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Exhibit 10.30
ASSET PURCHASE AGREEMENT
This Asset Purchase Agreement is made as of January 26, 1996, by and
between NORTHLAND CABLE PROPERTIES SEVEN LIMITED PARTNERSHIP, a Washington
limited partnership, and SOUTHLAND CABLEVISION, INC., a Georgia corporation.
RECITALS
A. Southland Cablevision, Inc. currently is engaged in the business
of providing cable television service in or around the communities of Vidalia
and Xxxxx and certain nearby unincorporated areas of Xxxxxx County, all in the
State of Georgia.
B. Northland Cable Properties Seven Limited Partnership desires to
purchase, and Southland Cablevision, Inc. desires to sell and convey
substantially all of the assets of Southland Cablevision, Inc. used or useful
in connection with such cable television business, all as more particularly
described below.
AGREEMENT
For good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties agree as follows:
SECTION 1. DEFINITIONS
For the purposes of this Agreement, the following capitalized terms shall
have the respective meanings ascribed to them below (terms defined in the
singular shall have the same meanings when used in the plural, and vice versa):
1.1 Agreement shall mean this Asset Purchase Agreement, as amended,
supplemented or modified from time to time, including all agreements,
instruments and documents delivered in connection with this Agreement and all
Schedules and Exhibits annexed hereto.
1.2 Assets shall mean all properties, privileges, rights and
interests, real and personal, tangible and intangible, of every type and
description in which Seller has any right, title or interest, and that are
owned, held, used, or useful in the CATV Systems as of the Closing Dates, except
only for the Excluded Assets as defined in Section 1.14. Assets include without
limitation the items which are listed in Schedule 1.2, and the following:
1.2.1 Cash and Cash Equivalents. All cash and cash equivalents
held by Seller and relating to converter and other subscriber deposits (but only
to the extent the refund obligations for the same are assumed by Buyer), all
subscriber prepayments, advertising prepayments and other prepaid revenues, and
all accounts receivable existing as of Closing with
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respect to the CATV Systems, including but not limited to those Cash Equivalents
described in Schedule 1.2, but not including cash on hand, accounts or
investments of any kind that are not otherwise Cash Equivalents;
1.2.2 CATV Instruments. Franchises, licenses, crossing permits,
service agreements, retransmission consent agreements and all intangible CATV
channel distribution rights or privileges owned, used or held for use by Seller,
including without limitation those described in Schedule 1.2;
1.2.3 CATV Equipment. All tangible personalty, furniture,
fixtures, office equipment and supplies, electronic devices, strand, trunk,
feeder, drop and other distribution cable, towers, antennae, poles, amplifiers,
power supplies, conduit, vaults, pedestals, grounding and pole hardware,
"headend" (origination, earth stations, transmission and distribution system)
hardware, motor and other vehicles, tools, construction equipment, test
equipment, maintenance equipment, spare parts, inventory and other personal
property and facilities owned, leased, used, or held for use in the CATV
Systems, and subscribers' devices to the extent owned by Seller (including
without limitation converters, encoders, transformers behind TV sets and
fittings), all of which includes without limitation those described in Schedule
1.2;
1.2.4 Real Property. All realty, including appurtenances,
improvements, and fixtures located thereon, easements, and other such items,
owned or leased by Seller and used or held for use in the CATV Systems,
including Seller's fee and leasehold interests therein, and including without
limitation those items or interests described in Schedule 1.2;
1.2.5 Seller Contracts. All contracts, agreements and other
arrangements pertaining to the lawful ownership, operation and maintenance of
the CATV Systems or used in the CATV Systems, including without limitation those
described in Schedule 1.2; and
1.2.6 Intangibles. All general intangibles including, but not
limited to, subscriber lists, accounts receivable, notes receivable, options,
claims, all trade names of Seller, (including without limitation "Southland
Cablevision, Inc.," "Southland" and any derivatives thereof), patents,
copyrights, registered trademarks, and goodwill.
1.3 Basic Package Services shall mean the package of cable television
programming, including broadcast and satellite service programming (but
excluding premium or pay-television programming) sold to the greatest number of
subscribers of the CATV Systems for a fixed monthly fee, as more particularly
described in Schedule 1.7.
1.4 Basic Service Tier shall mean that level of cable services,
offered at the rate set forth in Schedule 1.7, that includes only (a) the
signals of off-air television broadcast stations, (b) the signals of television
broadcast stations that are secondarily transmitted by a satellite carrier
beyond the local service area of such stations, (c) local origination channels,
and (d) public, educational and governmental access channels.
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1.5 Buyer shall mean Northland Cable Properties Seven Limited
Partnership, a Washington limited partnership.
1.6 CATV shall mean cable television.
1.7 CATV Systems shall refer to (a) Seller's complete CATV reception
and distribution systems as presently conducted by Seller in or around the
communities of Vidalia and Xxxxx and certain nearby unincorporated areas of
Xxxxxx County, all in the State of Georgia, consisting of one or more headends,
trunk cable, feeder cable, microwave transmission and reception facilities,
drops and associated electronic equipment, which are, or are capable of being,
operated as an independent system without interconnections to other CATV
systems; and (b) all of the Assets and business of such systems, as more
particularly described in Schedule 1.7.
1.8 CLI Rules shall refer to the Cumulative Leakage Index ("CLI")
standards under currently effective FCC rules and regulations.
1.9 Closings and Closing Dates shall refer to the consummation of the
transactions contemplated by this Agreement, to be held at the place and on the
dates specified in Section 8.1. The day on which such meeting to sell the Group
A Assets takes place shall be referred to as the "Group A Closing Date," and the
day on which such meeting to sell the Group B Assets takes place shall be
referred to as the "Group B Closing Date."
1.10 Code shall mean the Internal Revenue Code of 1986, and any
successor statute of similar import, and regulations thereunder, in each case as
in effect from time to time.
1.11 Equivalent Billing Units shall mean the sum of: (a) the number
obtained by dividing the aggregate monthly amount billed by Seller to bulk
subscribers of the CATV Systems, such as hotels, motels and apartment houses,
that receive Basic Package Services (not more than a single month's billing for
any single bulk account and excluding installation and other non-recurring
charges), by the full monthly rate charged to single family households in the
CATV Systems for Basic Package Services, provided, that no part of the account
of any bulk subscriber is more than ninety (90) days past due from the original
due date of billing, and provided further that each such bulk subscriber has
paid at least two (2) months' regular charges for Basic Package Services and all
installation charges billed therefor; and (b) the number obtained by dividing
the aggregate monthly amount billed by Seller to Basic Service Tier subscribers
(excluding installation and other non-recurring charges) by the full monthly
rate charged to subscribers of the Basic Package Services, and provided further,
that no part of the account of any Basic Service Tier subscriber is more than
ninety (90) days past due from the from the original due date of billing, and
provided further that each Basic Service Tier subscriber has paid at least two
(2) months' regular charges for such services and all installation charges
billed therefor.
1.12 Equivalent Subscribers shall mean, with respect to the CATV
Systems, the sum of (a) the number of single family households (exclusive of
"additional outlets" or "second
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connects" and "pending disconnects," as such terms are commonly understood in
the CATV industry) subscribing to Basic Package Services of the CATV Systems and
paying the full monthly rate for such services, whose accounts payable to Seller
for Basic Package Services are not more than ninety (90) days past due from the
original due date as stated on such billing, and who have paid at least two (2)
months' payment for Basic Package Services in full without discount and all
installation charges billed therefor, and (b) the number of Equivalent Billing
Units. In no case, however, shall the number of Equivalent Subscribers whose
accounts are more than sixty (60) days past due from the from the original due
date of billing exceed fifty (50).
1.13 ERISA shall mean the Employee Retirement Income Security Act of
1974, as amended, and any successor statute of similar import, and regulations
thereunder, in each case as in effect from time to time.
1.14 Excluded Assets shall include: Seller's cash on hand at Closing
(but only to the extent that such cash does not constitute Cash Equivalents
under Section 1.2.1); and only those other assets mutually agreed to by the
parties and listed in Schedule 1.14.
1.15 FCC shall mean the Federal Communications Commission.
1.16 Group A Assets shall mean those Assets listed in Schedule 1.16.
1.17 Group B Assets shall mean those Assets listed in Schedule 1.17.
1.18 Group B License Agreement shall mean the personal property license
agreement referred to in Section 3.1.1, substantially in the form of Exhibit G.
1.19 Holdback Note shall mean the promissory note referred to in
Section 3.1.2, substantially in the form of Exhibit H.
1.20 Minimum Monthly Revenue shall mean Sixty Thousand Dollars
($60,000).
1.21 Monthly Revenue shall mean the monthly average of the total
revenues (as defined under generally accepted accounting principles, but not
including any franchise fees, sales or similar taxes collected by Seller on
behalf of any governmental entity) earned by the CATV Systems during the three
(3) full calendar months immediately preceding the Closing Date from (a)
recurring monthly subscription payments received from the CATV Systems'
Equivalent Subscribers and Pay-TV Subscribers, and (b) the other operations of
the CATV Systems; provided, however, that such revenue shall be counted in the
determination of Monthly Revenue only to the extent that the CATV Systems'
charges to customers for any equipment and/or services subject to regulation are
in compliance with the applicable rate regulation rules of the FCC.
1.22 Pay-TV Services shall mean one or more addition channels of
programming commonly known as premium or pay-television programming channels not
otherwise made
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available to Equivalent Subscribers without the payment of monthly fees in
addition to the fee for Basic Package Services.
1.23 Pay-TV Subscribers shall mean the sum of (a) the number of
Equivalent Subscribers who are paying to receive one or more Pay-TV Services,
and (b) the number of such Pay-TV Services in excess of one which each such
Equivalent Subscriber is paying for, provided, that the payment for such Pay-TV
Services is not more than ninety (90) days past due from the original due date
as stated on such billing and that such subscriber has paid at least two (2)
months' regular charges for such services and all installation charges billed
therefor.
1.24 Permitted Exceptions shall mean, with respect to ALTA lessee's
and owner's extended coverage title insurance policies, (a) standard printed
exceptions, (b) inchoate liens for current taxes and assessments not yet
delinquent, (c) standard utility and roadway easements, covenants and
restrictions, whether or not of record, that do not individually or in the
aggregate materially detract from the value of, or impair the use of the Real
Property affected thereby, (d) existing zoning or similar laws or ordinances
that do not interfere with the operation of the CATV Systems, (e) Security
Interests specifically assumed by Buyer pursuant to Section 4.1, (f) survey
exceptions that do not individually or in the aggregate materially detract from
the value of, or impair the use of the Real Property affected thereby, and (g)
standard mineral or water rights exceptions.
1.25 Purchase Price shall mean the total consideration payable by
Buyer to Seller for the transactions contemplated in this Agreement, as more
particularly described in Section 3.1. The portion of the Purchase Price for the
Group A Assets shall be referred to as the "Group A Purchase Price," and the
portion of the Purchase Price for the Group B Assets shall be referred to as the
"Group B Purchase Price."
1.26 Remedial Steps shall mean the necessary steps Seller will have
taken so as to have caused the CATV Systems to be in full compliance with the
Technical Standards.
1.27 Required Consents shall mean the written consents of the
governmental authorities and other third parties necessary or required for Buyer
to conduct the business of the CATV Systems, as more particularly described in
Section 5.6.
1.28 Security Interest shall mean any mortgage, deed-of-trust, lien,
security agreement, limitation, pledge, hypothecation, assignment for security
purposes, option, put, charge, restrictive agreement, capital or financing lease
arrangement, restriction, priority, encumbrance, adverse interest, claim,
restraint on transfer, or claim of any kind or nature whatsoever (including,
without limitation, any agreement to give or suffer to exist any of the
foregoing) against title with respect to any Asset to be sold under this
Agreement.
1.29 Seller shall mean Southland Cablevision, Inc., a Georgia
corporation.
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1.30 Seller's Knowledge shall mean the actual or constructive knowledge
of a particular matter of any of the executive officers of Seller or general
managers of the CATV Systems, after due investigation of the CATV Systems and
discussion with the personnel of such CATV Systems.
1.31 Technical Standards shall mean the standards set forth in Section
5.8.3.
SECTION 2. SALE OF ASSETS
2.1 Agreement to Purchase and Sell. Subject to the terms and
conditions set forth in this Agreement, at Closing Buyer shall purchase and
Seller shall sell, transfer, assign, convey and deliver the Assets to Buyer.
2.2 Assets to Be Sold. Except as otherwise specifically provided in
this Agreement, all of the Assets, whether or not described in the Schedules to
this Agreement, are intended to be sold, transferred, assigned, conveyed and
delivered to Buyer, free and clear of all Security Interests.
2.3 Conveyance of Assets. The Assets shall be sold to Buyer in two
transactions. In the first transaction, Seller shall sell, transfer, assign,
convey and deliver to Buyer the Group A Assets. In the second transaction,
Seller shall sell, transfer, assign, convey and deliver to Buyer the Group B
Assets.
SECTION 3. PURCHASE PRICE
3.1 Purchase Price. Buyer shall pay to Seller total consideration of
Three Million Seven Hundred Ten Thousand Dollars ($3,710,000) for the Assets, as
adjusted pursuant to Sections 3.2 and 3.3. The Purchase Price shall be paid as
follows:
3.1.1 Group A Closing. At the Group A Closing, Buyer shall
pay to Seller Two Million Six Hundred Forty Thousand Dollars ($2,640,000), as
adjusted pursuant to Section 3.2, by wire transfer of immediately available
funds on the Group A Closing Date; and
3.1.2 Group B Closing. At the Group B Closing, Buyer shall
(a) pay to Seller Seven Hundred Seventy Thousand Dollars ($770,000), as adjusted
pursuant to Section 3.2, by wire transfer of immediately available funds on the
Group B Closing Date, and (b) execute and deliver to Seller an unsecured,
non-negotiable, non-assignable, non-interest bearing Holdback Note in the
principal amount of Three Hundred Thousand Dollars ($300,000), due and payable
one hundred eighty (180) days after the Group B Closing Date and in
substantially the form of Exhibit H. The Holdback Note shall be subject to
offset as described in Section 3.3.3. Upon the request of Buyer, Seller, at
Closing, shall enter into a subordination agreement with Buyer's senior lender,
reasonably acceptable to Seller, Buyer and Buyer's senior
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lender, providing that the Holdback Note and any right to payment thereunder
shall be fully subordinated to the interest of Buyer's senior lender.
3.2 Reductions and Prorations to the Purchase Price at Closing
3.2.1 Purchase Price Reduction. The Purchase Price (including
both the Group A Purchase Price and the Group B Purchase Price) and the portions
thereof payable under Sections 3.1.1 and 3.1.2(a) shall be reduced, at Buyer's
sole discretion, based upon the lowest result generated from each of the
following:
(a) Subscriber Adjustments. If the CATV Systems serve
fewer than two thousand six hundred fifty (2,650) Equivalent Subscribers
at the Group A Closing Date, to an amount determined by multiplying the
Purchase Price by a fraction, the numerator of which is the actual number
of Equivalent Subscribers at the Group A Closing Date, and the denominator
of which is two thousand six hundred fifty (2,650); or
(b) Monthly Revenue Shortfall Adjustment. If the CATV
Systems generate less than the Minimum Monthly Revenue at the Group A
Closing Date, to an amount determined by multiplying the Purchase Price
by a fraction, the numerator of which is the actual Monthly Revenue at the
Group A Closing Date, and the denominator of which is the Minimum Monthly
Revenue.
3.2.2 Prorations and Other Adjustments
(a) Prorations. In addition to the adjustments described
in Section 3.2.1, appropriate adjustments to the Purchase Price and the
portion thereof payable under Section 3.1.1 shall be made on a prorata
basis as of the Group B Closing Date to the extent reasonably possible for
all prepaid expenses, accrued expenses and prepaid revenue, all as
determined in accordance with generally accepted accounting principles, to
reflect the principle that all expenses arising out of and all income
attributable to the CATV Systems for the period prior to 12:00 a.m. on the
Group B Closing Date are for the account of Seller, and that all expenses
arising out of and all income attributable to the CATV Systems for the
period after 12:00 a.m. on the Group B Closing Date are for the account of
Buyer. All overlapping items of income or expense, including without
limitation the following, shall be prorated or reimbursed, as the case may
be, as of 12:00 a.m. on the Group B Closing Date:
(i) Prepaid expenses and deposits made prior to
the Group B Closing, as permitted by the terms hereof, for or in
connection with goods or services where all or a part of such
goods or services have not been received or used as of the Group
B Closing Date (e.g., rents paid in advance for a rental period
extending beyond the Group B Closing Date);
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(ii) Liabilities customarily accrued, arising from
expenses incurred but unpaid as of the Group B Closing, including
without limitation liabilities under any and all obligations
assumed by Buyer pursuant to Section 4.1 (e.g., rents, sales
commissions, fees for business and professional services, and
other similar matters);
(iii) Taxes and utility charges related to the CATV
Systems or in respect of any of the Assets (other than state
sales taxes that may be due as a consequence of the consummation
of the transactions contemplated by this Agreement, and any taxes
that may be imposed upon Buyer on the basis of Buyer's income);
(iv) Deposits made and unearned prepayments
received by Seller in connection with any of Seller's obligations
assumed by Buyer pursuant to Section 4.1; and
(v) Franchise fees, copyright payments, pole
attachment agreements, railroad and/or highway crossing charges,
programming expenses, satellite service fees, antenna space
leases, bad debt expenses, billing company charges, and other
fees, expenses, costs and charges normally prorated in the sale of
the assets of a CATV business.
No payments or adjustments shall be made with respect to any accounts
receivable, which shall be conveyed to Buyer at the Group B Closing, or
with respect to any Excluded Assets.
(b) Pre-Closing Procedure. At least seven (7) calendar
days before the Group A Closing, Seller shall notify Buyer of Seller's good
faith estimate of (i) the Equivalent Subscribers and the Monthly Revenue as
of the Group A Closing Date, and (ii) any adjustments or prorations
required by this Section 3.2. If such estimate will result in a reduction
to the Purchase Price, then the amount to be paid by Buyer at the Group A
Closing shall be preliminarily reduced by such estimate. Prior to the Group
A Closing, Seller shall provide Buyer or Buyer's representatives with
copies of or reasonable access to all books and records, subscriber work
orders, billing reports, bank statements and related documentation as Buyer
may reasonably request for purposes of verifying the matters set forth in
such notification, but without limiting Seller's obligations hereunder to
certify the accuracy of all adjustments. Seller and Buyer shall work
together in good faith to resolve on or before the Group A Closing Date any
disagreement with respect to any matter set forth in such notification. At
least two (2) days before Closing, Seller shall deliver to Buyer a
certificate setting forth (i) the number of Equivalent Subscribers and the
Monthly Revenue as of the Group A Closing Date, and (ii) any reductions or
prorations required by this Section 3.2 to which the parties have mutually
agreed.
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3.3 Post-Closing Adjustments
3.3.1 Procedure. As soon as practicable, but in any event
within sixty (60) days after the Group B Closing Date, Buyer shall prepare and
deliver to Seller a certificate setting forth Buyer's computations of the amount
of all prorations and adjustments, if any, called for in Section 3.2. After such
certificate has been delivered, Seller shall have a period of fifteen (15) days
to review such certificate and to present objections, if any, to Buyer. Buyer
shall grant to Seller or Seller's representatives reasonable access to Buyer's
books and records as Seller may reasonably request for purposes of verifying
such computations. Such certificate shall be final and conclusive unless
objected to by Seller in writing within such 15-day period. During the fifteen
(15) days after Buyer's receipt of any such written objection from Seller,
Seller and Buyer shall attempt to reach agreement upon the proper prorations and
adjustments called for in Section 3.2. A payment shall be made by Seller or
Buyer within five (5) business days after any such agreement as to the proper
undisputed amounts, taking into account any preliminary adjustment for such
items made at each of the Group A and Group B Closings. If Seller and Buyer are
unable to agree upon the proper amount of any such adjustment within such 15-day
period, then the amounts in dispute shall be submitted to an accounting firm
mutually acceptable to Buyer and Seller, which shall render a written decision
to Seller and Buyer within thirty (30) calendar days after it has been retained,
which decision shall be final, and whose fees shall be paid one-half by Buyer
and one-half by Seller.
3.3.2 Property Taxes. If the amount of any real or personal
property tax to be prorated is not known on the Group B Closing Date, such tax
shall be apportioned on the basis of the most recent tax assessment; except,
however, if there is a re-assessment pending or threatened with respect to the
property being taxed, then the parties shall mutually agree to an appropriate
apportionment taking into account such pending or threatened re-assessment.
3.3.3 Continuing Offset Rights of Buyer. Buyer shall have
the continuing right to offset or recoup against the Holdback Note: (a) for
liabilities or expenses of Seller which were undisclosed by Seller prior to the
Group B Closing and which Buyer in its sole and absolute discretion elects to
assume; or (b) for damages suffered or costs incurred (whether or not yet paid)
by Buyer for reason of Seller's breach of any provision of this Agreement. After
the Group B Closing, Buyer shall not have the right to offset or recoup against
the Holdback Note for further reductions to the Purchase Price pursuant to
Section 3.2.1, unless Buyer can reasonably demonstrate that Seller committed
fraud or made a knowing misrepresentation. Nothing contained in this Section
3.3.3 shall be deemed to limit or in any way restrict Buyer's right to be
indemnified by Seller pursuant to Section 14 of this Agreement to the extent the
amount to which Buyer is entitled under Section 14 exceeds the amount actually
offset or recouped under this Section 3.3.3.
3.4 Allocation of Purchase Price. The Purchase Price shall
be allocated among the Group A Assets and the Group B Assets in such amounts as
set forth in Schedule 3.4. Buyer and Seller agree to be bound by such allocation
and to file according to Code Section 1060, all returns and reports with respect
to the transaction contemplated by this Agreement, including,
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but not limited to, all federal, state, and local tax returns, on the basis of
such allocation. In the event the Purchase Price is adjusted pursuant to
Sections 3.2 or 3.3, the difference shall be allocated among appropriate
categories on a prorata basis unless such differences are specifically allocable
in whole or in part to a particular category or categories as mutually agreed by
Buyer and Seller.
SECTION 4. ASSUMPTION OF LIABILITIES
4.1 Assignment and Assumption. All of Seller's obligations with
respect to the CATV Systems are set forth in the agreements listed in Schedule
1.2. Buyer shall assume only the obligations of Seller set forth on Schedule 4.1
that accrue on or after the Group A Closing Date (the "Assumed Liabilities"). At
Closing, Seller shall assign and Buyer shall assume the Assumed Liabilities.
Such agreement for assignment and assumption pertaining to CATV Instruments and
Seller Contracts shall, to the extent reasonably possible, be in the form of
Exhibit B. Such agreement for assignment and assumption pertaining to Franchises
shall, to the extent reasonably possible, be in the form of Exhibit C. Such
agreement for assignment and assumption pertaining to Real Property shall, to
the extent reasonably possible, be in the form of Exhibit D.
4.2 Limitation of Liability
4.2.1 Buyer's Liability. It is expressly understood and agreed
that Buyer shall not be liable for, and does not assume, any obligations or
liabilities of Seller of any kind or nature, other than Seller's obligations to
subscribers of the CATV Systems with respect to (a) subscriber deposits held by
Seller (and for which Buyer receives credit) as of the Group B Closing Date
which are refundable, (b) subscriber advance payments held by Seller (and for
which Buyer receives credit) as of the Group B Closing Date for services to be
rendered in connection with the operation of the CATV Systems subsequent to the
Group B Closing Date, and (c) obli gations accruing after the Group A Closing
under the Assumed Liabilities expressly assumed by Buyer pursuant to the terms
of Section 4.1. Except as otherwise set forth herein, Buyer shall be under no
obligation to, and shall not, assume any obligation, liability or indebtedness
of Seller or the CATV Systems, including without limitation any and all fines or
penalties levied or assessed by the Copyright Office after the Group A Closing,
to the extent that such fines or penalties (i) relate to the period prior to the
Group B Closing Date, and (ii) have been determined to be valid.
4.2.2 Termination of or Indemnification Against Agreements
not Assumed. Seller in its discretion may terminate as of the Group A Closing
Date any and all agreements with third parties which affect the Assets or the
CATV Systems which Buyer does not expressly assume; provided, however, that any
agreements not terminated shall be subject to Seller's representations and
warranties set forth in Section 5.7.3.
4.3 Sales and Transfer Taxes; Third-Party Consents. Seller shall
assume the liability for and shall pay any and all taxes that may be imposed on
Seller on the basis of Seller's income,
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and any and all other reasonable costs, fees and taxes associated with the
consummation of the transactions contemplated by this Agreement, including
without limitation the expenses associated with obtaining the consent or
agreement to any part of the transactions contemplated by this Agreement of any
governmental authority or any independent third-party with whom Seller is
contractually bound; provided, however, that Seller shall not be obligated under
this Section either to pay any unreasonable fees or expenses or to undertake any
unreasonable obligations as a part of Seller's performance. Buyer shall assume
only the liability for and only shall pay the sales taxes that may be imposed on
Buyer pursuant to law as a result of the consummation of the transactions
contemplated by this Agreement. Notwithstanding the foregoing, unless
specifically set forth herein, each party shall bear the expenses of its own
attorneys, accountants and experts.
SECTION 5. REPRESENTATIONS AND WARRANTIES OF SELLER
To induce Buyer to enter into this Agreement, Seller represents and
warrants to Buyer as follows:
5.1 Organization and Authority. Seller is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Georgia and is qualified to transact business in all other jurisdictions in
which the failure to so qualify would have a material adverse effect on its
business or properties; openly and lawfully does business under the names
"Southland Cablevision, Inc." and "Southland" but no other name; has full power
and authority to execute, deliver, and perform this Agreement; has all requisite
power and authority to carry on its business as currently conducted and to own,
lease, use, and operate the Assets at the places they are located and in the
manner in which the CATV Systems are operated; and has taken all corporate
action required by law, its articles of incorporation and otherwise, and as of
the Group A Closing shall have used its commercially reasonable efforts to have
obtained all Required Consents and shall have received all necessary corporate
consents and approvals, including without limitation the approval of all of the
shareholders and directors of Seller, to authorize the execution, delivery, and
performance of this Agreement. Seller has not, within the four (4) year period
immediately preceding the date of this Agreement, changed its name, been the
surviving entity of a merger or consolidation, or acquired all or substantially
all of the assets of any person, company or entity.
5.2 Schedules. The Schedules to this Agreement, as the same may be
amended or supplemented pursuant to Section 15.9, list all of the material
Assets owned, held, or used for the performance of any CATV Instrument or Seller
Contract and for the lawful conduct of the CATV Systems. All Schedules to this
Agreement, as the same may be amended or supplemented pursuant to Section 15.9
are true, accurate, and complete in all material respects.
5.3 No Breach or Violation. The execution, delivery, and performance
of this Agreement will not (a) conflict with or result in a breach or violation
by Seller of, or (b) constitute default by Seller under, or (c) create or impose
any Security Interest or right of termination, cancellation, or acceleration
with respect to any of the Assets pursuant to, any
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statute, ordinance, rule, regulation, or order, or any material agreement,
lease, instrument, document or arrangement affecting the CATV Systems or the
Assets or any part thereof, to which Seller is a party or by which Seller or the
Assets are bound. This Agreement constitutes the legal, valid, and binding
obligation of Seller, enforceable in accordance with its terms.
5.4 Title to Assets. Seller has good, marketable and indefeasible
title, both legal and equitable, to all of the Assets which are owned, and a
valid leasehold interest in all of the Assets which are leased; and the Assets
are free and clear of all Security Interests of any kind or nature, subject only
to (a) Permitted Exceptions with respect to Real Property, (b) any property
taxes not delinquent, and (c) those Security Interests disclosed in Schedule
5.4, which Security Interests shall be removed and released at or prior to the
Group A Closing, unless assumed by Buyer.
5.5 Real Property. With respect to all Real Property:
5.5.1 Zoning. The Real Property and the improvements located
thereon and the continuation of business presently being conducted thereon do
not and will not violate any applicable material zoning laws.
5.5.2 Access; Utilities. The Real Property is served by all
utilities and services, including without limitation electrical power, water,
sewer and telephone, reasonably necessary for the normal and intended use of the
Real Property in connection with the operation of the CATV Systems.
5.5.3 Effectiveness of Leases. All leases of Real Property
are currently in full force and effect and are valid and enforceable in
accordance with their respective terms under all applicable laws. Seller is in
compliance with all of the material requirements and obligations under all such
leases, and there is no pending assertion or claim by any party that Seller is
in default or otherwise not in compliance with all such leases. Except as
disclosed in Schedule 5.5.3, each lease of Real Property has been duly recorded
in the records of the appropriate governmental authority.
5.5.4 Easements. Except as disclosed in Schedule 5.5.4,
Seller owns and possesses all ease ments and rights-of-way necessary for the
operation, maintenance, repair, replacement, and current location of all cables,
lines, towers, poles, equipment, and other facilities used or useful in
connection with the operation of the CATV Systems.
5.5.5 Environmental Matters
(a) Definitions. For purposes of this Section
5.5.5, the following terms shall have the following meanings:
(i) Hazardous Substance. "Hazardous
Substance" shall mean any chemical, substance, material, or waste,
including without limitation asbestos, PCBs and formaldehyde, that
is defined, classified, listed, or
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designated as hazardous, toxic, or radioactive, or by other
similar term, by any federal, state, or local environmental
statute, regulation, rule, order, or ordinance presently in
effect.
(ii) Other Property. "Other Property"
shall mean any property that becomes contaminated with any
Hazardous Substance as a result of operations or other activities
on, or as a result of any contamination of, the Real Property.
(iii) Environmental Laws. "Environmental
Laws" shall mean all federal, state and local laws and regulations
in effect as of the Group B Closing Date relating to emissions,
discharges, releases or threatened releases of pollutants,
contaminants, chemicals or industrial, hazardous or toxic
materials or wastes into the environment (including without
limitation the atmosphere, ambient water, surface water, ground
water or land surface or sub-surface) or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage,
disposal, transport, or handling of Hazardous Substances.
(b) Presence. Except as set forth on Schedule
5.5.5, Seller has no knowledge of: (i) any storage, spill, release,
discharge, emission, or disposal of any Hazardous Substance that has
occurred or is presently occurring in, upon, or onto the Real Property in
violation of any Environmental Law; or (ii) the presence of any underground
storage tank on the Real Property.
(c) Pending Proceedings. Except as set forth on
Schedule 5.5.5, there is no threatened or pending civil or criminal
litigation, notice of violation, investigation or administrative proceeding
arising out of the business or activities of Seller, including without
limitation any threatened or pending litigation, notice, investigation or
proceeding relating in any way to the Environmental Laws.
5.6 Required Consents. Schedule 5.6 sets forth a true, correct and
complete list of all Required Consents to be obtained from governmental
agencies, franchising authorities, lessors, and any other third parties whose
consents and approvals are reasonably necessary or required for Seller to sell,
transfer, assign, convey and deliver the Assets to Buyer and for Buyer to
conduct the business of the CATV Systems and to own, lease, use, and operate, as
the case may be, the Assets at the places and in the manner in which the CATV
Systems and Assets are presently conducted or used and will be conducted or used
on the Group A Closing Date.
5.7 CATV Instruments and Seller Contracts
5.7.1 Effectiveness. Except as disclosed in Schedule 1.2, the
CATV Instruments and Seller Contracts (a) are currently in full force and
effect, (b) are valid and enforceable in accordance with their respective terms
under all applicable federal, state, and local laws and (c) include all material
licenses, rights of entry, permits, and other rights and
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authorizations, necessary to enable Seller to operate the CATV Systems as and in
the manner in which they presently are conducted and in accordance with all
applicable federal, state and local laws. Seller is not in default under or
violation of any material provision of any CATV Instrument or Seller Contract.
Except as disclosed in Schedule 1.2, there is no dispute, legal action,
governmental proceeding or investigation, pending or threatened, for the purpose
of modifying, revoking, terminating, suspending, canceling, or reforming any
CATV Instrument or Seller Contract, or seeking damages or other relief with
respect thereto. Except as disclosed in Schedule 1.2, Seller is in material
compliance with the applicable requirements of all governing or regulatory
authorities (including without limitation the FCC and the Register of
Copyrights) relating to the CATV Instruments and Seller Contracts, including,
without limitation, all requirements relating to notification, filing, document
delivery, reporting, posting, maintenance of logs and records and payment of
fees or other amounts due. Except as set forth in Schedule 5.11, there is no
pending assertion or claim in writing by any governmental authority or party to
any CATV Instrument or Seller Contract that operations pursuant to such CATV
Instruments or Seller Contracts have been improperly conducted or maintained. As
of the Group B Closing, a request for renewal has been filed under Section 626
of the Cable Communications Policy Act of 1984 with respect to all franchises
expiring within thirty-six (36) months of the date of this Agreement.
5.7.2 Copies. Seller has delivered to Buyer true, correct and
complete copies of all material CATV Instruments and Seller Contracts and any
amendments to the CATV Instruments and the Seller Contracts to the date of this
Agreement. Seller has delivered to Buyer copies of all renewal notices filed
under Section 626 of the Cable Communications Policy Act of 1984 with respect to
all franchises expiring within thirty-six (36) months of the date of this
Agreement.
5.7.3 Status of CATV Instruments and Seller Contracts Not
Assumed. At the Group A Closing, Seller either (a) will have terminated all CATV
Instruments and Seller Contracts that are not assumed by Buyer under Section
4.1, or (b) will forever indemnify Buyer for any and all Third Party Claims and
Direct Claims (as such terms are defined in Section 14.2.1) against Buyer
arising directly or indirectly from such CATV Instruments and Seller Contracts
that are not assumed by Buyer under Section 4.1 and not terminated by Seller in
accordance with (a) above.
5.8 FCC Compliance
5.8.1 General Compliance. As of the Group A Closing, Seller
shall be duly authorized under applicable CATV Instruments and FCC rules,
regulations, and orders to distribute all of the off-air television and radio
broadcast signals presently being cablecast to the subscribers of the CATV
Systems and to utilize all carrier frequencies generated by the CATV Systems,
and shall be duly licensed to operate all the property, equipment and
facilities, including, without limitation, any business radio and any CATV relay
service system, being operated in connection with the CATV Systems. As of the
Group A Closing, the operation of the CATV Systems and of any FCC-licensed
facility used in conjunction with the operation of the
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CATV Systems shall be in material compliance with the FCC's rules and
regulations and, to the extent applicable, the rules and regulations of the
Federal Aviation Administration, and Seller has received no notice, and
otherwise has no reason to know, of any claimed default or material violation
with respect to the foregoing. Prior to the Group A Closing, Seller will have
delivered to Buyer copies of all current and past reports and filings for the
immediately past two years as may be necessary for Buyer to evaluate Seller's
compliance with FCC rules and regulations. As of the Group A Closing, Seller
will have materially complied with and will have provided Buyer with true,
correct and complete copies of all valid Syndicated Exclusivity, Network
Nonduplication and Sports Blackout requests and all notices received by Seller
with respect to any of the signals carried on the CATV Systems. Schedule 5.8.1
sets forth a true, correct and complete list of (a) all local franchising
authorities of the CATV Systems that have exercised authority pursuant to
Section 76.309(a) of the FCC's rules to enforce customer service standards, (b)
all local franchising authorities of the CATV Systems that have sought
certification from the FCC to regulate rates, and (c) all complaints filed with
the FCC with respect to rates charged by the CATV Systems. Prior to the Group A
Closing, Seller will make available for Buyer's inspection and at the Group A
Closing Seller will deliver to Buyer true and correct copies of all current and
past reports, filings and notices, for the immediately past two years, of the
following (if and to the extent the same are available):
(i) The CATV Systems' political file maintained
pursuant to Section 76.207 of the FCC's rules.
(ii) The CATV Systems' advertising and sponsorship
identification file maintained pursuant to Section 76.221(f) of the FCC's
rules.
(iii) The CATV Systems' paid political advertising
file maintained pursuant to Section 76.221(d) of the FCC's rules.
(iv) The CATV Systems' file on commercial matter on
children's programs maintained pursuant to Section 76.225(c) of the FCC's
rules.
(v) The CATV Systems' proof of performance test
data, including an identification of the instruments, a description of the
procedures utilized, and a statement of the qualifications of the person
performing the tests, from the semi-annual performance tests required
pursuant to Section 76.601(c) of the FCC's rules.
(vi) The CATV Systems' written policy statement and
all records relating to indecent leased access programming pursuant to
Section 76.701(h) of the FCC's rules, and a schedule of Seller's commercial
leased access rates pursuant to Section 76.970(e) of the FCC's rules.
(vii) Records of complaints from subscribers of the
CATV Systems concerning the quality of the television signals delivered
together with Seller's correspondence and other records of how such
complaints were resolved.
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(viii) Letters to off-air broadcasters sent pursuant
to Section 76.58 of the FCC's rules.
(ix) FCC Forms 393, 1200, 1210 and 1215 as
submitted to the FCC and/or any of the CATV Systems' franchising
authorities, together with any correspondence, notices or other
documentation related thereto.
(x) The CATV Systems' notices to subscribers sent
pursuant to Sections 76.56(d)(3), 76.309(c)(3), 76.607, 76.630(a),
76.630(d), 76.630(e), 76.802, 76.931, 76.932, 76.964, 76.952, and 76.980(d)
of the FCC's rules, and the notice sent to subscribers pursuant to Section
624(d) of the Communications Act of 1934, as amended.
5.8.2 CLI Compliance. As of the Group A Closing, Seller
shall have materially complied with its obligations in connection with the CLI
Rules including, without limitation, (a) using reasonably adequate CLI
monitoring equipment, (b) maintaining appropriate log books and other
record-keeping pursuant to and in accordance with Section 76.601(e) of the FCC's
rules, and (c) promptly correcting any radiation leakage discovered by Seller in
connection with its monitoring obligations under the CLI Rules.
5.8.3 Tests and Compliance with Technical Standards. During
the period beginning not more than sixty (60) days prior to the execution of
this Agreement and ending not more than fifteen (15) days after the execution of
this Agreement, Seller shall have completed each of the following tests in the
manner specified below and shall have certified to Buyer that each of the CATV
Systems complies with the standards set forth in Sections 5.8.3(a) and (e), and
that each of the CATV Systems that serves greater than 1,000 subscribers
complies with the standards set forth in Sections 5.8.3(a), (b), (c), (d) and
(e) (when conducting any of the following tests, the CATV Systems shall be
operated at the power levels specified in the CATV Systems' technical design).
(a) Signal Leakage and CLI Certification. Pursuant to the
rules of the FCC and in accordance with the standards generally accepted by
qualified engineers in the CATV industry, Seller shall conduct a ground-based
signal leakage test on the CATV Systems, and shall certify that the CATV
Systems' CLI, as determined by using the I(inf) method is equal to or less than
58. Results of the signal leakage test, together with a log covering the three
year period immediately preceding the date of this Agreement of all detected
leaks and a description of the repairs effected, shall be delivered to Buyer
promptly following completion of the testing.
(b) Proof of Performance. Seller shall perform an
end-to-end swept frequency response test of all the trunk facilities of the CATV
Systems from 50 to 350 MHz, and shall demonstrate a "peak-to-valley" ratio of
less than 3dB between adjacent channels and less than 10dB between all other
channels.
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(c) Carrier to Noise. Seller shall perform carrier to
noise ratio testing on an adequate number of channels, including at least the
highest and lowest channels carried on each CATV System, and shall demonstrate a
ratio of better than 43 dB on the channels tested.
(d) Hum Modulation. Seller shall perform hum modulation
testing on an adequate number of channels, including at least the highest and
lowest channels carried on each CATV System, and shall demonstrate hum
disturbances of less than three percent on the channels tested.
(e) Aeronautical Frequencies. All aeronautical frequencies
used by the CATV Systems shall be maintained within 5 KHz +/- of the authorized
offset frequency.
5.8.4 System Repair. To the extent the CATV Systems or any
portion thereof are not in compliance with the Technical Standards, Seller, at
its sole cost and expense, will have taken all appropriate Remedial Steps no
later than fifteen (15) days prior to the Group A Closing and shall maintain the
CATV Systems in compliance with the Technical Standards until the Group B
Closing.
5.8.5 Payment of FCC Regulatory Fees and Fines. Seller has
paid, or will pay prior to the Group A Closing, in full any and all FCC
regulatory fees due in connection with the operation of the CATV Systems and any
and all fines, penalties, or forfeitures levied or assessed by the FCC as a
result of the failure of any portion of the CATV Systems to comply with the CLI
Rules, the standards prescribed in Section 5.8.3, or any other FCC rules. Seller
shall remain responsible for (and shall pay in full) any such fines, penalties,
or forfeitures levied or assessed by the FCC after the Group B Closing, to the
extent that the same (a) relate to the period prior to the Group B Closing, and
(b) have been determined to be valid.
5.8.6 Carriage of Broadcast Signals. Schedule 5.8.6 sets forth
a true, correct and complete list of all television broadcast stations carried
on the CATV Systems and designates whether the stations' signals are carried
pursuant to the must-carry provisions of the FCC's rules or pursuant to
retransmission consent agreements.
5.9 Copyrights, Patents and Trademarks
5.9.1 Copyright Filings. Except as set forth in Schedule
5.9.1, Seller has timely made all requisite filings with and payments to the
Register of Copyrights and is otherwise in material compliance with all
applicable rules and regulations of the Copyright Office. Seller has delivered
to Buyer copies of all current and past reports and filings within the past
three (3) years reasonably necessary to evidence such compliance with Copyright
Office rules and regulations.
5.9.2 Copyright Infringement. The Assets and the programming
offered over the CATV Systems are free and clear of any rightful claim of any
third person by way of copyright infringement. The manner in which the off-air
broadcast signals and other program
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services are offered over the CATV Systems will not result in additional
reportable gross receipts under applicable rules and regulations of the
Copyright Office.
5.9.3 Payment of Fines and Copyright Royalties. Seller has,
prior to the Group A Closing, paid in full any and all fines or penalties levied
or assessed by the Copyright Office as a result of the failure to timely or
accurately file Statements of Account for the CATV Systems.
5.9.4 Patents, Trademarks. Seller does not possess any patent,
patent right, trademark, copyright or other proprietary intellectual property
and is not a party to any license or royalty agreement with respect to any
patent, trademark, or copyright except for licenses respecting program material
and obligations under the Copyright Act of 1976 applicable to CATV systems
generally.
5.10 Assets and CATV Business
5.10.1 Generally. Except as expressly set forth in the
Schedules to this Agreement and subject to any waiver with respect to the CATV
Equipment pursuant to Section 11.1, at the Group A Closing all Assets shall be
in operating condition, ordinary wear and tear excepted. None of the CATV
Systems, or the buildings, structures, or appurtenances used in the CATV
Systems, violates applicable laws, ordinances, codes, regulations or restrictive
covenants, the enforcement of which would involve a material cost to correct,
would materially detract from their value, or would materially interfere with
their use. Except as expressly set forth in the Schedules, the CATV Systems are
properly located and materially comply with all applicable laws, rules and
regulations. Seller has not received any notice heretofore not complied with,
from any federal, state, local or other governmental authority or agency having
jurisdiction over the CATV Systems or the Assets, or any insurance or inspection
body, that the CATV Systems or the Assets fail to materially comply with any
applicable law, ordinance, regulation, building or zoning law, or the
requirements of any public authority or body. The CATV Systems and the Assets
are suitable for continued use in the manner in which they are presently
operated without the need for repairs or replacement, except for the repairs and
maintenance normally arising in the ordinary course of business of a cable
system of similar age and geographic location.
5.10.2 Cable Plant Design and Performance. All cable used in
the CATV Systems is coaxial, and, except for such conditions as might be
expected for a cable system of its age and geographic location, is water-tight
and joined and connected according to normal and customary industry standards.
The CATV Systems, at the Group A Closing Date, shall have no fewer than 125
strand miles and 148 plant miles (consisting of 5 aerial trunk miles, 42
underground trunk miles, 11 aerial distribution miles and 90 underground
distribution miles) excluding service drops, and shall be capable of operations
(in accordance with the Technical Standards) at the capacity level of 450 MHz.
5.11 Litigation and Proceedings. Except as set forth in Schedule 5.11,
there is no litigation at law, or in equity, and there is no other proceeding or
investigation pending or, to Seller's Knowledge, threatened against, or which
may adversely affect, Seller, or which involves
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the possibility of any judgment, order, award or other decision affecting Seller
and (a) which might impair the ability of Seller to perform under this
Agreement, (b) could have any adverse effect on the CATV Systems, might impair
the quality of title to the Assets, or (c) might adversely affect the rights,
title, or interest of Seller, and Seller does not know of any basis for such
litigation or proceedings. Seller is not materially in default in any manner
with respect to any order, writ, injunction, or decree of any court or federal,
State, municipal, or other governmental department, commission, board, bureau,
agency, or instrumentality which relates to the operation of the CATV Systems,
and Seller has materially complied with all laws, rules, or regulations
applicable to the CATV Systems and the operation thereof.
5.12 Tax Returns; Other Reports. Seller has duly and timely filed in
proper form all federal, state, local, and foreign income, franchise, sales,
use, property, excise, payroll, and other tax returns and all other reports
(whether or not relating to taxes) required to be filed by law with any
governmental authority or agency thereof. All taxes, fees and assessments of
whatever nature due or payable by Seller pursuant to said returns, reports, or
otherwise, have been paid. There are no tax audits pending and no outstanding
agreements or waivers extending the statutory period of limitations applicable
to any federal, state, or local income tax return for any period.
5.13 Dissenters' Rights. Neither the sale and transfer of the Assets
pursuant to this Agreement, nor Buyer's ownership, possession, or use of the
Assets from and after the Group A Closing because of such sale and transfer,
will result in or be subject to, the imposition of any liability upon Buyer for
appraisal rights or any other liability of any nature whatsoever owing to any
participation interest holder in Seller or any other person.
5.14 Employment Matters
5.14.1 Employees. Schedule 5.14.1 contains a true and complete
list of the names, positions, current hourly wages or annual salary, and other
compensation amounts of all employees of the CATV Systems. Seller has materially
complied with all applicable laws relating to the employment of labor,
including, without limitation, ERISA, and those relating to wages, hours,
collective bargaining, unemployment insurance, worker's compensation, equal
employment opportunity and the payment and withholding of taxes.
5.14.2 Employment Relationship. Seller has no employment
agreements, either written or oral, with any person which would require Buyer to
employ any person after the Group A Closing Date.
5.14.3 Unions. Seller is not a party to any contract with any
labor organization, and neither has Seller agreed to recognize any union or
other collective bargaining unit, nor has any union or other collective
bargaining unit been certified as representing any of its employees nor has
Seller received any requests from any party for recognition as a representative
of employees for collective bargaining purposes.
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5.14.4 Benefits. At the Group A Closing, Seller shall have the
sole responsibility for, and Buyer shall not be required to continue, any
defined benefit, defined contribution, or other employee benefit plan subject to
the jurisdiction of ERISA to which Seller is currently a party or by which
Seller is bound.
5.14.5 Plans. Seller shall have the sole responsibility for
maintenance and/or distribution of benefits accrued under any qualified plans
maintained by Seller pursuant to the plan provisions of all such plans sponsored
by Seller, if any. Buyer will not assume any liability for (a) any such accrued
benefits or (b) any fiduciary or administrative responsibility to account for or
dispose of any such accrued benefits maintained under any qualified plans
sponsored by Seller.
5.14.6 Seller's Responsibility. All welfare plan claims and
short- or long-term disability plan obligations incurred on or before the Group
B Closing, if any, shall remain the sole responsibility of Seller. Eligible
indemnity plan expenses attributable to any of Seller's covered employees or
dependents who are confined to a hospital or medical institution on the Group B
Closing Date will continue to be the responsibility of Seller to the extent
required under Seller's applicable plans.
5.14.7 Health Care Continuation. There has been no material
failure to comply with the continuation health care requirements of the Code or
related acts, laws, rules and regulations as such requirements have applied or
currently apply to any current or former employee of Seller or any spouse,
former spouse, dependent child, or former dependent child of any such employee
under any group health plan maintained by or for Seller on or prior to the Group
B Closing Date.
5.14.8 Miscellaneous Federal Acts. Seller's present employment
practices materially comply with all rules and standards set by the Americans
With Disabilities Act of 1990, Pub. L. 101-36, as amended, and the Family and
Medical Leave Act of 1993, Pub. L. 103-3 including any regulations promulgated
thereunder.
5.14.9 FCC Filings. Schedule 5.14.9 contains true, correct and
complete copies of Seller's FCC Form 395-A filings, which Seller filed on or
before the applicable deadlines, beginning with the Form 395-A filed two years
before such form filed at the latest applicable deadline.
5.15 Subscribers Fees and Rates. The monthly rates currently charged by
Seller for each of the services offered on the CATV Systems are as set forth in
Schedule 1.7. Except as set forth in Schedule 5.15, Seller has not been ordered
by the FCC or any of the CATV Systems' local franchising authorities to reduce
the rates charged for any of the regulated services and equipment listed in
Schedule 1.7 nor is any such order threatened. For the last two billing cycles
prior to the execution of this Agreement, Seller has not increased the rates
charged for regulated services and equipment.
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5.16 Insolvency Proceedings. No insolvency proceedings of any
character, including without limitation bankruptcy, receivership,
reorganization, composition or arrangement with creditors, voluntary or
involuntary, affecting Seller or the CATV Systems are pending or threatened.
Seller has not made an assignment for the benefit of creditors or taken any
action with a view to, or that would constitute a valid basis for, the
institution of any such insolvency proceedings. On the Group B Closing Date,
Seller (i) will have sufficient capital to carry on its business and
transactions, (ii) will be able to pay its debts as they mature or become due,
and (iii) will own assets the fair market value of which will be greater than
the sum of all liabilities of Seller not specifically assumed by Buyer pursuant
to the terms of this Agreement.
5.17 Finders and Brokers. Neither Seller nor its officers, directors,
shareholders or employees has entered into any contract, arrangement, or
understanding with any person or firm which may result in the obligation of
Seller or Buyer to pay any finder's, brokerage, or agent's fees, commission or
other like payment or compensation due to the transactions contemplated in this
Agreement. For the two year period prior to the date of this Agreement, Seller
has not entered into any agreement, whether written, oral, express or implied,
directly or indirectly regarding the sale or other disposition of the CATV
Systems.
5.18 Effect of Certificates. All certificates required to be delivered
by Seller under this Agreement shall be deemed to be additional representations
and warranties of Seller.
5.19 Citizenship. Seller is not a "foreign person" as defined in
Section 1445(f)(3) of the Code. Buyer shall have the right to furnish copies of
any Seller affidavit of such representation to the Internal Revenue Service.
5.20 Overbuilds; Competition. To the best of Seller's Knowledge, no
area presently served by the CATV Systems or within the scope of any of Seller's
CATV franchises is presently subject to an overbuild situation (except for the
cable system owned by TCI of Georgia Inc.) or subject to competition from a
multipoint distribution service ("MDS"), multichannel multipoint distribution
service ("MMDS") or other wireless cable services. To the best of Seller's
Knowledge, no person or firm other than Seller has been granted a CATV franchise
(except for the franchises granted to TCI Cablevision of Georgia, Inc.), or a
license to provide MDS, MMDS or other wireless cable services in any of the
communities (or any of the unincorporated areas) presently served by the CATV
Systems or within the geographical scope of any of Seller's CATV franchises.
Seller has no current knowledge of any person or firm (other than TCI
Cablevision of Georgia, Inc.) that (a) intends to construct or operate a CATV
system or to provide MDS, MMDS or other wireless cable services within any area
served by the CATV Systems or any area within the geographical scope of any of
Seller's CATV franchises, or (b) intends to apply for a CATV franchise or a
license to provide MDS, MMDS or other wireless cable services covering any area
served by the CATV Systems or any area within the geographical scope of any of
Seller's CATV franchises.
5.21 Financial Statements. Seller's audited financial statements,
including without limitation balance sheets, income statements and any and all
other related documents, the most
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recent of which are attached as Schedule 5.21: (i) have been prepared in
accordance with generally accepted accounting principles applied on a consistent
basis throughout the period involved and as compared with prior periods; (ii)
are true, correct, complete and accurate in all material respects subject, in
the case of any interim statements, to year-end adjustments where applicable,
and (iii) fairly present Seller's financial position, income, expenses, assets,
liabilities, shareholders' equity and the results of operation of the CATV
Systems as of the date and for the period indicated. There has been no material
adverse change in the business, assets, properties, prospects, or condition
(financial or otherwise) of the CATV Systems since the preparation of the most
recent financial statements. No event has occurred and, except as may be
disclosed in the Seller's Certificate delivered pursuant to Section 9.1, no
event will have occurred prior to the Group B Closing that would make the
financial statements delivered to Buyer misleading in any material respect.
5.22 Free CATV Service. Except as set forth in Schedule 5.22 to this
Agreement, there is no agreement, obligation or other requirement for Seller to
provide free CATV service to any person, entity or firm.
5.23 Full Disclosure. No representation or warranty by Seller in this
Agreement or any Schedule or Exhibit to this Agreement, or any statement, list,
document or certificate furnished or to be furnished by Seller pursuant to this
Agreement, contains or will contain any untrue statement of material fact, or
omits or will omit to state a material fact required to be stated therein or
necessary to make the statements contained therein not misleading or necessary
in order to provide a prospective purchaser of the Assets and CATV Systems with
complete and proper information as to such assets and business.
SECTION 6. BUYER'S REPRESENTATIONS AND WARRANTIES
6.1 Organization and Authority. Buyer is a limited partnership duly
formed and validly existing under the laws of the State of Washington; has full
power and authority to execute, deliver and perform this Agreement; and has
taken all partnership action required by law and otherwise to authorize the
execution, delivery and performance of this Agreement. This Agreement
constitutes the legal, valid and binding obligation of Buyer enforceable in
accordance with its terms.
6.2 Litigation and Proceedings. Except for matters affecting the cable
television industry generally, there is no litigation at law, or in equity, and
there is no other proceeding or investigation pending or, to Buyer's knowledge,
threatened against, or which may adversely affect, Buyer, or which involves the
possibility of any judgment, order, award or other decision which might impair
the ability of Buyer to perform under this Agreement, and Buyer does not know of
any basis for such litigation or proceedings.
6.3 Finders and Brokers. Neither Buyer, nor its partners, nor its
officers, directors, shareholders or employees of its partners has entered into
any contract, arrangement, or
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understanding with any person or firm, which may result in the obligation of
Seller or Buyer to pay any finder's, brokerage, or agent's fees, commission or
other like payment or compensation.
6.4 Status of Assumed Liabilities. After the Group A Closing, Buyer
shall perform and pay any and all obligations due under the Assumed Liabilities
which accrue after the Group A Closing Date.
6.5 Effect of Certificates. All certificates required to be delivered
by Buyer under this Agreement shall be deemed to be additional representations
and warranties of Buyer.
SECTION 7. CONDUCT PENDING CLOSING
7.1 Access to Premises and Records. Between the date of execution and
delivery of this Agreement and the Group A Closing Date, Seller shall allow
Buyer, its accountants, auditors, engineers and representatives full access, on
not less than three (3) business days' prior notice, at mutually agreed upon
reasonable times, to all of the premises and books and records of Seller and the
CATV Systems and shall furnish to Buyer and its representatives all information
regarding the business and properties of Seller. Buyer shall have the
opportunity to perform CLI testing, other FCC-related systems performance
testing, and environmental site assessments of the Assets pursuant to Section
11.1 with Seller's full cooperation and assistance prior to the Group A Closing,
provided that such audit and other procedures do not unreasonably interfere with
the operations of the CATV Systems. Buyer shall have the opportunity to perform
a field audit of Seller's accounts and such other procedures commonly performed
in an audit conducted by an independent certified public accounting firm with
Seller's full cooperation and assistance prior to the Closing, provided that
such audit and other procedures do not unreasonably interfere with the
operations of the CATV Systems. Seller also shall cooperate with Buyer and its
accountants, auditors and representatives to enable Buyer to generate the type
of financial information required under Form 8-K to be filed by Buyer with the
United States Securities and Exchange Commission pursuant to Section 13 or
Section 15(d) of the Securities Exchange Act of 1934, as amended, and the rules
and regulations promulgated thereunder.
7.2 Continuity and Maintenance of Operations. Seller shall continue to
operate the CATV Systems, shall maintain the Assets (including maintenance and
replenishment of all inventories of spare equipment and parts reasonably
adequate for the needs of the CATV Systems, including without limitation those
listed in Schedule 1.2), and shall keep all of its business books, records, and
files all in the ordinary course of business in accordance with past practices,
consistently applied. Seller shall bear the risk of loss on or prior to the
Group B Closing with respect to the Assets and the CATV Systems as a result of
any loss, claim, casualty, or calamity. Seller shall not, without prior written
consent of Buyer, which consent shall not be unreasonably withheld, (a) change
the rate charged for Basic Package Services or any premium services, (b) add or
delete any program services, or (c) rearrange the CATV Systems' channel
line-ups. Seller shall not sell, transfer, assign, or permit the creation of any
Security Interest on any of the Assets without the prior written consent of
Buyer, which consent shall not be unreasonably withheld. Except as otherwise
required under the terms of this Agreement, Seller
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may amend or cancel any CATV Instruments, any Seller Contract or any other
contract or agreement which is necessary or appropriate for the maintenance of
the Assets or the operation of the CATV Systems, but only in the ordinary course
of business. Seller specifically acknowledges that any amendment or cancellation
of any franchise or lease agreement shall be deemed not to be in the ordinary
course of business. Seller shall not itself, nor shall Seller permit any of its
directors, officers, shareholders, agents or employees, or any of its partners
or its partners', directors, officers, shareholders, agents, or employees to pay
any of Seller's accounts receivable from the CATV Systems' subscribers
outstanding on the date of this Agreement or hereafter; provided, however, that
such persons shall be permitted to make payment for CATV services received by
them at their own dwellings.
7.3 Existing Relationships. Except as otherwise required by this
Agreement, Seller shall use its best efforts to preserve the CATV Systems as a
going concern and to preserve existing relationships with suppliers, customers,
governmental entities and others having business dealings with Seller, all in
accordance with Seller's ordinary course of business consistent with past
practices.
7.4 Employees; Employment Relationship. All of Seller's employees
shall be and remain Seller's employees, with Seller having full authority and
control over their actions, and Buyer shall not assume the status of an employer
or a joint employer of, or incur or be subject to any liability or obligation of
an employer with respect to, any such employees unless and until actually hired
by Buyer. Seller shall be solely responsible for any and all liabilities and
obligations Seller may have to its employees, including without limitation
compensation, severance pay, and accrued vacation time and long-term disability,
if applicable. Seller shall comply with the provisions of the Worker Adjustment
and Retraining and Notification Act and similar laws, if applicable, and shall
be solely responsible for any and all liabilities, penalties, fines, or other
sanctions that may be assessed or otherwise due under such laws on account of
the closing of the transaction contemplated by this Agreement and the dismissal
or termination of any of Seller's employees by Seller at or prior to the Group B
Closing. Seller shall use its best efforts to preserve Seller's relationship
with its employees and shall pay to those employees all salaries, commissions,
benefits and other compensation to which they are entitled for services rendered
prior to the Group B Closing. Seller shall not, without the prior written
consent of Buyer, which consent shall not be withheld unreasonably, change the
compensation of any employees of the CATV Systems where such changes would be
inconsistent with Seller's past practices consistently applied.
7.5 Buyer's Right to Employ. Seller consents to Buyer discussing with
any of Seller's employees, at any time after five (5) days from the execution of
this Agreement the possibility of their employment by Buyer after the Group B
Closing and to Buyer hiring any of those employees after the Group B Closing.
Seller agrees and acknowledges, however, that Buyer is under no obligation to
offer employment to any of those employees. Current employees of Seller which
are hired by Buyer, if any, shall not be considered to be in the employ of Buyer
until such time as they have been formally hired by Buyer and satisfy the active
work requirement of completing one full hour of active service for Buyer.
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7.6 Approvals. To the extent reasonably possible, Seller shall deliver
to Buyer for Buyer's review and approval a copy of Seller's request for each
Required Consent, together with any franchise, agreement, lease, document,
instrument or paper to be executed by or on behalf of any governmental entity,
franchising authority, lessor or other third party, prior to delivery of such to
any such party. Such consents shall be in forms reasonably acceptable to Buyer.
Seller shall use its best efforts to obtain each of the Required Consents,
including without limitation the payment of standard processing fees, charges
and expenses, but Seller shall not be required to pay any extraordinary or
unreasonable fees or expenses. Buyer shall reasonably cooperate with and assist
Seller in obtaining the Required Consents; provided, however, that such
cooperation and assistance shall not require Buyer to undertake any
extraordinary or unreasonable measures to obtain such approvals and consents,
including, without limitation, the payment of any extraordinary or unreasonable
fees or expenses, or the initiation or prosecution of legal proceedings.
7.7 News Releases and Media Notification. Prior to the Group B
Closing, any and all news releases or other notification of the local media with
respect to the transactions contemplated in this Agreement shall be subject to
the prior consent of both Seller and Buyer, which consent shall not be
unreasonably withheld.
7.8 Written, Executed Easements. With respect to easements listed in
Schedule 5.5.4 that are not in a properly recordable form, Seller shall use its
best efforts to obtain written easements that are assignable to Buyer, executed
by the proper third parties, that accurately set forth the legal descriptions
and scope of such easements or rights-of-way.
7.9 Remedial Steps. During the thirty (30) day period commencing forty
five (45) days prior to the Group A Closing, Buyer, at its expense and with
Seller's reasonable cooperation, shall have the opportunity to conduct tests and
inspections to determine whether the CATV Systems comply with the Technical
Standards. In the event Buyer and Seller are unable to agree whether Seller has
taken appropriate Remedial Steps pursuant to Section 5.8.4 to bring the CATV
Systems into compliance with the Technical Standards, Buyer and Seller shall
appoint a mutually acceptable engineering firm to conduct appropriate tests, in
accordance with the rules of the FCC and the standards generally accepted by
qualified engineers in the CATV industry, to certify the CATV Systems'
compliance with the Technical Standards, which firm shall render a written
report to Buyer and Seller within thirty (30) calendar days after it has been
retained, and whose fees shall be paid one-half by Buyer and one-half by Seller.
SECTION 8. CLOSINGS; CLOSING DATES; TERMINATION
8.1 Closing Date. Subject to the terms and conditions of this
Agreement, both the Group A Closing and the Group B Closing shall be conducted
at the offices of Buyer. The Group A Closing shall take place not later than
fifteen (15) days following the date on which Seller has obtained all Required
Consents and has complied with all other terms and conditions of this Agreement;
provided, however, that the Group A Closing may be postponed by either
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party for an aggregate maximum period of thirty (30) days from such date. The
Group B Closing shall take place not later than one day after the Group A
Closing.
8.2 Termination. This Agreement may be terminated at any time prior
to the Group A Closing:
(a) by the mutual written consent of Seller and Buyer;
(b) by Buyer in its reasonable discretion, if Seller or the CATV
Systems are subject to an order of the FCC or any of the CATV Systems'
local franchising authorities to materially reduce any of the rates charged
to the CATV Systems' subscribers;
(c) by either Seller or Buyer, in the event of a material breach
or misrepresentation under this Agreement by the other party unless (i)
such breach is cured within fifteen (15) days after written notice thereof
is given by the party alleging such material breach or misrepresentation,
or (ii) the alleged breaching party has given written notice providing
reasonable assurance to the nonbreaching party that it is exercising its
diligent best efforts to cure the alleged breach; provided that in no
circumstance shall the period to cure exceed forty-five (45) days after the
original written notice was given; or
(d) by either party in such party's sole and absolute discretion,
if the transactions contemplated by this Agreement shall not have been
consummated on or before May 1, 1996.
8.3 Effect of Termination. In the event this Agreement is terminated
pursuant to Section 8.2:
(a) this Agreement will thereafter be void and have no force and
effect, except that Sections 5.17, 14 and 15.7 and this Section 8.3 will
remain in effect;
(b) nothing in this Section 8.3 shall be deemed to release either
party from any liability for any breach by such party of the terms and
provisions of this Agreement or any failure by such party to perform its
obligations hereunder. Nothing in this Section 8.3 or elsewhere in this
Agreement shall impair the right of either party, prior to termination of
this Agreement pursuant to Section 8.2, to pursue all legal remedies for
breach of contract and damages or to compel specific performance by the
other party of its obligations hereunder; and
(c) in the event this Agreement is terminated pursuant to Section
8.2(a) or (d), neither Seller nor Buyer shall be liable to each other for
any legal or equitable remedies.
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SECTION 9. SELLER'S OBLIGATIONS AT AND PRIOR TO THE CLOSINGS
Unless delivery is required prior to the Group A Closing by the terms
of this Agreement, Seller, at its sole cost and expense, shall deliver to Buyer
at each of the Group A Closing and the Group B Closing all of the following:
9.1 Group A Transaction Documents. On the Group A Closing Date,
executed originals of a xxxx of sale for the Group A Assets, an assignment and
assumption agreement, an assignment and assumption of franchises, an assignment
and assumption of leases, a Seller's certificate, a noncompetition agreement, a
Group B license agreement, an opinion of Seller's legal counsel, and an opinion
of Seller's FCC counsel each substantially in the forms of Exhibits A, B, C, D,
E, F, G, I, and J, respectively.
9.2 Group B Transaction Documents. On the Group B Closing Date,
executed originals of a xxxx of sale for the Group B Assets substantially in the
form of Exhibit A.
9.3 Closing Documents Checklist. The documents, certificates and
papers listed on the Closing Documents Checklist, in the form of Exhibit K,
together with such other deeds, assignments, certificates, and other documents,
instruments, and agreements as shall be necessary or appropriate to vest in
Buyer all right, title, and interest in and to the Assets free and clear of all
Security Interests (except for Permitted Exceptions and liabilities assumed by
Buyer pursuant to Section 4.1) and all right, title, and interest of Seller
arising under or by virtue of each CATV Instrument and Seller Contract expressly
assumed in writing by Buyer, and as may otherwise be reasonably required by
Buyer.
9.4 Security Interest Searches. UCC searches, tax lien searches,
pending litigation searches and judgment searches of the county and state public
records from each county in which any of the Assets are located, within
forty-five (45) days after the execution of this Agreement. Buyer, at its sole
expense, shall obtain any and all updates of such security interest searches. To
the extent that any Security Interests appear on the aforementioned UCC
searches, Seller shall deliver full and complete releases of such Security
Interests in form reasonably satisfactory to Buyer at the Group A Closing unless
assumed by Buyer. Seller also shall deliver evidence of the dismissal of any
suits or the satisfaction of any liens or judgments, all in form reasonably
satisfactory to Buyer.
9.5 Tax Certificates. Except as specifically waived by Buyer in
writing, Seller shall deliver to Buyer certificates, if and to the extent
available, from each appropriate taxing authority stating that all applicable
state and/or local taxes, such as personal property taxes, due in connection
with the transactions contemplated by this Agreement have been timely paid in
full and that no obligation or liability is outstanding in connection therewith.
9.6 Employees. Seller will pay its employees (except those employees
who are not hired by Buyer) all accrued, if any, compensation, including
vacation, sick pay, and other benefits accrued as of the Group B Closing Date
(except for amounts owing under the terms of
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Seller's benefit plans, which amounts shall be provided in accordance with the
terms of such plans). Seller will terminate the employment of each of its
employees as of the Group B Closing Date (except those employees who are not
hired by Buyer).
SECTION 10. BUYER'S OBLIGATIONS AT CLOSING
10.1 Group A Closing. At the Group A Closing, Buyer shall: (a) deliver
to Seller payment of the Group A Purchase Price required by Section 3.1.1; and
(b) deliver to Seller executed originals of an assignment and assumption
agreement, an assignment and assumption of franchises, an assignment and
assumption of leases, a noncompetition agreement, a Group B license agreement,
and a Buyer's certificate, each substantially in the forms of Exhibits B, C, D,
F, G, and L, respectively.
10.2 Group B Closing. At the Group B Closing, Buyer shall: (a) deliver
to Seller payment of the Group B Purchase Price required by Section 3.1.2(a);
and (b) execute and deliver the Holdback Note required by Section 3.1.2(b).
SECTION 11. CONDITIONS OF BUYER'S OBLIGATIONS
Buyer's obligations to close hereunder are subject to the satisfaction
of all of the following conditions, each of which must be satisfied on or before
the Group A Closing Date and any of which may be waived in writing by Buyer.
11.1 Tests and Inspections Before Closing.
11.1.1 Technical Standards. Prior to the Group A Closing, the
CATV Systems shall be in compliance with the Technical Standards.
11.1.2 Environmental Site Assessments. Within sixty (60) days
after the execution of this Agreement, Buyer, at its sole expense, may conduct
"Level I" environmental site assessments of the Assets (including without
limitation the Real Property) and the CATV Systems, provided that such audits
shall not include any intrusive soil or ground water testing. The results and
findings of such audits shall be satisfactory to Buyer in its sole discretion.
11.1.3 Financial Inspection. Buyer and its accountants and
representatives shall have generated the financial information required by Form
8-K, as more particularly described in Section 7.1. Seller shall have provided
Buyer's accountants with a standard representation letter certifying the
fairness of the presentation of Seller's financial position, the completeness of
the information provided, and the absence of any other irregularities,
communications or transactions not otherwise disclosed. The results and findings
of such financial inspections shall be satisfactory to Buyer in its sole
discretion.
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11.2 Approvals and Consents
11.2.1 Franchises. All franchising authorities shall have
consented to the assignment and assumption of the respective franchises, if
applicable, and shall have waived in writing all rights, if any, they may have
to purchase all or any part of the CATV Systems.
11.2.2 Other Required Consents. All of the other Required
Consents shall have been obtained and delivered to Buyer, except to the extent
that Seller and Buyer execute a memorandum at the Group A Closing specifying any
Required Consent that Buyer agrees need not be obtained until after the Group A
Closing Date or Required Consents for assignment of agreements which Buyer does
not agree to assume. Buyer shall have received from Seller evidence reasonably
satisfactory to Buyer that no material terms or conditions of the CATV
Instruments and Seller Contracts have been or will be amended, modified or
changed prior to or effective with the Group A Closing.
11.3 Performance by Seller of Covenants and Accuracy of Representations
and Warranties
11.3.1 Performance of Covenants. Seller shall have performed
all of its agreements and covenants under this Agreement to the extent such are
required to be performed at or prior to the Group A Closing, and all of Seller's
representations and warranties shall be true and correct as of the Group A
Closing and as of the Group B Closing.
11.3.2 Operability. Between the date of this Agreement and
the Group A Closing Date, the CATV Systems shall not have suffered, on or prior
to the Group A Closing, any loss, claim, casualty, or calamity that has a
material adverse effect on the Assets or the CATV Systems, whether or not
disclosed in Seller's amended Schedules and whether or not covered by insurance.
Seller shall bear the risk of loss on or prior to the Group B Closing with
respect to the Assets and the CATV Systems as a result of any loss, claim,
casualty, or calamity.
11.3.3 Restraint of Proceedings. No action, proceeding or
investigation shall have been instituted or threatened on or prior to the Group
B Closing, to set aside or modify the transactions provided for in this
Agreement or to enjoin or prevent its consummation or which would impair the
ability of Buyer to realize the benefits of such transactions.
11.3.4 No Governmental Action. No investigation, action or
proceeding shall have been commenced by the Department of Justice or Federal
Trade Commission or any other governmental entity challenging or seeking to
enjoin the consummation of this transaction and neither Buyer nor Seller shall
have been notified of a present intention by the Assistant Attorney General in
charge of the Antitrust Division of the Department of Justice, the Director of
the Bureau of Competition of the Federal Trade Commission or any governmental
entity (or their respective agents or designees) to commence, or recommend the
commencement of, such an investigation, action or proceeding.
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11.3.5 Updated Schedules. Buyer shall have received updated
Schedules, dated as of the Group A Closing Date and certified by Seller as true,
complete and correct, which are reasonably satisfactory to Buyer and Seller.
11.3.6 Closing Documents. Buyer shall have received all of the
documents described in Section 9 in form reasonably satisfactory to Buyer.
11.4 Conveyance of Title to Assets
11.4.1 Security Interests. Buyer shall have received
documentation reasonably satisfactory to it of the release and discharge of any
and all Security Interests, suits or judgments on or against Seller, the Assets
or the CATV Systems, except to the extent Buyer assumes such Security Interests
pursuant to Section 4.1.
11.4.2 Title Insurance. Seller shall, at least forty-five (45)
days prior to the Group A Closing Date, have delivered to Buyer the
commitment(s) of a title insurance company reasonably satisfactory to Buyer (the
"Title Company") agreeing to issue to Buyer ALTA lessee's extended coverage
title insurance policies and ALTA owner's extended coverage title insurance
policies insuring Buyer's interests in the Real Property (the values of such
interests in the properties so insured being mutually established by Buyer and
Seller). In each case, such policies shall be subject only to Permitted
Exceptions. If a preliminary title binder indicates an exception other than a
Permitted Exception that would impair the marketability or use of the Real
Property in any material respect, Seller shall, at its expense, have caused such
exception to be removed on or before the Group A Closing Date. At the Group A
Closing Seller shall have delivered to Buyer an affidavit or indemnification
agreement that shall be sufficient to cause the Title Company to affirmatively
insure against the existence of outstanding rights that could form the basis for
mechanic's, materialmen's or similar liens, unrecorded documents, claims of
parties in possession, and judgments, bankruptcies or other charges against any
persons whose names are the same as or similar to Seller's name. Seller shall be
responsible for the payment of (a) all surveys and other documents required by
the Title Company to issue such policies, and (b) all title insurance premiums.
11.5 Financing Commitment. Buyer shall have received a financing
commitment from Buyer's lenders in a form and substance satisfactory to Buyer in
its sole and absolute discretion.
11.6 Simultaneous Acquisition of Cable System. On or before the Group
A Closing Date, Buyer shall have consummated the acquisition from TCI
Cablevision of Georgia, Inc. of substantially all of the assets of the cable
television system that serves the same areas as the CATV Systems.
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SECTION 12. CONDITIONS OF SELLER'S OBLIGATIONS
Seller's obligations to close are subject to all of the following
conditions, any of which may be waived in writing by Seller.
12.1 Performance by Buyer. Buyer shall have performed all of its
agreements and covenants under this Agreement to the extent such are required to
be performed at or prior to the Group A Closing.
12.2 Buyer's Certificate. At the Group A Closing, Buyer shall have
certified to Seller that Buyer's representations and warranties set forth in
this Agreement are true and correct as of the Group A Closing. The Buyer's
Certificate shall be in the form of Exhibit L.
12.3 Operability. Between the date of this Agreement and the Group B
Closing Date, the CATV Systems shall not have suffered, on or prior to the Group
B Closing, any loss, claim, casualty, or calamity that has a material adverse
effect on the Assets or the CATV Systems, whether or not disclosed in Seller's
amended Schedules and whether or not covered by insurance.
12.4 Restraint of Proceedings. No action, proceeding or investigation
shall have been instituted or threatened on or prior to the Group B Closing, to
set aside or modify the transactions provided for in this Agreement or to enjoin
or prevent its consummation or which would impair the ability of Seller to
realize the benefits of such transactions.
12.5 No Governmental Action. No investigation, action or proceeding
shall have been commenced by the Department of Justice or Federal Trade
Commission or any other governmental entity challenging or seeking to enjoin the
consummation of this transaction and neither Buyer nor Seller shall have been
notified of a present intention by the Assistant Attorney General in charge of
the Antitrust Division of the Department of Justice, the Director of the Bureau
of Competition of the Federal Trade Commission or any governmental entity (or
their respective agents or designees) to commence, or recommend the commencement
of, such an investigation, action or proceeding.
12.6 Closing Documents. Seller shall have received all of the
documents described in Section 10 in form reasonably satisfactory to Seller.
SECTION 13. NONCOMPETITION AGREEMENT
On the Group A Closing Date, Seller shall enter into a noncompetition
agreement with Buyer, in the form of Exhibit F.
SECTION 14. INDEMNIFICATION
14.1 Survival of Representations, Warranties and Covenants. The
representations, warranties and covenants of each of Buyer and Seller made
pursuant to this Agreement shall
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survive both the Group A Closing and the Group B Closing for the following
periods after the later of the Group A Closing Date or the Group B Closing Date:
(a) The representations, warranties and covenants set forth in
Sections 5.4, 5.7.3, 5.17, 6.3 and 6.4 shall survive without limitation as to
time.
(b) All other representations, warranties and covenants shall
survive for three (3) years.
Representations, warranties and covenants under this Agreement shall be of no
further force of effect after the applicable Termination Date (as defined
below). Any claim for indemnification with respect to any alleged breach of any
representation, warranty or covenant not asserted by notice given as herein
provided that specifically identifies a particular breach and the underlying
facts thereto, which notice is given prior to the Termination Date, may not be
pursued and is irrevocably waived and released after such time. Any and all
claims for indemnification under this Section 14 must be based on either a Third
Party Claim or a Direct Claim (as such terms are defined below).
14.2 Limitations of Liability.
14.2.1 For purposes of this Section 14:
(a) "Indemnitee" means any person or entity entitled to
indemnification under this Agreement;
(b) "Indemnifying Party" means any person or entity required
to provide indemnification under this Agreement;
(c) "Indemnifiable Losses" means any losses, liabilities,
costs, fines, penalties, damages (actual, punitive or other), and expenses
and any claims, demands or suits by any person or entity, including,
without limitation, any federal governmental authority or any state,
county, town, municipality, special political subdivision, or any agency,
department or division related thereto, and costs and expenses actually
incurred in connection with any actions, suits, demands, assessments,
judgments and settlements and reasonable attorneys' fees and expense, in
such case (i) reduced by the amount of insurance proceeds recovered from
any person or entity as a result of the Indemnifiable Losses involved and
(ii) provided that the underlying liability or obligation is not solely the
result of any action taken or omitted to be taken by the Indemnitee;
(d) "Indemnification Payment" means any amount of
Indemnifiable Losses required to be paid pursuant to this Agreement;
(e) "Third Party Claim" means any claim or commencement of
any action, proceeding, or investigation by any entity or person that is
not a party to this
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Agreement or an affiliate of such a party, and includes
without limitation claims asserted against Buyer for any finder's,
brokerage, or agent's fees, commission or other like payments or
compensation as a result of Seller's activities;
(f) "Direct Claim" means any claim by an Indemnitee on
account of an Indemnifiable Loss that does not result from a Third Party
Claim; and
(g) "Termination Date" means the date of expiration of any
representation, warranty or covenant as set forth in Section 14.1.
14.2.2 As between Seller and any affiliate of Seller, on the
one hand, and Buyer and any affiliate of Buyer, on the other hand, the rights
and obligation set forth in this Section 14 will be the exclusive rights and
obligations with respect to the liabilities and obligations referred to in
Section 14.3 and any breach of the representations, warranties or covenants
contained in this Agreement, except for any liability, obligation or breach that
results from the actual fraud under the common law, not otherwise implied or
imputed, by a party to this Agreement.
14.2.3 Notwithstanding any other provision of this Agreement
or of any applicable law, no Indemnitee will be entitled to make a claim against
an Indemnifying Party under Section 14.3.1 or Section 14.3.2 until the aggregate
amount of claims that may be asserted for such Indemnifiable Losses incurred by
the Indemnitee exceeds Two Thousand Dollars ($2,000), after which amount the
Indemnitee may claim for the entire aggregate amount of such claims.
14.2.4 Notwithstanding any other provision of this Agreement,
the indemnification obligations of Seller under Section 14.3.1 and of Buyer
under Section 14.3.2 will not exceed the Purchase Price.
14.2.5 Notwithstanding anything to the contrary contained
herein, no Indemnifying Party shall be liable to or obligated to indemnify any
Indemnitee hereunder for any consequential, special, multiple, punitive or
exemplary damages including, but not limited to, damages arising from loss or
interruption of business, profits, business opportunities or goodwill, loss of
use of facilities, loss of capital, claims of customers, or any costs or expense
related thereto, except to the extent such damages have been recovered by a
third person and are the subject of a Third Party Claim for which
indemnification is available under the express terms of this Section 14.
14.3 Indemnification.
14.3.1 Subject to the other sections of this Section 14, Seller
will indemnify, defend and hold harmless Buyer and its affiliates, directors,
officers, agents and representatives from all Indemnifiable Losses relating to,
resulting from or arising out of (a) a breach by Seller of any of the
representations, warranties or covenants contained in this
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Agreement, except for any such breach of representations, warranties or
covenants which was specified on Seller's Schedules or Closing Certificate all
of which are waived upon Closing, or (b) any Third Party Claim, whether filed,
asserted, or sought before or after the Closing Date, in respect of the
operations of the CATV Systems or the ownership or operation of the Assets or
CATV Systems by Seller, on or prior to the Closing Date, regardless of whether
known or unknown, asserted or unasserted, on the Closing Date.
14.3.2 Subject to the other sections of this Section 14, Buyer
will indemnify, defend and hold harmless Seller and its affiliates, and their
directors, officers, agents and representatives from all Indemnifiable Losses
relating to, resulting from or arising out of (a) a breach by Buyer of any
representations, warranties or covenants contained in this Agreement, except for
any such breach of representations, warranties or covenants which was specified
on Buyer's Closing Certificate all of which are waived upon Closing, or (b) any
Third Party Claim, filed, asserted, or sought after the Closing Date, in respect
to the ownership or operation of the assets or the CATV Systems by Buyer or its
affiliates after the Closing Date.
14.3.3 Payments made under this Section 14.3 shall be treated
by Buyer and Seller as purchase price adjustments and Buyer and Seller shall
file all tax returns consistent with such treatment. Notwithstanding anything to
the contrary contained herein, Buyer shall not be indemnified or reimbursed for
any adjustment to the basis of any asset resulting from any adjustment to the
purchase price or any additional or reduced taxes resulting from any such basis
adjustment.
14.4 Defense of Claims.
14.4.1 If any Indemnitee receives notice of the assertion of
any Third Party Claim against such Indemnitee, with respect to which an
Indemnifying Party is obligated to provide indemnification under this Agreement,
the Indemnitee will give such Indemnifying Party reasonably prompt written
notice thereof, but in any event not later than thirty (30) calendar days after
receipt of actual notice of such Third Party Claim; provided, however, that the
failure of the Indemnitee to notify the Indemnifying Party during the required
notification period shall only relieve the Indemnifying Party from its
obligation to indemnify the Indemnitee pursuant to this Section 14 to the extent
that Indemnifying Party is materially prejudiced by such failure (whether as a
result of the forfeiture of substantive rights or defenses or otherwise); and
provided, however, that the Indemnitee must, in any event, notify the
Indemnifying Party prior to the Termination Date as required pursuant to Section
14.1 in order for such party to be indemnified. The Indemnifying Party shall be
entitled, upon written notice to the Indemnitee, to assume the investigation and
defense thereof with counsel reasonably satisfactory to the Indemnitee. Whether
or not the Indemnifying Party elects to assume the investigation and defense of
any Third Party Claim, the Indemnitee shall have the right to employ separate
counsel and to participate in the investigation and defense thereof, provided,
however, that the Indemnitee shall pay the fees and disbursements of such
separate counsel unless (a) the employment of such separate counsel has been
specifically authorized in writing by the Indemnifying Party, (b) the
Indemnifying Party has failed to assume the defense of such Third Party Claim
within a
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reasonable time after receipt of notice thereof with counsel reasonably
satisfactory to such Indemnitee, or (c) the named parties to the proceeding in
which such claim, demand, action or cause of action has been asserted include
both the Indemnifying Party and the Indemnitee and, in the reasonable judgment
of counsel to such Indemnitee, there exists one or more defenses that may be
available to the Indemnitee that are in conflict with those available to the
Indemnifying Party. Notwithstanding the foregoing, the Indemnifying Party shall
not be liable for the fees and disbursements of more than one counsel for all
Indemnified Parties in connection with any one proceeding or any similar or
related proceedings arising from the same general allegations or circumstances.
Without the prior written consent of the Indemnitee, the Indemnifying Party will
not enter into any settlement of any Third Party Claim that would lead to
liability or create any financial or other obligation on the part of the
Indemnitee unless such settlement includes as an unconditional term thereof the
release of the Indemnitee from all liability in respect of such Third Party
Claim.
14.4.2 Any Direct Claim will be asserted by giving the
Indemnifying Party reasonably prompt written notice thereof, but in any event
not later than thirty (30) calendar days after the Indemnitee actually becomes
aware of the incurrence thereof, and the Indemnifying Party will have a period
of thirty (30) calendar days within which to respond in writing to such Direct
Claim; provided, however, that the failure of the Indemnitee to notify the
Indemnifying Party shall only relieve the Indemnifying Party from its obligation
to indemnify the Indemnitee pursuant to this Section 14 to the extent the
Indemnifying Party is materially prejudiced by such failure (whether as a result
of the forfeiture of substantive rights or defenses or otherwise); and provided,
however, that the Indemnitee must, in any event, notify the Indemnifying Party
prior to the Termination Date as required pursuant to Section 14.1 in order for
such party to be indemnified. If the Indemnifying Party does not so respond
within such thirty (30) calendar day period, the Indemnifying Party will be
deemed to have rejected such claim, in which event the Indemnitee will be free
to pursue such remedies as may be available to the Indemnitee on the terms and
subject to the provisions of this Section 14.
14.4.3 If after the making of any Indemnification Payment, the
amount of the Indemnifiable Loss to which such payment relates is reduced by
recovery, settlement or otherwise under any insurance coverage, or pursuant to
any claim, recovery, settlement or payment by or against any other entity, the
amount of such reduction (less any costs, expenses, premiums or taxes incurred
in connection herewith) will promptly be repaid by the Indemnitee to the
Indemnifying Party. Upon making any Indemnification Payment, the Indemnifying
Party will, to the extent of such Indemnification Payment, be subrogated to all
rights of the Indemnitee against any third party that is not an affiliate of the
Indemnitee in respect to the Indemnifiable Loss to which the Indemnification
Payment relates; provided that (a) the Indemnifying Party shall then be in
compliance with its obligations under this Agreement in respect of such
Indemnifiable Loss and (b) until the Indemnitee recovers full payment of its
Indemnifiable Loss, all claims of the Indemnifying Party against such third
party on account of said Indemnification Payment will be subrogated and
subordinated in right of payment to the Indemnitee's rights against such third
party. Without limiting the generality or effect of any other provision of this
Section 14, each such Indemnitee and Indemnifying Party will duly execute upon
request all
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instruments reasonably necessary to evidence and perfect the above-described
subrogation and subordination rights.
14.5 Extension of Due Date of Holdback Note. If Buyer has submitted a
claim for Indemnifiable Losses pursuant to this Section 14 and there remains
pending a claim for Indemnifiable Losses on the date payment of the Holdback
Note is due, Buyer, in addition to its right to offset described in Section
3.3.3, shall be entitled to postpone payment of the Holdback Note until the
claim for Indemnifiable Losses has been resolved pursuant to Section 14.
14.6 Dispute Resolution Regarding Indemnification Claims. If either
Seller or Buyer rejects a claim for indemnification by the other party, Seller
and Buyer shall submit the dispute to binding arbitration in accordance with the
alternative dispute resolution procedures set forth in Exhibit M.
SECTION 15. MISCELLANEOUS
15.1 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Washington.
15.2 Assignment and Delegation of Agreement. Neither party may assign
this Agreement or any interest in this Agreement without the prior written
consent of the other party, which consent shall not be unreasonably withheld;
provided, however, that Buyer may assign and delegate, at or prior to the Group
A Closing, all or a part of its rights and obligations under this Agreement to
one or more entities affiliated with Buyer without the prior written consent of
Seller.
15.3 Entire Agreement; Amendments. This Agreement constitutes and
embodies the entire agreement and understanding between the parties with respect
to the subject matter hereof and this Agreement supersedes all prior or
contemporaneous written or oral agreements and understandings between the
parties with respect thereto. This Agreement may not be modified or amended
except by a written instrument executed by the parties.
15.4 Binding Effect. Notwithstanding the provisions of Section 15.2,
this Agreement shall be binding upon and shall inure to the benefit of the
parties to this Agreement and their respective permitted successors and assigns.
15.5 Additional Agreements. Seller and Buyer shall sign any additional
agreements and other documents necessary or desirable to carry out the terms of
this Agreement.
15.6 Efforts. Subject to the terms and conditions herein, each of the
parties hereto agrees to use all reasonable efforts to take, or cause to be
taken, all actions and to do, or cause to be done, all things necessary, proper
or advisable under applicable laws and regulations to consummate and make
effective the transactions contemplated by this Agreement, including using all
reasonable efforts to obtain all necessary waivers, consents and approvals to be
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provided by each of them hereunder, and to effect all necessary registrations
and filings, including, but not limited to, submissions of information requested
by governmental authorities.
15.7 Expenses. Except as otherwise expressly provided in this
Agreement, each party shall pay all of its expenses, including attorneys' and
accountants' fees, in connection with the negotiation of this Agreement, the
performance of its obligations hereunder, and the consummation of the
transactions contemplated by this Agreement.
15.8 Execution in Multiple Counterparts. This Agreement may be
executed in one or more identical counterparts, and all of such counterparts,
when taken together, shall be deemed to constitute the original of this
Agreement.
15.9 Schedules and Exhibits. Each of the Schedules and Exhibits listed
below shall be incorporated into and shall for all purposes be deemed a part of
this Agreement:
Schedule 1.2 - Assets
Schedule 1.7 - Description of CATV Systems
Schedule 1.14 - Excluded Assets
Schedule 1.16 - Group A Assets
Schedule 1.17 - Group B Assets
Schedule 3.4 - Allocation of Purchase Price
Schedule 4.1 - Seller's Obligations Assumed by Buyer
Schedule 5.4 - Security Interests
Schedule 5.5.3 - Non-recorded Real Property Leases
Schedule 5.5.4 - Easements to be Obtained
Schedule 5.5.5 - Environmental Matters
Schedule 5.6 - Required Consents
Schedule 5.8.1 - LFA Certifications and Rate Complaints
Schedule 5.8.6 - Broadcast Signals Carried
Schedule 5.9.1 - Copyright Filing Matters
Schedule 5.11 - Seller's Litigation and Proceedings
Schedule 5.14.1 - Employees
Schedule 5.14.9 - Form 395-A Filings
Schedule 5.15 - Rate Reduction Orders
Schedule 5.21 - Seller's Financial Statements
Schedule 5.22 - Free CATV Service
Exhibit A - Xxxx of Sale
Exhibit B - Assignment and Assumption Agreement
Exhibit C - Assignment and Assumption of Franchises
Exhibit D - Assignment and Assumption of Leases
Exhibit E - Seller's Certificate
Exhibit F - Noncompetition Agreement
Exhibit G - Group B License Agreement
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Exhibit H - Holdback Note
Exhibit I - Opinion of Seller's Counsel
Exhibit J - Opinion of Seller's FCC Counsel
Exhibit K - Closing Document Checklist
Exhibit L - Buyer's Certificate
Exhibit M - Alternative Dispute Resolution Procedures
Except as otherwise provided in Section 4.1, any of such Schedules and
Exhibits may be later amended or revised by the mutual consent of the parties.
Such Schedules and Exhibits, as so amended or revised, shall be incorporated
into and shall for all purposes be deemed a part of this Agreement.
15.10 Waiver. No waiver of or with respect to any term, provision,
requirement, or condition of this Agreement, nor consent by a party to the
breach of or departure from any of the terms, provisions, requirements or
conditions hereof by the other party, shall in any event be binding on or
effective against the waiving or non- breaching party unless it be in writing
and signed by such party, and then such waiver shall be effective only in the
specific instance and for the purpose for which given.
15.11 Counsel. Each party has been represented by its own counsel in
connection with the negotiation and preparation of this Agreement and,
consequently, each party hereby waives the application of any rule of law that
would otherwise be applicable in connection with the interpretation of this
Agreement, including but not limited to any rule of law to the effect that any
provisions of this Agreement shall be interpreted or construed against the party
whose counsel drafted the provision.
15.12 Captions and Headings. The captions and headings are inserted
in this Agreement for convenience only, and shall in no event be deemed to
define, limit, or describe the scope or intent of this Agreement, or of any
provision hereof, nor in any way affect the interpretation of this Agreement.
15.13 Notices. All notices and communications required or permitted
to be given under any of the provisions of this Agreement shall be in writing
and shall be deemed to have been duly given when delivered by messenger, by
overnight delivery service, by facsimile transmission (receipt confirmed), or
mailed by first class certified mail, return receipt requested, addressed to the
parties at the addresses set forth below or at such other addresses as either
party shall notify the other in accordance with this Section 15.13:
If to Buyer:
Northland Cable Properties Seven Limited Partnership
0000 Xxxxx Xxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxxxxxxx 00000
Attn: Xxxx X. Xxxxxxxx and Xxxxx X. Xxxxxx
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and to:
Xxxx X. Xxxxxxx, Esq.
Xxxx Xxxxxxx & Cleveland
0000 Xxxxx Xxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxxxxxxx 00000
If to Seller:
Xx. Xxxx X. X'Xxxx
Southland Cablevision, Inc.
000 XxXxxx Xxxxxx
Xxxxxxx, Xxxxxxx 00000
and to:
Xxxx X. Xxxxxx, Esq.
Xxxxxx & Xxxxxx
000 Xxxxxxxx Xxxxx
Xxxxxxxxxx, Xxxxxxx 00000
15.14 Legal Expenses. If any proceeding is brought by either party to
enforce or interpret any term or provision of this Agreement, the substantially
prevailing party in such proceeding shall be entitled to recover, in addition to
all other relief as set forth in this Agreement, such party's reasonable
attorneys' and experts' fees and expenses.
15.15 Severability; Invalidity. If any provision of this Agreement is
held to be invalid, such invalidity shall not render invalid the remainder of
this Agreement or the remainder of which such invalid provision is a part. If
any provision of this Agreement is so broad as to be held unenforceable, such
provision shall be interpreted to be only so broad as is enforceable.
15.16 Time of the Essence. Time is of the essence in this Agreement.
BUYER: NORTHLAND CABLE PROPERTIES SEVEN
LIMITED PARTNERSHIP
By Northland Communications Corporation
Managing General Partner
By /s/ Xxxxx X. Xxxxxx
----------------------------------
Its Vice President
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SELLER: SOUTHLAND CABLEVISION, INC.
By /s/ Xxxx X. X'Xxxx
----------------------------------
Its President
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