachment fees
and the number of poles covered by each such agreement are disclosed in Schedule
5.14 hereto. All pole attachment fees due and payable under any pole attachment
Contracts as of the Closing have been or will be paid prior to the Closing.
5.15 Easements, Etc. Seller owns and possesses all easements,
--------------
rights of way, licenses, and other agreements material to the operation of the
System as and where it is presently operated and all of which are described in
Schedule 1.1.4. To the best knowledge of the Warranting Parties, the System
does not have cable crossing any property except under the terms of valid
easements, verbal or written licenses, leases, pole attachment agreements,
franchises or other authorizations. The current use of any Real Property does
not constitute a nonconforming use under, nor does it violate, any applicable
zoning laws or regulations.
5.16 Employment Matters. Schedule 5.16 includes a schedule showing
------------------
the name, address, date of birth, gender, and dependent status of each person
regularly employed in the operation of the System, including commission agents
and other independent contractors (other than construction contractors), along
with each such person's current annual salary rate and any amounts paid or
payable to each such person as bonus payments, indirect and/or deferred
compensation, or similar additional compensation payments for the period from
January 1, 1996, to the date of this Agreement. Except as set forth in Schedule
5.16, Seller is not a party to:
5.16.1 any union collective bargaining or similar agreement
involving employees of the System;
16
5.16.2 any plan providing for pension benefits, medical
benefits, hospitalization, life insurance or other insurance, or related
benefits to employees of the System;
5.16.3 any employment contract or bonus or deferred
compensation plan or arrangement; or
5.16.4 any similar arrangement for the benefit of employees,
whether for selected individuals or otherwise, of Seller or to which Seller has
contributed or is under an obligation to fund.
Without material exception, Seller has complied and will comply with
all applicable laws and regulations relating to the employment of labor,
including those related to wages, hours, collective bargaining, discrimination,
employee benefit plans, and the payment of Social Security or similar taxes.
There are no unfair labor practice charges or claims pending against Seller, nor
any pending or threatened charges against Seller with respect to any wage and
hour, employment discrimination, or other statutory violation. To the best
knowledge of the Warranting Parties, there is no union campaign being conducted
to solicit cards from employees to authorize the union to request an NLRB
certification election with respect to any employees of Seller.
5.17 Miles of Plant; Homes Passed. The System has not more than One
----------------------------
Hundred Fifty-Eight (158) miles of plant. The System passes approximately Nine
Thousand Four Hundred (9,400) residential dwellings. The bandwidth of such
plant is at least Three Hundred Thirty (330) MHz.
5.18 Tax Returns; Other Reports. Seller has filed in true and
--------------------------
correct form all federal, state, local, and foreign tax returns and other
reports required to be filed with respect to the System, and has timely paid all
taxes and assessments which have become due and payable, whether or not so shown
on any such return or report, the failure to file or pay which could affect or
result in the imposition of a lien or encumbrance on the Assets. Seller has
received no notice of, nor does Seller have any knowledge of, deficiency or
assessment of proposed deficiency or assessment from any taxing governmental
authority with respect to the System which could affect or result in the
imposition of a lien or encumbrance on the Assets. There are no audits pending
with respect to the System or which could affect the Assets, and there are no
outstanding agreements or waivers by or with respect to Seller, that extend the
statutory period of limitations applicable to any federal, state, local, or
foreign tax returns or taxes for any period with respect to the System or which
could affect the Assets.
5.19 Competition and Overbuilds. Except as designated in Schedule
--------------------------
5.19 hereto, the Warranting Parties do not, after due inquiry, have knowledge of
any individual or entity who:
5.19.1 Intends to construct and/or operate another franchised
cable television system in any part of the area served by the System or any
other area within the scope of any of the cable television franchises, or has
expressed any interest in doing so; and/or
17
5.19.2 Is constructing and/or operating another franchised
cable television system in any part of the area served by the System or any
other area within the scope of any of the cable television franchises; and/or
5.19.3 Intends to apply or has applied for a franchise
covering any part of the area served by the System or any other area within the
scope of any of the cable television franchises, or has expressed any interest
in doing so.
5.20 Brokerage Commission. Other than a commission payable to The
--------------------
Xxxxx Group, Ltd. upon the consummation of the transactions contemplated by this
Agreement (which shall be payable solely by Seller), neither of the Warranting
Parties has entered into any agreement or other arrangement pursuant to which a
brokerage or other commission or finder's fee will be payable arising out of the
transactions contemplated by this Agreement.
5.21 Sufficiency of Assets. The Assets, the Excluded Assets, along
---------------------
with all contracts excluded from assumption hereunder pursuant to Sections
1.3.1.1, 1.3.1.2, 1.3.1.3, 1.3.1.4 and 1.3.1.5 above, constitute all of the
assets necessary to operate the System as it is presently being operated and in
compliance with all applicable laws, rules, and regulations.
5.22 No Other Commitment to Sell. No part of the System or any of
---------------------------
the Assets is directly or indirectly subject in any manner to any written or
oral commitment or any arrangement for the sale, transfer, assignment, or
disposition thereof, in whole or in part, except for actions taken in the
ordinary course of business or pursuant to this Agreement.
5.23 Environmental. To Seller's knowledge, after due inquiry, none
-------------
of the Real Property has ever been included, or considered for inclusion, on any
federal, state, or local list of properties contaminated by Hazardous Substances
(as hereinbelow defined). Seller has no knowledge of any releases, discharges,
emissions, spills, use, or storage of Hazardous Substances having occurred on
the Real Property in violation of any applicable law or regulation, and Seller
is not aware of any condition that is likely to result in any releases,
discharges, emissions, spills, use, or storage of Hazardous Substances occurring
on the Real Property in the future. The term "Hazardous Substance(s)" shall be
deemed to include (i) any "hazardous substance" as defined by the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended (42
U.S.C. Section 9601 et seq.) ("CERCLA"), and the rules and regulations
promulgated thereunder; (ii) petroleum, crude oil, diesel, natural gas,
synthetic gas usable for fuel, liquefied natural gas, and any other fraction of
crude oil; (iii) the term "pollutant or contaminant" as defined in CERCLA; (iv)
any substance regulated by the Toxic Substances Control Act (TSCA) (15 U.S.C.
Section 2601 et seq.), as amended, and rules and regulations promulgated
thereunder; (v) asbestos; (vi) polychlorinated biphenyls (PCBs); (vii) any
substance the presence, use, treatment, storage, or disposal of which on the
Real Property is prohibited by any legal requirements; and (viii) any other
substance which by any legal requirements requires special handling, reporting,
or notification by Seller of any governmental authority with respect to its
collection, storage, use, treatment, or disposal. "Disposal" as used in this
section shall have the meaning given that term under the Resource Conservation
and Recovery Act of 1976, as amended (42 U.S.C. Section 6901 et seq.), and the
rules and regulations promulgated thereunder.
18
5.24 Full Disclosure. No representation or warranty made by the
---------------
Warranting Parties contained in this Agreement or in any statement or
certificate furnished or to be furnished pursuant hereto contains or will
contain any untrue statement of any material fact, or omits or will fail to
state any material fact known to either of the Warranting Parties that is
required to make the statements herein or therein contained not misleading.
Any investigation made at any time by or on behalf of any party hereto
shall not diminish in any respect whatsoever Buyer's right to rely on the
foregoing representations and warranties and any others made by or on behalf of
the Warranting Parties pursuant to this Agreement.
6.0 Representations and Warranties of Buyer.
---------------------------------------
As an inducement to Seller to enter into this Agreement and to
consummate the transactions contemplated hereby, Buyer represents and warrants
to Seller as follows:
6.1 Organization and Standing. Buyer is a limited partnership duly
-------------------------
organized, validly existing, and in good standing under the laws of the State of
California and has full power and authority to enter into this Agreement and to
carry out the transactions contemplated hereby.
6.2 No Conflict. The execution, delivery, and performance of this
-----------
Agreement by Buyer will not, with or without the giving of notice or the passage
of time, or both, in any material respect conflict with, result in a default or
loss of rights under, or result in the creation of any lien, charge, or
encumbrance pursuant to, any provision of its articles of incorporation, bylaws,
corporate resolutions, or any mortgage, deed of trust, lease, license,
agreement, understanding, law, order or judgment, franchise, ordinance, or
decree to which Buyer is a party or by which it is bound. Buyer has the full
power and authority to enter into this Agreement and to carry out the
transactions contemplated hereby, and this Agreement and Buyer's performance
hereunder have been duly and validly authorized by all necessary actions on the
part of Buyer and the Agreement constitutes a valid and binding obligation of
Buyer enforceable in accordance with its terms.
6.3 Brokerage Commission. Buyer has not entered into any agreement
--------------------
or other arrangement pursuant to which a brokerage or other commission or
finder's fee will be payable arising out of the transactions contemplated by
this Agreement.
6.4 Consents. No permit, consent, approval, or authorization of,
--------
or declaration to or filing with, any governmental or regulatory authority, and
no consent or approval from any other party, is required prior to the Closing in
connection with the execution and delivery of this Agreement by Buyer or the
consummation by Buyer of the transactions contemplated hereby.
6.5 Legal Proceedings. There is no claim, legal action,
-----------------
counterclaim, suit, arbitration, governmental investigation, or other legal,
administrative, or tax proceeding, nor any order, decree, or judgment in
progress or pending, nor to the best knowledge of Buyer, threatened, against or
relating to Buyer which, if adversely determined, would restrain or enjoin the
19
consummation of the transactions contemplated by this Agreement or declare
unlawful the transactions or events contemplated by this Agreement or cause any
such transaction to be rescinded.
6.6 Full Disclosure. No representation or warranty by Buyer
---------------
contained in this Agreement or in any statement or certificate furnished or to
be furnished pursuant hereto contains or will contain any untrue statement of
material fact, or omits or will fail to state any material fact known to Buyer
that is required to make the statements herein or therein contained not
misleading.
Any investigation made at any time by or on behalf of any party hereto
shall not diminish in any respect whatsoever Seller's right to rely on the
foregoing representations and warranties and any others made by or on behalf of
Buyer pursuant to this Agreement.
7.0 Conduct of Business of Seller Pending Closing.
----------------------------------------------
Except as otherwise expressly provided herein, between the date
hereof and the Closing:
7.1 Compliance with Laws and Regulations. Seller will conduct its
------------------------------------
business and affairs in material compliance with all applicable laws and
regulations, including the timely pursuit of all regulatory matters;
7.2 Maintenance of System. Seller will maintain, keep, and
---------------------
preserve the System and Assets in the same general operating condition as on the
date hereof, ordinary wear and tear excepted. To the extent any
programming/affiliation company(ies) announce or have announced future
scrambling of signals:
7.2.1 if scrambling is to commence prior to the Closing Date,
Seller shall acquire, at its own expense, all Videocipher satellite descramblers
and such other equipment as will be necessary to continue the present operation
of the System on and after the Closing Date;
7.2.2 if scrambling is not to commence until on or after the
Closing Date, and free descrambling equipment is offered by the
programming/affiliation company(ies), if Seller has not already ordered such
equipment on its own, it shall do so upon the request of Buyer; and
7.2.3 if scrambling is not to commence until on or after the
Closing Date, and free descrambling equipment is not offered by the
programming/affiliation company(ies), then upon written request by Buyer, Seller
shall order the necessary descrambling equipment. Buyer shall assume all
obligations for such equipment ordered and will be entitled to such equipment
whether or not the transaction contemplated herein actually closes; provided,
however, that if Buyer has instructed Seller to place an order for such
equipment and this transaction fails to close, Seller shall have the option to
purchase the equipment from Buyer at Buyer's cost;
20
7.3 Maintenance of Business. Seller will use commercially
-----------------------
reasonable efforts to preserve intact its business and organization relating to
the System, and will conduct its business and affairs substantially in the
ordinary course and consistent with its prior practices;
7.4 Employees and Goodwill. Seller will use commercially
----------------------
reasonable efforts to keep available to Buyer the services of the employees of
the System (provided, however, that Seller will not increase the compensation
level of any employees of the System without the prior written consent of Buyer,
except in the ordinary course of business consistent with past practices and
except for the payment of "staying" bonuses to employees in accordance with the
past practices of Xxxxx Intercable, Inc.), and Seller will use commercially
reasonable efforts to preserve for the benefit of Buyer the goodwill of its
suppliers and customers and others having business relations with it;
7.5 Notice of Material Change. The Warranting Parties will give
-------------------------
Buyer prompt written notice of any material change in any of the information
contained in the representations and warranties made in Sections 5.1 through
5.24 hereof or the Schedules referred to herein which occurs prior to the
Closing, including but not limited to providing Buyer with copies of all
correspondence received or sent by Seller which relates to regulatory matters
and promptly notifying Buyer of any material regulatory developments;
7.6 Contracts and Agreements. Except for transactions contemplated
------------------------
hereby, Seller will not enter into any contract, agreement, commitment, or other
understanding or arrangement, other than in the ordinary course of business, and
except for agreements of the nature of those listed in Schedule 1.1.4, Seller
will not enter into any agreement or transaction obligating the System or any of
the Assets beyond the Closing Date, except to the extent such obligations will
be terminable as of the Closing Date without penalty;
7.7 Acts and Transactions. Seller will not, except for
---------------------
transactions contemplated by this Agreement or matters not within Seller's
reasonable control, perform or take any action or incur or permit to exist any
of the acts, transactions, events, or occurrences of the type described in
Section 5.4;
7.8 Breaches or Modifications. Seller will not, except for
-------------------------
transactions contemplated by this Agreement, breach, cancel, modify, or amend
any Lease, Contract, or License, and will pay all current liabilities when due;
7.9 Sale or Transfer. Seller will not sell, dispose of, or
----------------
transfer any of the Assets (except as permitted herein and except that Seller
may use inventory and dispose of damaged or defective equipment or material in
the normal course of business, subject to Section 7.10 below), or permit the
creation of any mortgage, pledge, lien or other encumbrance, security interest,
or imperfection of title thereon or with respect thereto, except for liens for
taxes not yet due and payable and liens arising under the terms of existing
security agreements in connection with Seller's secured credit facility;
7.10 Inventory; Equipment. Seller will maintain inventory levels
--------------------
consistent, in all material respects, with the inventory levels maintained by
Seller as of the date of this
21
Agreement; and Seller shall replace equipment that is damaged and disposed of
with equipment of like kind and quality;
7.11 Subscriber Rates, Deposits, Etc. Seller will not, directly or
-------------------------------
indirectly, modify or amend any rate, deposit, or other material condition under
which it does business with its subscribers or potential subscribers, except to
the extent required under any applicable legal requirement or order, or
undertake any promotion, other than the Permitted Inducements, pursuant to which
any subscriber or potential subscriber will be entitled to receive any service
after the Closing Date at a lesser rate than those specified on Schedule 5.11,
or be entitled to receive any premium, prize, or other inducement after the
Closing Date; and
7.12 Representations and Warranties. Except as required under any
------------------------------
applicable legal requirement or order, Seller will not take any action which
would cause any of the representations and warranties of the Warranting Parties
contained in this Agreement to be untrue in any material respect as of the
Closing.
7.13 Extension of Myrtle Creek Franchise. Seller will use
-----------------------------------
commercially reasonable efforts to obtain an extension of the term of the
franchise granted by the City of Myrtle Creek, Oregon, such that the term of the
franchise would expire no earlier than five years from the Closing Date.
8.0 Additional Covenants and Agreements.
-----------------------------------
8.1 Access to Business and Records. During normal business hours
------------------------------
and upon reasonable advance notice, Seller will permit Buyer to have access to
the premises in which Seller conducts its business and to all of its books,
records, and personnel. Seller will furnish to Buyer such financial data,
operating data, and other information as Buyer may reasonably request, including
but not limited to (i) monthly profit and loss statements for the System from
the date of this Agreement through the Closing Date; (ii) monthly subscriber
reports from the date of this Agreement through the Closing Date, showing the
number of subscribers to the System receiving basic service, tier service, pay
services, additional outlet service, and remote control service; and (iii) the
then most current available aging of subscriber accounts receivable, broken down
by subscriber and showing the number of accounts and the corresponding dollars
owed in each category. Upon request, Seller will promptly provide to Buyer or
its representatives for review its partnership records (but only to the extent
Buyer can show a reasonable need therefor), and copies of all retirement plans,
employment agreements, leases, contracts with suppliers, and other contracts or
documents which relate to the System. Buyer and its representatives will be
afforded the opportunity, upon reasonable notice and at reasonable times, to
examine the business, assets, and operation of the System, including an on-site
inspection of the System and Assets. Buyer shall hold all information obtained
in such examinations confidential, except as may be reasonably necessary in
order for Buyer to evaluate the Assets.
8.2 Information After Closing. For a period of five (5) years
-------------------------
after the Closing Date, Buyer shall give to Seller, its representatives, and its
accountants access to any records delivered to Buyer by Seller pursuant to this
Agreement, and Seller shall give Buyer access to any records relating to the
System for the three (3) complete fiscal years ending prior to
22
the Closing Date, in each case to the extent necessary to enable Buyer or
Seller, as the case may be, to prepare its audited and unaudited financial
statements, tax returns, or other reports, and to obtain any information it may
require in connection with the audit of any tax return or other report filed by
it. For a period of three (3) years after the Closing Date, Seller acknowledges
Buyer's right, at Buyer's expense, to engage Seller's accounting firm or any
other accounting firm to conduct an audit of Seller's books and records as they
pertain to the System for the three (3) complete fiscal years ending prior to
the Closing Date.
8.3 Cooperation. The parties shall cooperate to file, as quickly
-----------
as possible, any applications to any governmental authority, including the FCC,
to obtain such consents as are necessary to assign the Licenses identified and
described in Schedule 1.1.3, and shall otherwise cooperate fully with each other
and their respective counsel and accountants in connection with any steps
required to be taken as part of their respective obligations under this
Agreement, and all parties will use commercially reasonable efforts to
consummate the transactions contemplated hereby and to fulfill their obligations
hereunder.
8.4 Leased Vehicles. Seller shall pay to the lessors the
---------------
outstanding balances owed on all vehicle leases for the vehicles to be sold to
Buyer hereunder, and shall transfer title to said vehicles to Buyer free and
clear of all liens and encumbrances.
8.5 Continuance of Construction and Marketing Activities. All new
----------------------------------------------------
construction and all marketing will continue in the ordinary course of business
consistent with past practices during the period following the execution of this
Agreement through the Closing Date.
8.6 No Rate Increases or Lineup Changes Without Consent. Seller
---------------------------------------------------
will not implement any rate increases or channel additions or reconfiguration of
the existing tier service level prior to the Closing, unless agreed to by Buyer
in writing or otherwise required by law, regulation of judicial order.
8.7 Persons Employed in the System. Seller will provide to Buyer
------------------------------
as soon as practicable after the execution of this Agreement copies of all
documentation describing any employee benefit plans currently in place for any
persons employed in the operation of the System, and will promptly provide Buyer
with copies of any such documentation relating to benefit plans which come into
effect between the date hereof and the Closing Date.
8.8 Employees to be Hired by Buyer. Buyer shall provide Seller, at
------------------------------
least thirty (30) days prior to the Closing Date (but not earlier than ten (10)
days following Buyer's receipt of an executed copy of this Agreement with
Schedule 5.16 attached), a written list of the names of all of the System's
current employees, if any, to be hired as employees of Buyer after the Closing
Date (a "Transferred Employee"). It is clearly understood that Buyer has no
obligation to employ any of Seller's employees, and that Seller will be
responsible for all amounts owed to any employee terminated on or before the
Closing Date, including but not limited to wages, salaries, sick pay, accrued
vacation or other benefits, or payments on account of the termination.
Effective upon the Closing, Seller will terminate all employees of the System
who will not remain employees of Seller after the Closing (including any
Transferred Employee), and will pay to all such employees all wages, salaries,
sick pay, and other benefits accruing through the Closing Date
23
(except for accrued vacation to the extent included in the adjustments to the
Purchase Price pursuant to Section 4.1), along with any payments due on account
of the termination. Each Transferred Employee shall be eligible to participate
in Buyer's employee benefit plans as of the first day of the month following the
month during which the Closing occurs (except with respect to Seller's 401(k)
plan, eligibility for participation in which will begin on the January 1 or
July 1 first following the Closing Date).
8.9 Negotiations with Others. Until the Closing, neither Seller
------------------------
nor its agents or employees will offer the assets of the System to, respond to
offers for the assets of the System from (other than to indicate that the sale
of the assets of the System is under contract), or otherwise negotiate for the
sale of the assets of the System to, or for any merger with, any third party,
nor will any of them make information about the assets of the System available
to any third party who is not currently a partner of Seller, except in the
ordinary course of business.
8.11 Allocation of Purchase Price. The consideration payable by
----------------------------
Buyer under this Agreement will be allocated among the Assets as set forth in a
schedule to be prepared not later than 180 days after the Closing Date (or April
1 of the year following the Closing Date, if earlier) by an independent
appraiser with significant experience in the cable television industry. Such
appraiser shall be selected by the mutual agreement of Buyer and Seller within
30 days after the date of this Agreement, and the fees and expenses of such
appraiser shall be shared equally by Buyer and Seller. Buyer and Seller agree
to be bound by the allocation and will not take any position inconsistent with
such allocation and will file all returns and reports with respect to the
transactions contemplated by this Agreement, including all federal, state and
local tax returns, on the basis of such allocation.
8.12 Subscriber Billing and Collections After the Closing. Seller
-----------------------------------------------------
will provide reasonable assistance to Buyer to facilitate the generation of
billing statements to subscribers of the System during the sixty (60) day period
following the Closing Date, subject to Buyer's obligation to reimburse Seller
for all actual out-of-pocket costs incurred by Seller in connection therewith,
and Seller shall cooperate with Buyer and execute all documentation necessary to
enable Buyer to negotiate checks from subscribers made payable to Seller but
delivered after the Closing.
8.13 Brokerage Commission to be Paid by Seller. Seller shall pay
-----------------------------------------
the brokerage commission, if any, due to The Xxxxx Group, Ltd.
9.0 Conditions Precedent to Buyer's Obligations.
-------------------------------------------
All obligations of Buyer at the Closing hereunder are subject to the
fulfillment of each of the following conditions at or prior to the Closing, any
or all of which may be waived in writing in whole or in part by Buyer:
9.1 Representations and Warranties. The representations and
------------------------------
warranties of the Warranting Parties contained herein shall have been true and
correct in all material respects as of the date when made and shall be true and
correct in all material respects on and as of the
24
Closing Date with the same force and effect as though made on and as of the
Closing Date, except for changes permitted or contemplated by this Agreement.
9.2 Covenants. Seller shall in all material respects have
---------
performed its obligations, agreements, and covenants contained in this Agreement
to be performed or complied with by it on or before the Closing Date.
9.3 Consents and Approvals. Seller and Buyer shall have obtained
----------------------
all consents and approvals of third persons or parties, including the FCC, the
FAA, all franchise authorities, and all other governmental authorities, bodies,
or agencies having jurisdiction over the transactions contemplated by this
Agreement, or any part thereof, necessary for the consummation of the
transaction contemplated by this Agreement, including consents to assignment of
the Leases, Contracts, and Licenses; provided, however, that with respect to
each pole agreement, either (i) Seller shall have obtained any required consent
to assign such agreement to Buyer or (ii) Buyer shall have entered into a new
license agreement for pole attachments or made alternative arrangements
reasonably acceptable to Buyer for use of such pole attachments without
violation of any law, rule or regulation. With respect to all contractual
arrangements requiring the consent of third parties, Seller shall have used
commercially reasonable efforts to obtain a representation from the consenting
party that the subject agreement is in full force and effect, and that Seller is
not in material default of any of its obligations with respect to the subject
agreement. The obtaining of any such consent shall not be conditioned upon
Buyer agreeing to terms less favorable to Buyer than those set forth in the
copies of the Leases, Contracts, and Licenses delivered by Seller to Buyer, or
to any other conditions materially adverse to Buyer.
9.4 Instruments of Conveyance. Seller shall have delivered to
-------------------------
Buyer a Xxxx of Sale and Assignment in the form of Exhibit 9.4.1 hereto,
Assignments of Cable Television Franchises in the form of Exhibit 9.4.2 hereto,
and all other applicable assignments and other good and sufficient instruments
of conveyance, transfer, and assignment, all in form and substance reasonably
satisfactory to Buyer, as shall be effective to vest in Buyer good and
marketable title in and to the System and the Assets transferred pursuant to
this Agreement, free and clear of all mortgages, liens, restrictions,
encumbrances, claims, and obligations, of any nature whatsoever, except as
permitted in this Agreement. With respect to any fee simple interests in real
property transferred hereunder, Seller shall have obtained, at Seller's expense,
title insurance commitments in form and content reasonably satisfactory to
Buyer, and shall have delivered to Buyer copies of all recorded documents
evidencing exceptions to title specified in such title policies. With respect
to any unrecorded leasehold interests in real property transferred hereunder,
Seller shall have used commercially reasonable efforts to cause to be executed
by the lessor thereof and delivered to Buyer a memorandum of lease in proper
form for recordation.
9.5 Opinion of Counsel. Buyer shall have been furnished with an
------------------
opinion of Xxxxxxxxx X. Xxxxxx, Vice President and General Counsel of Xxxxx
Intercable, Inc., dated the Closing Date and addressed to Buyer, in the form
attached hereto as Exhibit 9.5.
25
9.6 Opinion of FCC Counsel. Buyer shall have been furnished with
----------------------
an opinion of Cole Raywid & Xxxxxxxxx, FCC counsel for Seller, dated the Closing
Date and addressed to Buyer, in the form attached hereto as Exhibit 9.6.
9.7 Lien Clearances. Seller shall have obtained and delivered to
---------------
Buyer a copy of the report of a lien search (including all supporting
documentation) conducted by a company reasonably acceptable to Buyer in all
states and counties in which any of the Assets are located and/or Seller is
incorporated, dated not more than ten (10) days prior to the Closing Date,
designating all presently effective financing statements, chattel or other
mortgages, tax or judgment liens, or other liens purporting to affect any of the
Assets (collectively, "Record Liens"). In the event Seller has operated any
part of the System or owned or leased any of the Assets under any fictitious or
assumed business name or trade name, the search shall include the applicable
records under each such fictitious or assumed business name or trade name as
well as the name of Seller set forth on page 1 of this Agreement. In the event
the search reveals any Record Liens (other than Permitted Encumbrances), such
liens shall have been released or terminated at or prior to the Closing, or
Buyer shall have received adequate assurances that all such Record Liens will be
released or terminated substantially concurrently with the Closing.
9.8 Adverse Change. Between the date of this Agreement and the
--------------
Closing, there shall have been no material adverse change in the System or the
Assets, or their respective conditions (financial or otherwise), operations, or
business, other than (i) a change arising out of general economic conditions in
the United States, (ii) any change affecting the U.S. cable industry as a whole,
including any change arising from legislation, litigation, rulemaking or
regulation, or (iii) competition caused by or arising from direct broadcast
satellite services. Neither Seller nor the System shall have suffered any
material loss by fire, windstorm, or other casualty which, subject to any
election made by Buyer pursuant to Section 16, has not been fully restored or
replaced to the condition in which it existed prior to such change.
9.9 Certificate of Compliance. Seller shall have delivered to
-------------------------
Buyer a Certificate of Compliance in the form of Exhibit 9.9 hereto, signed by
the general partner of its general partners and dated on and as of the Closing
Date.
9.10 Legal Proceedings. There shall not be pending or threatened
-----------------
any lawsuit, claim, or legal action involving Buyer, Seller, the Assets, or the
System relating to the transactions contemplated by this Agreement.
9.11 Copyright Documentation. Prior to or at the Closing, Seller
-----------------------
shall have delivered copies of all of its Copyright Filings (as defined in
Section 5.12, above) for the System which relate to the last six (6) semiannual
reporting periods occurring prior to the Closing, along with all information
required by Buyer to complete the Copyright Filings for the semiannual reporting
period in which the Closing occurs.
9.12 Blueprints, Etc. Seller shall have delivered to Buyer all
---------------
blueprints, schematics, working drawings, plans, projections, statistics,
engineering records, contracts to be assumed by Buyer, customer and subscriber
lists, and other files and records used by Seller in connection with its
operations and to be assigned to Buyer in accordance with this Agreement.
26
9.13 Covenants not to Compete. Seller shall have delivered to
------------------------
Buyer, and shall have caused Xxxxx Intercable, Inc., Xxxxx Cable Income Fund 1-
B, Ltd., and Xxxxx Cable Income Fund 1-C, Ltd. to have delivered to Buyer, Non-
Competition Agreements in the form of Exhibit 9.13.
9.14 Sales Tax Clearances. Seller shall have delivered to Buyer
--------------------
certificates issued by all applicable taxing authorities, to the extent such
certificates are provided by such authorities, certifying the absence of any
sales tax liability applicable to the System, issued as of a date not more than
ten (10) days prior to the Closing Date.
9.15 Confirmation Sweep. Buyer shall have been afforded the
------------------
opportunity, at Buyer's expense, to engage a qualified engineer to perform a
sweep of the System to confirm that the entire distribution system of the System
is as set forth in Schedule 5.11.
9.16 Number of Basic Subscribers. The System will have not less
---------------------------
than Six Thousand Three Hundred (6,300) Basic Subscribers (as defined in Section
4.2) as of the Closing.
9.17 Compliance Documentation. Buyer shall have received (i) copies
------------------------
of all required current Proofs of Compliance with OSHA Safety Standards for all
vehicles and vehicle safety equipment; (ii) copies of Seller's filed FCC Forms
395-A for the last five years; (iii) copies of Seller's FCC/EEO compliance
certificates for the last five years, or reasonably satisfactory explanations
for any periods for which such certificates were withheld; and (iv) copies of
Employee Eligibility Verification Forms (I-9) as required by the Immigration
Control and Reform Act of 1986, for each employee being hired by Buyer who was
hired by Seller after November 6, 1986 (other than employees Fields and
Xxxxxxx).
9.18 Rate Certification Documentation. Buyer shall have received
--------------------------------
true and correct copies of all FCC Forms 393 (and/or Forms 1200, 1205, 1210 and
1240) which have been filed or prepared for filing with respect to the System,
along with copies of such backup documentation as Buyer may reasonably request
to confirm the information contained in all such Forms 393 (and/or Forms 1200,
1205, 1210 and 1240).
9.19 System Revenues. Revenues generated directly from the
---------------
operation of the System during the three (3) month period concluding with the
last day of the last calendar month prior to the month during which the Closing
occurs shall have been not less than Six Hundred Twelve Thousand Five Hundred
Dollars ($612,500.00).
9.20 Signal Leakage. The System shall have complied in all material
--------------
respects with FCC rules and regulations regarding signal leakage, as reflected
in the leakage logs and other records delivered to Buyer in accordance with
Section 5.6.4.
9.21 Other Documents. Seller shall have delivered such other
---------------
documents as may be reasonably requested by Buyer to effect the transaction
contemplated by this Agreement.
27
10.0 Conditions Precedent to Seller's Obligations.
--------------------------------------------
All obligations of Seller at the Closing hereunder are subject to the
fulfillment of each of the following conditions at or prior to the Closing, any
one or more of which may be waived in writing in whole or in part by Seller:
10.1 Purchase Price. Receipt by Seller of the Purchase Price as
--------------
described in Section 2.0.
10.2 Representations and Warranties. All representations and
------------------------------
warranties of Buyer contained herein shall have been true and correct in all
material respects as of the date when made and shall be true and correct in all
material respects on and as of the Closing Date with the same force and effect
as though made on and as of the Closing Date.
10.3 Covenants. Buyer shall, in all material respects, have
---------
performed all of its obligations, agreements, and covenants in this Agreement to
be performed or complied with by it on or before the Closing Date.
10.4 Certificate of Compliance. Buyer shall have delivered to
-------------------------
Seller a Certificate of Compliance in the form of Exhibit 10.4 hereto, signed by
the President or any Executive Vice President of Buyer, dated on and as of the
Closing Date.
10.5 Assumption Agreement. Buyer shall have executed and delivered
--------------------
to Seller an Assumption Agreement in the form of Exhibit 10.5, dated the Closing
Date.
10.6 Opinion of Counsel. Seller shall have received an opinion of
------------------
Xxxxxxx & Kagon Law Corporation, counsel for Buyer, dated the Closing Date and
addressed to Seller, in the form of Exhibit 10.6 hereto.
10.7 Consents and Approvals. Seller and Buyer shall have obtained
----------------------
all required consents and approvals of third persons or parties, including the
FCC, the FAA, all franchise authorities, and all other governmental authorities,
bodies, or agencies having jurisdiction over the transactions contemplated by
this Agreement, or any part thereof, necessary for the consummation of the
transaction contemplated by this Agreement, including required consents to
assignment of the Leases, Contracts, and Licenses, all such consents without any
conditions materially adverse to Seller.
10.8 Legal Proceedings. There shall not be pending or threatened
-----------------
any lawsuit, claim, or legal action relating to the transactions contemplated by
this Agreement seeking to enjoin or render unlawful its consummation.
10.9 Minimum Subscribers. The System will have not less than six
-------------------
thousand three hundred (6,300) Basic Subscribers (as defined in Section 4.2) as
of the Closing; provided, however, that in the event the System has fewer than
six thousand three hundred (6,300) Basic Subscribers as of Closing and Buyer
agrees to limit the amount of the actual adjustment to the Purchase Price
pursuant to Section 4.1.4 to $527,450 (the product of One Thousand Five Hundred
28
Seven Dollars ($1,507.00) and Three Hundred Fifty (350), then the condition set
forth in this Section 10.9 shall be deemed waived by Seller.
10.10 Limited Partner Approval. The limited partners of the general
------------------------
partners of Seller shall have voted to approve the transactions contemplated by
the Agreement in accordance with their respective partnership agreements.
10.11 Other Documents. Buyer shall have delivered such other
---------------
documents as may be reasonably requested by Seller to effect the transaction
contemplated by this Agreement.
11.0 Further Assurances.
------------------
At and after the Closing, Seller and Buyer will, without further
consideration, execute and deliver such further instruments and documents and do
such other acts and things as the other party or parties may reasonably request
in order to effect or confirm the transactions contemplated by this Agreement.
12.0 Indemnification.
---------------
12.1 Indemnification of Buyer by the Warranting Parties. The
--------------------------------------------------
Warranting Parties and their successors and assigns shall indemnify and hold
Buyer harmless against and in respect of, and shall reimburse Buyer for:
12.1.1 Any and all losses, liabilities, or damages resulting
from any untrue representation, breach of warranty, or nonfulfillment of any
covenant or agreement by any of the Warranting Parties contained herein or in
any certificate, document, or instrument delivered to Buyer hereunder;
12.1.2 Any and all obligations of Seller not specifically
assumed by Buyer pursuant to the terms of this Agreement and the Assumption
Agreement, including but not limited to any and all federal or state income,
franchise, sales, property, or payroll tax liabilities or any and all
liabilities arising under any Leases, Contracts, Licenses, or other agreements
assumed by Buyer pursuant to this Agreement and the Assumption Agreement and
relating to events which occurred prior to the close of business on the Closing
Date;
12.1.3 Any claims for finder's fees or brokerage or other
commissions by any person, firm, or corporation, arising by reason of any
services alleged to have been rendered to or at the instance of any of the
Warranting Parties with respect to this Agreement or any of the transactions
contemplated hereby;
12.1.4 Any and all losses, liabilities, or damages resulting
from Seller's operation or ownership of the System prior to the close of
business on the Closing Date;
12.1.5 Any and all losses, liabilities, or damages resulting
from claims arising after the Closing Date made by or on behalf of persons
employed by Seller at any time prior to the Closing and who are not employed by
Buyer after the Closing; and
29
12.1.6 Any and all actions, suits, proceedings, claims,
demands, assessments, judgments, costs, and expenses, including, without
limitation, reasonable legal fees and expenses, incident to any of the foregoing
or incurred in investigating or attempting to avoid the same or to oppose the
imposition thereof, or in enforcing this indemnity.
If any claim covered by the foregoing indemnity is asserted against
Buyer by a third party, Buyer shall promptly give Seller notice thereof and give
the Warranting Parties an opportunity to defend or settle the same with counsel
of their choice and at their expense. The failure to give Seller prompt notice
of any such claim shall not affect the Warranting Parties' obligations pursuant
to this Section 12.1, except that Buyer shall be responsible for any damages
proximately incurred by Seller as a result of such failure. Buyer shall extend
its full cooperation in connection with such defense, subject to reimbursement
for actual out-of-pocket expenses incurred by Buyer as the result of a request
by either of the Warranting Parties. The settlement of any such claim by Buyer
prior to giving the Warranting Parties such opportunity or while the Warranting
Parties are providing an appropriate defense, without the Warranting Parties'
prior written consent (which consent shall not be unreasonably withheld or
delayed), shall release the Warranting Parties from their obligations hereunder
with respect to such claim or action so settled. No settlement which fails to
contain a provision expressly negating any claim of wrongdoing on the part of
Buyer shall be entered into on behalf of Buyer without its prior written
consent. Such consent shall not be unreasonably withheld or delayed, and may
only be withheld to the extent Buyer reasonably believes the lack of such a
provision may result in a material adverse impact on its business operations.
If the Warranting Parties fail to defend said claim within a reasonable time
after notice thereof, Buyer shall be entitled to assume the defense thereof and
the Warranting Parties shall be bound by the results obtained by Buyer with
respect to such claim, and the Warranting Parties shall be liable to Buyer for
all expenses incurred in such defense and/or in any action to enforce its
indemnification rights hereunder, including, without limitation, reasonable
attorneys' fees and any settlement payments.
12.1.7 Claims for indemnification arising solely by reason of
any misrepresentation or breach or nonfulfillment of any representation,
warranty or covenant shall not be payable by the Warranting Parties hereunder
unless such claims exceed, on a cumulative basis, the sum of $25,000 ("Seller's
Basket Amount"). In the event such claims exceed Seller's Basket Amount, such
claims shall be payable from the first dollar thereof. Notwithstanding anything
in this Agreement to the contrary, the liability of Warranting Parties to Buyer
under this Agreement shall not exceed $2,500,000 in the aggregate; provided,
however that this limitation shall not apply to any breaches of Warranting
Parties' warranties of title with respect to the Assets.
12.2 Indemnification of Seller by Buyer. Buyer and its successors
----------------------------------
and assigns shall indemnify and hold Seller harmless against and in respect of,
and shall reimburse Seller for:
12.2.1 Any and all losses, liabilities, or damages resulting
from any untrue representation, breach of warranty, or nonfulfillment of any
covenant or agreement by Buyer contained herein or in any certificate, document,
or instrument delivered to Seller hereunder;
30
12.2.2 Any claims for finder's fees or brokerage or other
commissions by any person, firm, or corporation, arising by reason of any
services alleged to have been rendered to or at the instance of Buyer with
respect to this Agreement or any of the transactions contemplated hereby;
12.2.3 Any and all losses, liabilities, or damages resulting
from Buyer's operation or ownership of the System after the Closing Date or
relating to obligations undertaken by Buyer pursuant to the Assumption
Agreement; and
12.2.4 Any and all actions, suits, proceedings, claims,
demands, assessments, judgments, costs, and expenses, including, without
limitation, reasonable legal fees and expenses, incident to any of the foregoing
or incurred in investigating or attempting to avoid the same or to oppose the
imposition thereof, or in enforcing this indemnity.
If any claim covered by the foregoing indemnity is asserted against
Seller by a third party, Seller shall promptly give Buyer notice thereof and
give Buyer an opportunity to defend or settle the same with counsel of Buyer's
choice and at Buyer's expense. The failure to give Buyer prompt notice of any
such claim shall not affect Buyer's obligations pursuant to this Section 12.2,
except that Seller shall be responsible for any damages proximately incurred by
Buyer as a result of such failure. Seller shall extend its full cooperation in
connection with such defense, subject to reimbursement for actual out-of-pocket
expenses incurred by Seller as the result of a request by Buyer. The settlement
of any such claim by Seller prior to giving Buyer such opportunity or while
Buyer is providing an appropriate defense, without Buyer's prior written consent
(which consent shall not be unreasonably withheld or delayed), shall release
Buyer from its obligations hereunder with respect to such claim or action so
settled. No settlement which fails to contain a provision expressly negating
any claim of wrongdoing on the part of Seller shall be entered into on behalf of
Seller without its prior written consent. Such consent shall not be
unreasonably withheld or delayed, and may only be withheld to the extent Seller
reasonably believes the lack of such a provision may result in a material
adverse impact on its business operations. If Buyer fails to defend any such
claim within a reasonable time after notice thereof, Seller shall be entitled to
assume the defense thereof and Buyer shall be bound by the results obtained by
Seller with respect to such claim, and Buyer shall be liable to Seller for all
expenses incurred in such defense and/or in any action to enforce its
indemnification rights hereunder, including, without limitation, reasonable
attorneys' fees and any settlement payments.
12.2.5 Claims for indemnification arising solely by reason of
any misrepresentation or breach or nonfulfillment of any representation,
warranty or covenant shall not be payable by Buyer hereunder unless such claims
exceed, on a cumulative basis, the sum of $25,000 ("Buyer's Basket Amount"). In
the event such claims exceed Buyer's Basket Amount, such claims shall be payable
from the first dollar thereof. Notwithstanding anything in this Agreement to the
contrary, in no event shall the liability of Buyer to Seller under this
Agreement exceed $2,500,000 in the aggregate.
31
13.0 Nature and Survival of Representations and Warranties.
-----------------------------------------------------
All statements made by the Warranting Parties in this Agreement or in
any certificate delivered by or on behalf of Seller pursuant to this Agreement
shall be deemed representations and warranties of the Warranting Parties, and
all statements made by Buyer in this Agreement or contained in any certificate
delivered by or on behalf of Buyer pursuant to this Agreement shall be deemed
representations and warranties of Buyer. Except as otherwise set forth below,
all representations and warranties made by Buyer or by the Warranting Parties
hereunder and all indemnities, covenants, and agreements relating thereto, other
than those expressly designating a longer term herein, shall survive the Closing
for a period of eighteen (18) months, notwithstanding any investigation by the
parties hereto. Notwithstanding the foregoing, the representations and
warranties made by the Warranting Parties in Section 5.18 and in the concluding
paragraph of Section 5.16 shall survive the Closing for the period of time
ending, in each case, as of the date of expiration of the applicable statutory
period within which Buyer could assert claims against Seller for a breach
thereof, and the following shall survive the Closing without limitation,
notwithstanding any investigation by the parties hereto:
13.1 The representations and warranties made by the Warranting
Parties in Sections 5.1, 5.2, and 5.22;
13.2 The representations and warranties made by Buyer in Sections
6.1 and 6.2;
13.3 The obligations of the Warranting Parties and Buyer for legal
fees and other defense costs under Sections 12.1 and 12.2; and
13.4 The obligations of either the Warranting Parties or Buyer under
any other representation or warranty made hereunder where the party relying on
such representation or warranty is able to prove that the party making such
representation or warranty had actual knowledge of the falsity of any such
representation or warranty at the time of execution. There are no intended
third party beneficiaries of this Agreement, and to the extent any third party
asserts any claim or cause of action arising from the alleged breach of any
representation or warranty, covenant, or agreement in this Agreement, the
statute of limitations for such alleged claim or cause of action shall not in
any way be extended or tolled by reason of this Section 13.0.
14.0 Notices.
-------
Any notices or other communications to Seller or Buyer shall be
personally delivered, sent by certified or registered mail, return receipt
requested, by Federal Express or similar service that records delivery, or by
facsimile transmission combined with any of the foregoing methods of notice, to
the addresses set forth below, or to such other address as Seller or Buyer may
designate, from time to time, by written notice to the other. Any such notice
shall be deemed effective upon receipt.
32
If To Seller: With A Copy To:
------------- ---------------
Xxxxx Cable Income 1-B/C Venture Holland & Xxxx
c/x Xxxxx Intercable, Inc. 000 Xxxxxxxxxxx Xxxxxx, Xxxxx 0000
0000 Xxxx Xxxxxxx Xxxxxx P.O. Box 8749
P.O Box 3309 Xxxxxx, XX 00000 (delivery)
Xxxxxxxxx, XX 00000 (delivery) 80201-8749 (mail)
80155 (mail) Fax No. (000) 000-0000
Fax No. (000) 000-0000 Attn: Xxxxxxx X. Xxxxxxx, Esq.
Attn: Legal Department
If to Buyer: With A Copy To:
----------- --------------
Falcon Cable TV Xxxxxxx & Kagon Law Corporation
00000 Xxxxxxxx Xxxxxxxxx 1801 Century Park Xxxx
Xxxxxxxxx Xxxxx Xxxxx 0000
Xxx Xxxxxxx, Xxxxxxxxxx 00000 Xxx Xxxxxxx, Xxxxxxxxxx 00000
Attn: General Counsel Attn: Xxxxxxx X. Xxxxx, Esq.
15.0 Confidentiality.
---------------
In the event this Agreement is terminated and the purchase and sale
contemplated hereby abandoned, the parties hereto will keep confidential any
proprietary information obtained from the other party in connection with the
transactions contemplated by this Agreement and will return to the other party
all documents, work papers, and other written material obtained by it in
connection with the transactions contemplated hereby.
16.0 Risk of Loss.
------------
The risk of loss, damage, or destruction to the Assets to be
transferred to Buyer hereunder from fire or other casualty or cause shall be
borne by Seller at all times up to the close of business on the Closing Date.
The proceeds of any claim for any such loss payable under any insurance policy
with respect thereto shall be used to repair, replace, or restore any such
property to its former condition, subject to the conditions stated below. In
the event of any loss or damage to any of the Assets to be transferred hereunder
from fire, casualty, or other causes prior to the Closing, Seller shall notify
Buyer of same in writing immediately. Such notice shall specify with
particularity the loss or damage incurred, the cause thereof (if known or
reasonably ascertainable), and the insurance coverage. In the event that
property reasonably required for the full operation of Seller's business is
required to be replaced or restored prior to the Closing, Buyer, at its sole
option upon five (5) days prior written notice to Seller, and notwithstanding
any other limitations contained in this Agreement, may elect to do one of the
following:
33
16.1 Postponement of Closing. Postpone the Closing until such time
-----------------------
as the property has been repaired, replaced, and restored, but in no event
beyond June 30, 1999;
16.2 Closing with Adjustments. Consummate the Closing and accept
------------------------
the property in its then condition, in which event Seller shall assign to Buyer
any proceeds of insurance theretofore or thereafter received covering the
property involved; or
16.3 Rescission. Rescind this Agreement and declare it of no
----------
further force and effect, in which event there shall be no Closing and this
Agreement and all the terms and provisions hereof shall thereupon be deemed null
and void, except for the provisions of Sections 8.13, 12.0 and 15.0 hereof, and
the obligation of Seller to return to Buyer any deposit made by Buyer hereunder,
which shall survive such rescission.
17.0 Termination Rights.
------------------
This Agreement may be terminated by either Buyer or Seller, if the
terminating party is not then in material default, by written notice to the
other party, upon the occurrence of either of the following, with the results
prescribed hereunder:
17.1 Material Default. Except as otherwise provided herein, if the
----------------
other party defaults in the observance or in the due and timely performance of
any of its material covenants or agreements herein contained, which default has
not been cured on or prior to the Closing Date (or any subsequent date by which
the defaulting party may cure such default), the nondefaulting party shall have
all rights and remedies provided in this Agreement and/or at law and/or in
equity.
17.2 Failure of Conditions Precedent. If any of the conditions
-------------------------------
precedent to Closing are otherwise not fulfilled or waived on or before April
30, 1999, without either party being at fault, either party may terminate this
Agreement on or after such date without any further liability to the other,
except for the liabilities created by the provisions of Sections 12.0 and 15.0
hereof, and the obligation of Seller to return to Buyer any deposit made by
Buyer hereunder, which shall survive such termination; provided, however, that
if the only conditions remaining unsatisfied as of such date are the obtaining
of consents from franchise authorities or otherwise effectuating the transfer of
any Licenses as set forth in Section 9.3, this Agreement may only be terminated
upon mutual agreement of Seller and Buyer.
If Buyer shall have the right to unilaterally terminate this Agreement
pursuant to this Section 17.0, it may nevertheless elect at its sole option to
proceed with the Closing, and such election shall not in any way be deemed a
waiver of any of Buyer's rights to indemnification.
18.0 Bulk Sales Laws.
---------------
Seller agrees to take or cause to be taken all steps necessary to
comply with the provisions of any applicable bulk sales, fraudulent conveyance,
or other laws for protection of creditors, and Seller further agrees to
indemnify and hold Buyer harmless from and reimburse Buyer for any and all
claims, liabilities, or obligations which Buyer may suffer or incur by virtue of
non-compliance with such applicable laws.
34
19.0 Miscellaneous.
-------------
19.1 Sales and Transfer Taxes and other Transfer Fees. All sales or
------------------------------------------------
use taxes, transfer taxes, stamp taxes, excise taxes, and license taxes
incurred, and all other fees charged, in connection with the sale, transfer, or
delivery of any of the Assets to Buyer, shall be paid by Seller, subject to
reimbursement of one-half of such taxes and fees by Buyer.
19.2 Expenses. Except as otherwise expressly provided herein, the
--------
parties hereto shall pay their respective expenses incurred under or in
connection with this Agreement.
19.3 Attorneys' Fees. Should either Buyer or Seller institute any
---------------
action or proceeding to enforce any provision of this Agreement, or for damages
by reason of any alleged breach of any provision of this Agreement, or for a
declaration of such party's rights or obligations hereunder, or for any other
judicial or quasi-judicial remedy, the prevailing party in such action or
proceeding shall recover from the losing party all reasonable attorneys' fees,
costs, and expenses incurred by the prevailing party for the services rendered
for or on behalf of such prevailing party.
19.4 Waiver. Either Buyer or Seller may waive any provision,
------
breach, or default of this Agreement; provided, however, no waiver of any
provision, breach, or default hereunder shall be considered valid unless
contained in a writing referring to this Agreement and signed by the party
giving such waiver, and no such waiver shall be deemed a waiver of any other
provision or any subsequent breach or default of the same or similar nature.
19.5 Assignment and Binding Effect. This Agreement shall be binding
-----------------------------
upon and inure to the benefit of each party hereto, and its successors, assigns,
and transferees. Prior to the Closing, Buyer may assign its rights hereunder to
any entity affiliated with Buyer, without the consent of Seller, provided that
no such assignment shall relieve Buyer of its obligations under this Agreement.
No other assignments of any party's rights or obligations hereunder may be made
without the prior written consent of the other parties hereto.
19.6 Governing Law. The construction and performance of this
-------------
Agreement shall be governed by and construed in accordance with the laws of the
State of Oregon.
19.7 Section Headings. The section headings contained in this
----------------
Agreement are for the purpose of convenience only, are not intended as part of
this agreement, and are not intended to define or limit the contents of said
sections.
19.8 Counterparts. This Agreement may be executed in one or more
------------
counterparts, each of which shall constitute an original but which, when taken
together, shall be deemed one instrument.
19.9 Exhibits and Schedules. The Exhibits and Schedules attached
----------------------
hereto shall be deemed to be incorporated by reference in this Agreement as if
fully set forth herein.
19.10 Entire Agreement. This Agreement and the Exhibits, agreements,
----------------
and Schedules referred to herein constitute the entire agreement of the parties
with respect to the
35
subject matter hereof and supersedes all prior and contemporaneous agreements,
negotiations, and oral understandings, if any. Except as otherwise provided
herein, this Agreement may not be modified, amended, or terminated other than by
a written agreement specifically referring to this Agreement and signed by all
of the parties hereto.
19.11 Resolutions. Within 45 days of the execution of this Agreement
-----------
Buyer and Seller shall have delivered to each other copies of resolutions of the
Board of Directors of each corporate general partner of Buyer and Seller
authorizing and approving the execution of this Agreement and the consummation
of the transactions contemplated hereby, certified as true and correct by the
Secretary or Assistant Secretary of each corporate general partner.
19.12 Due Inquiry. Whenever in this Agreement a representation is
-----------
qualified as being "to the best knowledge of the Warranting Parties, after due
inquiry," or the substantial equivalent thereof, it shall mean only that Seller
has made inquiry of the employees of the System and of Xxxx Xxxxxxxx, Vice
President/Operations of Xxxxx Intercable, Inc., and his management team with
respect to the particular matter.
36
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first above written.
SELLER: BUYER:
------ -----
XXXXX CABLE INCOME FUND 1-B/C FALCON COMMUNITY VENTURES I
VENTURE, a Colorado partnership LIMITED PARTNERSHIP,
a California limited partnership
By: Xxxxx Cable Income Fund 1-B, Ltd. By: Falcon Community
Investors, L.P., and Xxxxx Cable a California limited partnership,
Income Fund 1-C, Ltd. its general its managing general partner
partners
By: Xxxxx Intercable, Inc., By: Falcon Holding
Group, Inc., a Colorado a California corporation,
corporation, its managing general
their general partner partner
By: /s/ Xxxxx X. X'Xxxxx By: /s/ Xxxxxxx X. Xxxxxxxxxx
-------------------------- -------------------------
Name: Xxxxx X. X'Xxxxx Xxxxxxx X. Xxxxxxxxxx
------------------------ Executive Vice President
Title: President
-----------------------
The undersigned agrees to be bound by the representations and warranties
set forth in Section 5 hereof, and all other provisions affecting the survival
of such representations and warranties and the indemnification arising
therefrom.
XXXXX INTERCABLE, INC.,
a Colorado corporation
By: /s/ Xxxxxxxxx Xxxxxx
----------------------------------
Name: Xxxxxxxxx Xxxxxx
--------------------------------
Title: Vice President
-------------------------------
37
SCHEDULES
---------
1.1.1 Personal Property
1.1.2 Real Property
1.1.3 Licenses and Franchises
1.1.4 Contracts
1.1.7 Intellectual Property Transferred
5.1 Ownership, Key Personnel, and Fictitious Business Names
5.3 Consents
5.5 Claims
5.8 Financial Statements
5.9 Post-Closing Capital Improvements
5.11 Signal Carriage, Rates, and Technical Profile
5.13 Franchise Fees
5.14 Pole Attachment Fees
5.16 Employment Matters
5.19 Competition and Overbuilds
38
EXHIBITS
--------
2.1 Deposit Escrow Instructions
2.3 Holdback Escrow Instructions
9.4.1 Xxxx of Sale and Assignment
9.4.2 Assignment of Cable Television Franchises
9.5 Opinion of Seller's Counsel
9.6 Opinion of Seller's FCC Counsel
9.9 Seller's Certificate of Compliance
9.13 Covenants not to Compete
10.4 Buyer's Certificate of Compliance
10.5 Assumption Agreement
10.6 Opinion of Buyer's Counsel
39
