CONFORMED COPY
ASSET PURCHASE AGREEMENT
dated as of
October 21, 1999
between
COMCAST CORPORATION
and
SOUTH CENTRAL DEVELOPMENT COMPANY, LP
MID-ATLANTIC TELCOM PLUS, LLC
MID-ATLANTIC CONNECTICUT 1 LIMITED PARTNERSHIP
MID-ATLANTIC CABLE OPERATING LIMITED PARTNERSHIP
NO. 1 OF PRINCE XXXXXXX COUNTY
MID-ATLANTIC CABLE OPERATING LIMITED PARTNERSHIP
NO. 2 OF PRINCE XXXXXXX COUNTY
TABLE OF CONTENTS
PAGE
ARTICLE I
DEFINITIONS
SECTION 1.01. Definitions .................................................I
ARTICLE 2
PURCHASE AND SALE
SECTION 2.01. Purchase and Sale ..........................................16
SECTION 2.02. Excluded Assets ............................................18
SECTION 2.03. Assumed Liabilities ........................................19
SECTION 2.04. Excluded Liabilities .......................................19
SECTION 2.05. Assignment of Contracts and Rights .........................21
SECTION 2.06. Purchase Price .............................................23
SECTION 2.07. Post-closing Adjustment ....................................25
SECTION 2.08. Maryland LL C ..............................................27
SECTION 2.09. Closing ....................................................28
SECTION 2.10. Release of Amounts from Escrow .............................29
SECTION 2.11. Allocation of Purchase Price ...............................36
SECTION 2.12. Sellers' Agent .............................................36
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF SELLER
SECTION 3.01. Existence and Power .........................................37
SECTION 3.02. Authorization ...............................................37
SECTION 3.03. Noncontravention ............................................37
SECTION 3.04. Required Consents ...........................................38
SECTION 3.05. Financial Statements; No Adverse Change .....................38
SECTION 3.06. Absence of Certain Changes ..................................38
SECTION 3.07. No Undisclosed Material Liabilities .........................39
SECTION 3.08. Systems Franchises, Systems Licenses, Systems
Contracts, Owned Property and Real Property Interests ......39
SECTION 3.09. Litigation ..................................................41
SECTION 3.10. Compliance with Legal Requirements ..........................41
SECTION 3.11. [Intentionally Blank] .......................................44
SECTION 3.12. Systems Information .........................................44
SECTION 3.13. Purchased Assets ............................................46
SECTION 3.14. Sufficiency of and Title to the Purchased Assets ............47
PAGE
SECTION 3.15. Intellectual Property .......................................48
SECTION 3.16. Insurance Coverage ..........................................49
SECTION 3.17. Inventories .................................................49
SECTION 3.18. Receivables .................................................49
SECTION 3.19. Finders' Fees ...............................................49
SECTION 3.20. Employees ...................................................49
SECTION 3.21. Environmental Compliance ....................................50
SECTION 3.22. Year 2000 Compliance ........................................51
SECTION 3.23. Systems Options .............................................52
SECTION 3.24. Transactions with Affiliates ................................52
SECTION 3.25. Capitalization of Maryland LLC ..............................52
SECTION 3.26. Ownership of the Maryland LL C Shares .......................52
SECTION 3.27. Maryland LLC Assets and Liabilities .........................52
SECTION 3.28. Bonds .......................................................52
SECTION 3.29. Cut-off Dates ...............................................53
SECTION 3.30. Representations .............................................53
SECTION 3.31. Affiliates ..................................................53
SECTION 3.32. Direc7VAgreement ............................................53
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF THE BUYER
SECTION 4.01. Corporate Existence and Power ...............................53
SECTION 4.02. Corporate Authorization .....................................53
SECTION 4.03. Noncontravention 53
SECTION 4.04. Financing 54
SECTION 4.05. Litigation 54
SECTION 4.06. Finders' Fees 54
ARTICLE 5
COVENANTS OF SELLER
SECTION 5.01. Conduct of the Business 54
SECTION 5.02. Affirmative Covenants 57
SECTION 5.03. Certain Notices 60
SECTION 5.04. Subscriber Billing Services 60
SECTION 5.05. Cooperation as to Rates 60
SECTION 5.06. Franchise Expirations 60
SECTION 5.07. Distant Broadcast Signals 61
SECTION 5.08. Confidentiality 61
SECTION 5.09. Notices of Certain Events 61
ii
PAGE
SECTION 5. 10. RMTS
SECTION 5.11. Non-competition Agreement 62
SECTION 5.12, Risk of Loss; Condemnation 62
SECTION 5.13. Delivery of Financial Information 62
SECTION 5.14. Use of Sellers' Names and Logos 63
SECTION 5.15. Capital Leases 63
SECTION 5.16. Access 64
SECTION 5.17. Proceeds Sharing Arrangements, One-off Fees Etc 64
SECTION 5.18. FCC Applications 64
ARTICLE 6
COVENANTS OF BUYER
SECTION 6.01. Confidentiality 65
SECTION 6.02. Non-Solicitation of Employees 65
SECTION 6.03. Access 65
ARTICLE 7
COVENANTS OF BUYER AND SELLER
SECTION 7. 0 1. Commercially Reasonable Efforts; Further Assurances 66
SECTION 7.02. Certain Filings 67
SECTION 7.03. Public Announcements 67
SECTION 7.04. Warn Act 68
ARTICLE 8 ~ TAX MATTERS
SEcTioN8.01. Tax Definitions 68
SECTION 8.02. Tax Matters 68
SECTION 8.03. Tax Cooperation; Allocation of Taxes 69
ARTICLE 9
EMPLOYEE BENEFITS
SECTION 9.01. Employee Benefits Definitions 70
SECTION 9.02. ERISA Representations 70
SECTION 9.03. Employees and Offers of Employment 72
SECTION 9.04. Sellers' Employee Benefit Plans 72
SECTION 9.05. Buyer Benefit Plans 74
SECTION 9.06. No Third Party Beneficiaries 74
iii
ARTICLE 10
CONDITIONS TO CLOSING
SECTION 10. 0 1. Conditions to Obligations of the Buyer and the Sellers 74
SECTION 10.02. Conditions to Obligation of the Buyer 75
SECTION 10.03. Conditions to Obligation of the Sellers 78
ARTICLE 11
SURVIVAL; INDEMNIFICATION
SECTION 11. 0 1. Survival 79
SECTION 11.02. Indemnification 80
SECTION 11.03. Procedures 81
ARTICLE 12
TERMINATION
SECTION 12.01. Grounds for Termination 82
SECTION 12.02. Effect of Termination 83
ARTICLE 13
MISCELLANEOUS
SECTION 13.01. Notices 84
SECTION 13.02. Amendments and Waivers 85
SECTION 13.03. Expenses 85
SECTION 13.04. Successors and Assigns 85
SECTION 13.05. Governing Law 86
SECTION 13.06. Jurisdiction 86
SECTION 13.07. WAIVER OF JURY TRIAL 86
SECTION 13.08. Counterparts; Third Party Beneficiaries 86
SECTION 13.09. Entire Agreement 86
SECTION 13. 10. Bulk Sales Laws 86
SECTION 13.11. Captions 87
iv
ASSET PURCHASE AGREEMIENT
This ASSET PURCHASE AGREEMENT (the "Agreement") dated as of October
21, 1999 is among Comcast Corporation, a Pennsylvania corporation ("Buyer"),
those entities set forth on Exhibit A (each entity set forth on Exhibit A, a
"Seller" and collectively the "Sellers"), and South Central Development
Company, LP, a Maryland limited partnership ("Sellers' Agent"), solely in its
capacity as agent for the Sellers.
WITNESSETH:
WHEREAS, the Sellers own and operate each of the cable communications
systems (each, a "System") identified in Schedule 3.12 hereto;
WHEREAS, the Buyer desires to purchase substantially all of the assets
used in the operation of the Systems from the Sellers, and the Sellers desire
to sell substantially all of the assets used in the operation of the Systems to
the Buyer, upon the terms and subject to the conditions hereinafter set forth;
The parties hereto agree as follows:
ARTICLE I
DEFUITIONS
SECTION 1.01. Definitions.
(a) The following terms, as used herein, have the following meanings:
"Affiliate" means, with respect to any Person, any other Person
directly or indirectly controlling, controlled by, or under common control with
such other Person. For such purpose "control" means the possession, directly or
indirectly, of the power to direct or cause the direction of the management and
policies of a Person, whether through the ownership of voting securities or
voting interests, by contract or otherwise.
"Anticipated COBRA Damages Claim" means a claim by the Buyer in
respect of the maximum amount that it may reasonably be required to pay or
Damages that it may suffer or incur in respect of COBRA Obligations at any time
after the Initial Release Date.
"Basic Service Tier" means the service tier which includes the
retransmission of local television broadcast signals, as defined in 47 USC ss.
522(3).
"Basic Subscriber" means any Subscriber which is receiving Basic
Service Tier services from any Seller whether as a bulk only customer, a Basic
Service Tier only customer or an Expanded Basic Services customer without any
double counting of customers, as customarily shown on the Sellers' billing
system as active subscribers.
"Xxxxxxx Contract"means (i) Contract Number F49642-92-HOOOI dated
November 7, 0000 xxxxxxx xxx Xxxxxx Xxxxxx xx Xxxxxxx and Telcom Plus, as
successor-in-interest to American Cablecom, L.P., (ii) Purchase Order Number
L198-991-4 dated July 16, 0000 xxxxxxx xxx Xxxxxx Xxxxxx xx Xxxxxxx and Telcom
Plus, as successor-in-interest to Mid-Atlantic Cable, (iii) Contract Number
F49642-83-HOO02 between the United States of America and Telcom Plus, as
success or-in-interest to Mercure Telecommunication, Inc. and (iv) Private
Cable System Contract dated November 25, 1996 between Telcom Plus, as
successor-in-interest to Mid-Atlantic Cable Development Company LP, and Naval
District Washington.
"Business Day" means any day other than a Saturday or Sunday or a day
on which banks in New York, New York are authorized or required to be closed.
"Cable Act" means Title VI of the Communications Act, 47 USC ss. 521,
et seq.
" CERCLA" means the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended, and any rules or
regulations promulgated thereunder.
"Chain of Title Damages" means any Damages suffered or incurred by
the Buyer as a result of the Sellers not at Closing having good and marketable,
indefeasible, fee simple title to, or in the case of leased property having
valid leasehold interests in, any of the assets (including any bonds) used or
held for use in the Systems free and clear of any Liens other than Permitted
Liens, including any Damages resulting from any previous purported transfer of
any such assets to any Seller (a) being ineffective or (b) requiring any
consent or other action that has not been obtained or carried out.
"Closing Adjustment Amount" means the amount by which the Total
Liabilities, as of the Closing Date, are in excess of or are less than, as the
case may be, the Current Assets as of the Closing Date.
2
"Closing Basic Subscriber Number" means, with respect to any System or
any Private Cable Service Agreement the aggregate number of Relevant
Subscribers and Relevant New Subscribers of such System or served pursuant to
such Private Cable Services Agreement as of the Cut-off Time immediately
preceding the Closing Date.
"Closing Date" means the date of the Closing.
"Current Assets" means (without duplication) the sum of the following
calculated in accordance with GAAP except as otherwise provided below:
(i) ninety-five percent (95%) of the face amount of all
accounts receivable included in the Purchased Assets that relate to
services provided prior to the Closing and that as of the Closing Date
are 30 days or less past due measured from the first day of the period
to which the applicable billing relates;
(ii) eighty-five percent (85%) of the face amount of all
accounts receivable included in the Purchased Assets that relate to
services provided prior to the Closing and that as of the Closing Date
are between 31 and 60 days past due measured from the first day of the
period to which the applicable billing relates; and
(iii) the amount of all prepaid expenses as of the Closing
Date that are included in the Purchased Assets and that directly
relate to the Systems, but only to the extent the benefit of such
prepaid expenses can be realized by the Buyer within twelve months
after the Closing Date.
For the purposes of (i) and (ii) above: (A) in the event that any
account receivable consists of more than one portion (not including any portion
which amounts to $5.00 or less) that is past due, the entire account receivable
shall be deemed past due for the same number of days as that portion (not
including any portion which amounts to $5.00 or less) which has been past due
for the longest period, (B) accounts receivable shall be excluded if they did
not arise in the ordinary course of business or relate to Subscribers who are
inactive or whose service is pending disconnection on the Closing Date, and (C)
any account receivable in respect of the Xxxxxxx Contract shall be treated as
if all portions of such account receivable were 30 days or less past due
measured from the first day of the period to which the applicable billing
relates.
For the avoidance of doubt Current Assets shall not include: (A)
prepaid taxes based in whole or in part on the income of the Sellers or their
Affiliates or the transactions contemplated by this Agreement; (B) supplies or
inventory or
3
prepaid expenses relating to supplies or inventory; (C) prepaid insurance
expenses; and (D) prepaid wages, salaries, payroll taxes and expenses,
benefits, perquisites and other compensation related expenses.
"Cut-off Date" means in any given month, the date upon which,
consistent with past practice, subscribers are determined for purposes of
preparing bills in respect of the following month.
"Cut-off Time" means the close of business on the Cut-off Date
immediately preceding the Closing Date or such other time as the Buyer and the
Sellers may agree in writing.
"Delaire Access Agreement" means the Cable T.V. Access Agreement dated
as of October 16, 1985, by and between Delaire Landing Complex Association,
Inc. and Delaware River Cablevision relating to the provision of satellite
master antenna and/or cable television services by Delaware River Cablevision
to the Delaire Landing Complex, State Road, Pennsylvania.
"Delaire Apartment Purchase and Sale Contract" means the Purchase and
Sale Agreement dated as of October 30, 1998 between Delaware River Cablevision
and Telcom Plus, specifying in Section 1.2 thereto a purchase price of
$265,000.00.
"Delaire Apartment Subscribers" means those Subscribers which may be
acquired by the Systems pursuant to the Delaire Apartment Purchase and Sale
Contract.
"Delaire Condominium Purchase and Sale Contract" means the Purchase
and Sale Agreement dated as of October 30, 1998 between Delaware River
Cablevision and Telcom Plus, specifying in Section 1.2 thereto a purchase Price
of $385,000.00.
"Delaire Condominium Subscribers" means those Subscribers acquired by
the Systems pursuant to the Delaire Condominium Purchase and Sale Contract.
"Delaire Landing Contract" means any contract arrangement or
understanding of any kind relating to the provision of cable or other services
to any building or Person at or in respect of the Delaire Landing Complex,
State Road, Philadelphia.
"Delaire Landing Litigation" means the litigation captioned Delaire
Landing Associates, L.P. v. Delaware River Cablevision, Inc., et. al. in the
Court of Common Pleas, Philadelphia County, the litigation captioned Delaware
River
4
Cablevision v. Xxxxxxx Xxxx in the Philadelphia Court of Common Pleas, other
claim, action or litigation arising from substantially the same facts or
circumstances as either of the foregoing.
"Delaire Litigation Satisfaction Event" means the consummation of the
Delaire Apartment Purchase and Sale Contract in accordance with its terms
following (i) a binding settlement between the parties to the Delaire Landing
Litigation or (ii) a nonappealable, final order of a court of competent
jurisdiction, in each case that (x) terminates each claim of each party to the
Delaire Landing Litigation against each other such party, (y) contains nothing
that would or might prevent the transfer of the SM.ATV cable television system
which is the subject of the Delaire Apartment Purchase and Sale Contract from
Delaware River Cablevision, Inc. to Telcom Plus free and clear of any claims,
Liens, rights or interests of any third party with respect to such system, and
(z) is otherwise on terms reasonably satisfactory to the Buyer.
"Delaire Management Agreement, means the Management Agreement dated as
of October 30, 1998 between Telcom Plus and Delaware River Cablevision
providing for Telcom Plus to manage and operate the cable television system
servicing the Delaire Apartment Subscribers.
"Delaware River Cablevision" means Delaware River Cablevision, Inc., a
Pennsylvania corporation.
"Delivery Damages" means any Damages suffered or incurred as a result
of any Person challenging the right of any Seller, or the Buyer or the Systems
to use any means or facility for the delivery of signal to any Distant
Subscriber which means or facility is used by the Systems on the date of this
Agreement to deliver signal to any Distant Subscriber.
"DirecTV Agreement, means each of the agreements listed in item 4 of
Schedule 3.08(a)(viii).
"Distant Subscriber" means any Subscriber who is served by the Systems
from a head-end located in a building other than the building in which such
Subscriber is located.
"Environmental Laws" means any federal, state, local or foreign law
(including, without limitation, common law), treaty, judicial decision,
regulation, rule, judgment, order, decree, injunction, permit or governmental
restriction or any agreement with any governmental authority or other third
party, whether now or hereafter in effect, relating to the environment human
health and safety or to
5
pollutants, contaminants, wastes or chemicals or any toxic, radioactive,
ignitable, corrosive, reactive or otherwise hazardous substances, wastes or
materials.
"Environmental Liabilities" means any and all liabilities arising in
connection with or in any way relating to any of the Sellers (or any
predecessor of any of them or any prior owner of all or part of its business
and assets), any property now or previously owned, leased or operated by any of
the Sellers, the Systems (as currently or previously operated), the Purchased
Assets or any activities or operations occurring or conducted at or in
connection with the Owned Property or the Leased Property (including, without
limitation, offsite disposal), whether accrued, contingent, absolute,
determined, determinable or otherwise, which (i) arise under or relate to any
Environmental Law and (ii) relate to actions occurring or conditions existing
on or prior to the Closing Date (including, without limitation, any matter
disclosed or required to be disclosed in Schedule 3.21).
"Environmental Permits" means all permits, licenses, franchises,
certificates, approvals and other similar authorizations of governmental
authorities relating to or required by Environmental Laws and affecting, or
relating in any way to, the Systems, the Owned Property or the Real Property
Interests.
"Escrow Agreement" means the agreement to be dated the date of the
Closing between the Buyer, the Sellers, the Seller's Agent and a mutually
agreed independent escrowee in form and substance reasonably satisfactory to
the Buyer and the Sellers.
"Excluded Names" means the following: "Mid-Atlantic Communications,"
"Mid-Atlantic Telcom Plus," "OnePoint Communications," "South Central
Development" and "Matrix Equities."
"Expanded Basic Service" means any and all of the following services
as listed on Schedule 3.12(e): Expanded, Expanded Service, Basic Expanded
Service, Expanded Basic Channel Line-Up, Expanded Basic Line-Up and Expanded
Basic Service.
"FAA" means the Federal Aviation Administration.
"FCC" means the Federal Communications Commission.
"Franchise Area" means an area in which a Seller is authorized to
provide cable television service pursuant to a Systems Franchise.
6
"Franchise Subscriber Equivalent" means a unit of measurement to
calculate Subscriber equivalents in Franchise Areas, the number of Franchise
Subscriber Equivalents served as of a given date being equal to the quotient of
(a) 'the aggregate monthly xxxxxxxx received from the provision of Basic
Service Tier and Expanded Basic Service from all commercial, bulk-billed and
other accounts not billed by individual unit in the relevant Franchise Area for
the month preceding such date, divided by (b) the sum of the published regular
monthly Subscriber rates for the Basic Service Tier and Expanded Basic Service
as of such date for the relevant Franchise Area in which the account is
located. For the purposes of (a) above, there will be excluded (A) all xxxxxxxx
representing fees for installation for non-recurring charges (including late
charges), charges for equipment or for any outlet or connection other than the
first outlet or first connection in any residential unit charges for any Pay
TV, or pass-through charges for sales taxes, franchise fees and charges and the
like and (B) all xxxxxxxx to any account (i) that has not been receiving the
Basic Service Tier for at least 60 consecutive days prior to such date, (ii)
that has not paid for at least two consecutive months of Basic Service Tier
services at the applicable regular contract rate, (iii) that is pending
disconnection from the service provided by such System for any reason or (iv)
that is more than 60 days in arrears as measured from the first day of the
period to which the applicable billing relates on any amount (ignoring, for
such purpose, amounts of $5.00 or less in aggregate) due to such System.
Franchise Subscriber Equivalents shall be calculated on a
Franchise-by-Franchise basis.
"GAAP" means generally accepted accounting principles in the United
States, consistently applied, including the statements and interpretations of
the U.S. Financial Accounting Standards Board.
"Governmental Authority" means (i) the United States of America, (ii)
any state, commonwealth, territory or possession of the United States of
America and any political subdivision thereof (including counties,
municipalities, provinces, parishes and the like), (iii) any foreign (as to the
United States of America) sovereign entity and any political subdivision
thereof and (iv) any court, quasi-governmental authority, tribunal, department,
commission, board, bureau, agency, authority or instrumentality of any of the
foregoing.
"Hazardous Substances" means any pollutant, contaminant, waste or
chemical or any toxic, radioactive, ignitable corrosive, reactive or otherwise
hazardous substance, waste or material or any substance, waste or material
having any constituent elements displaying any of the foregoing characteristics
including, without limitation, petroleum, its derivatives, by-products and
other hydrocarbons, and any substance, waste or material regulated under any
Environmental Law.
7
"Homes Passed" means:
(i) residential dwelling units, multiple dwelling buildings
or complexes, planned unit developments, residential hotels and other
commercial locations within a Franchise Area (A) to which cable
television service may be provided at a distance no greater than
approximately 1,000 feet from the System's existing distribution
cable, or (B) which are at a distance greater than approximately 1,000
feet from the System's existing distribution cable but which are
premises of existing or former Subscribers; provided, however, that in
the case of (A) and (B) unoccupied residential lots shall not be
included in Homes Passed; and
(ii) multiple dwelling buildings or complexes, planned unit
developments, residential hotels and other commercial locations
outside a Franchise Area in respect of which the Systems currently
provide services under a bulk service or access agreement;
provided that, in the case of (i) and (ii), each dwelling unit in a multiple
dwelling building, complex, planned unit development or Relevant Hotel will be
counted as one Home Passed and each commercial location, including hotels,
motels, restaurants and bars (other than any Relevant Hotel) will be counted as
one Home Passed.
,, HSR Act' 'means the Xxxx-Xxxxx-Radian Antitrust Improvements Act of
1976, as amended.
"Judgment" means any judgment, judicial decision, writ order,
injunction, award or decree of or by any Governmental Authority.
"Largo Operations Center" means the facility at 0000 Xxxxxxxxxx Xxxx,
Xxxxx, XX.
"Leased Property" means any property demised to a Seller under any
Real Property Interest.
"Legal Requirement" means applicable common law and any statute,
ordinance, code, law, rule, regulation, order, technical or other written
standard, requirement or procedure enacted, adopted, promulgated, applied or
followed by or any agreement entered into by any Governmental Authority,
including any Judgment.
"Lien" means, with respect to any property or asset, any mortgage,
lien, pledge, charge, security interest encumbrance or other adverse claim of
any kind
8
in respect of such property or asset. For the purposes of this Agreement, a
Person shall be deemed to own subject to a Lien any property or asset which it
has acquired or holds subject to the interest of a vendor or lessor under any
conditional sale agreement, capital lease or other title retention agreement
relating to such property or asset.
"Maryland LLC" means MAC-Com, LLC, a Maryland limited liability
company.
"Material Adverse Effect" means a material adverse effect on the
Purchased Assets or the condition (financial or otherwise), business, prospects
or results of operations of the Systems (other than the Excluded Assets) taken
as a whole, but without giving effect to changes that are applicable to the
cable television industry in general.
"Material Contracts" means (i) all Systems Franchises and (ii) any
Systems Licenses and Systems Contracts of the kind described in any of Sections
3.08(a)(i) to (xvi) inclusive.
"Metro Cable Contract" means the letter dated April 8, 1996 from
Xxxxxx X. XxXxxx at Metro Cable Systems Inc. to Xxxx X. Xxxx at Mid-Atlantic
Cable.
,, Metro Cable Damages" means any Damages suffered or incurred by the
Buyer as a result of any claim by Metro Cable Systems, Inc. or any of its
assigns or successors or any other Person arising out of or relating to the
Metro Cable Contract, including the potential litigation disclosed on Schedule
3.09.
"Non-Competition Agreement" means the agreement attached hereto as
Exhibit C.
"Pay TV" means a la carte tiers or premium programming services
selected by and sold on a per channel or per program basis.
"Penalty Subscriber" means any Subscriber or Franchise Subscriber
Equivalent that satisfies item (a) of the definition of Relevant New Subscriber
but does not satisfy item (b) of the definition of Relevant New Subscriber.
"Person" means an individual, corporation, partnership, limited
liability company, association, trust or other entity or organization,
including a government or political subdivision or an agency or instrumentality
thereof
9
"Potential Penalty Subscriber" means any Subscriber or Franchise
Subscriber Equivalent that at Closing satisfies item (a) of the definition of
Relevant New Subscriber.
"Prime Rate" means the prime rate of interest, as amended from time to
time, of the Bank of New York in New York City.
"Private Cable Service Agreement" means any bulk service or access
agreement under which services are provided to any multiple dwelling building,
planned unit development or complex by any System whether in a Franchise Area
or not, but, for the avoidance of doubt excluding such agreements relating to
hotels or motels.
"Relevant Hotel" means each of the Four Seasons, Washington, DC, the
Crowne Plaza, Washington, DC, the Sheraton Stamford, Stamford, CT, the Windsor
Hotel, Philadelphia, PA and the Bridgeport Holiday Inn, Bridgeport, CT.
"Relevant-New Subscriber" means any Subscriber or Franchise Subscriber
Equivalent (a) that is not at Closing a Relevant Subscriber but that would as
of Closing have been included in the definition of Relevant Subscriber but for
item (A)(ii) or (iii) or (B) (ii) or (iii) of the definition of Relevant
Subscriber or item (B)(i) or (ii) of the definition of Franchise Subscriber
Equivalent, and (b) who would satisfy the definition of Relevant Subscriber in
all respects as of the date which falls 60 days after the Closing Date.
"Relevant Subscriber" means, as of any date, (A) any Subscriber (i)
which is a private residential customer account that has been billed by
individual unit (regardless of whether such account is in a single family home
or in an individually billed unit in an apartment house or other multiple
dwelling building, planned unit development or complex, but exclusive of
"secondary connects" or "additional outlets" as such terms are commonly
understood in the cable television industry) for the Basic Service Tier for the
month during which such date occurs at the published regular monthly Subscriber
rate of the applicable System for the Basic Service Tier, (ii) that has been
receiving the Basic Service Tier for at least 60 consecutive days prior to such
date, (iii) that has paid for at least two consecutive months of Basic Service
Tier services at the published regular monthly Subscriber rate of the
applicable System for the Basic Service Tier, (1v) that is not pending
disconnection from the service provided by the System for any reason and (v)
that is not more than 60 days in arrears as measured from the first day of the
period to which the applicable billing relates on any amount (ignoring, for
such purpose, amounts of $5.00 or less in aggregate) due to such System; (B)
any Subscriber (other than a Subscriber whose account is included in Item (a)
of the definition of Franchise Subscriber Equivalent) (i) that
10
is served pursuant to a bulk service agreement at any multiple dwelling
building, planned unit development or complex and any Subscriber that is a
commercial location (including hotels, motels, restaurants and bars), counting
each unit served within a multiple dwelling building, planned unit development,
complex or Relevant Hotel as one Relevant Subscriber and each commercial
location (other than a Relevant Hotel) served as one Relevant Subscriber, (ii)
that has been receiving the Basic Service Tier for at least 60 consecutive days
prior to such date, (iii) that has paid for at least two consecutive months of
Basic Service Tier services at the full contract rate for the Basic Service
Tier, (iv) that is not pending disconnection from the service provided by the
System for any reason and (v) that, except for amounts due under the Xxxxxxx
Contract is not more than 90 days in arrears as measured from the first day of
the period to which the applicable billing relates on any amount (ignoring, for
such purpose, amounts of $5.00 or less in aggregate) due to such System; and
(C) any Franchise Subscriber Equivalent as of such date. For purposes of
determining whether items (Ii), (iii), (iv) and (v) of (B) above have been
satisfied, the multiple dwelling building, planned unit development or complex
or commercial location, as the case may be, will be treated as the Subscriber.
For the purposes of this definition (v) a Subscriber at West Xxxxxxx University
shall not be excluded from this definition as a result of not paying for
services during the Winter semester break if such Subscriber would otherwise
satisfy this definition in all respects, (w) Subscribers and Franchise
Subscriber Equivalents served pursuant to any Risk Contract shall not be
counted as Relevant Subscribers, (x) for the avoidance of doubt unless the
Delaware Litigation Satisfaction Event shall have occurred, a Subscriber served
under any Delaire Landing Contract shall not be a Relevant Subscriber unless
such Subscriber is a Delaire Condominium Subscriber (and then only to the
extent such Subscriber would otherwise satisfy this definition), (y) any
Subscriber or Franchise Subscriber Equivalent served pursuant to any contract
which is or is deemed to be an Excluded Asset (including the Delaire Apartment
Purchase and Sale Contract if the Delaire Litigation Satisfaction Event shall
not have occurred) shall not be a Relevant Subscriber, and (z) for the
avoidance of doubt, a subscriber shall not be counted in more than one of (A),
(B) or (C) above.
"Revenue" means all revenue of the Systems from Relevant Subscribers
excluding, for the avoidance of doubt (a) interest income, (b) franchise fees,
late fees and other similar fees, in each case in item (b), that are separately
identified on a Subscriber's xxxx, (c) revenue from Subscribers under Risk
Contracts and (d) revenue under any contracts which are Excluded Assets.
"Risk Contract" means each of the contracts marked with an asterisk on
Schedule 3.08(c).
11
"Roof Rights Buildings" means each of Chestnut Hall, Xxxxxx Methodist
Village, Coldspring New Town Condos and 1500 Locust as identified in Schedule
3.12.
"Southern Managemenf' means Southern Management Corporation.
"Southern Management Agreement" means the Access Agreement dated as of
July 11, 1997 between Southern Management and OnePoint Communications, Inc.
(currently doing business as Telcom Plus) relating to the provision by Telcom
Plus of video and telecommunication services to various dwelling units under
the management of Southern Management, including any and all schedules and
exhibits thereto.
"Southern Management Buildings" means the following apartment
communities named in Schedule A to the Southern Management Agreement: Carriage
Hill, Nob Hill, Oxon Hill Village, Southview and Middletowne.
"Southern Management Litigation" means the litigation captioned
Southern Management Corporation v. OnePoint Communications, Inc. in the Circuit
Court of Maryland for Prince George's County, C.A.L. No. 98-17584, and any
other claim, action or litigation arising from substantially the same facts or
circumstances.
"Subscriber" means, as of any given time, a current subscriber of a
System.
"Sub Value" in respect of a Private Cable Service Agreement means (a)
$2,793, multiplied by (b) the Closing Basic Subscriber Number for Subscribers
under such agreement.
"Telcom Plus" means Mid-Atlantic Telcom Plus, L.L.C.
"Three Month Average Per Subscriber Revenue" as of a given date means
the quotient of (a) the Three Month Average Revenue as of such date, divided by
(b) the Three Month Average Subscribers as of such date.
"Three Month Average Subscribers" means as of a given date the
quotient of (a) the sum of the Relevant Subscribers of the Systems on each of
the four Cut-off Dates immediately prior to such date, divided by (b) four.
"Three Month Average Revenue" means as of a given date the quotient of
(a) the aggregate Revenue of the Systems for the calendar month which includes
the Cut-off Date immediately preceding such date and for the two
12
calendar months immediately preceding such calendar month, divided by (b)
three.
,, Total Liabilities" means (without duplication) the sum of the
following calculated in accordance with GAAP except as otherwise provided
below:
(i) all Subscriber deposits and advance payments existing
on the Closing Date and related primarily to the Systems (including
any accrued interest thereon),-
(ii) all accounts payable related primarily to the Systems,
incurred in the ordinary course of business and existing on the
Closing Date;
(iii) all payments received by the Sellers on or prior to the
Closing Date for services to be rendered to Subscribers after the
Closing Date or for other services to be rendered by the Buyer to
other third parties after the Closing Date for cable television
commercials or other services or rentals; and
(iv) all other current liabilities existing on the Closing
Date, arising in the ordinary course of business and related primarily
to the Systems (including without limitation, accruals for property
taxes, pole rental payments, copyright fees, rent and utilities).
"Transferred Closing Subscriber Number" means the Closing Basic
Subscriber Number for all the Systems, less the Closing Basic Subscriber Number
for the Subscribers under Required Private Agreements other than the Xxxxxxx
Contract. For the avoidance of doubt, Subscribers under Risk Contracts will not
be included in the calculation of the Transferred Closing Subscriber Number.
"Upgrade Commitments" means those commitments or upgrades which are
described in Schedule 3.13(e) or Schedule 5.01 as to be completed and paid for
by the Sellers.
"Upgrade Commitments Damages" means any Damages suffered or incurred
by the Buyer as a result of the Sellers not carrying out the Upgrade
Commitments, including without limitation any costs incurred by the Buyer in
itself performing any such Upgrade Commitment.
"Vehicle Leasing Contract" means the Master Open-End Vehicle Lease
Agreement between Allstate Leasing, Inc. and Mid-Atlantic Telecom Plus LLC
dated as of June 1, 1997.
13
"Y2K Controller Liability" means any liability suffered or incurred
by any Person as a result of any of the controllers used in the Systems not
being Year 2000 Compliant.
(b) Each of the following terms is defined in the Section set forth
opposite such term:
Term Section
Adjusted Purchase Price 2.06
Apportioned Obligations 8.03
Arbitrator 2.07
Assumed Liabilities 2.03
Xxxxxxx Escrow Amount 2.06
Xxxxxxx Extension 2.10
Books and Records 2.01
Buyer's Adjustment Certificate 2.07
Buyer Compensation Amount 2.10
Claim 11.03
Closing 2.09
COBRA Obligations 9.04
Code 8.01
Consent Escrow Amount 2.06
Consent Portion 2.10
Consent Satisfied Amount 2.10
Contested Contract 2.10
Damages 11.02
Deemed Consented Contracts 2.10
EEO 3.10
Employee Plans 9.01
ERISA 9.01
ERI SA Affiliate 9.01
Escrow Agent 2.06
Estimated Purchase Price 2.06
Excluded Assets 2.02
Excluded Liabilities 2.04
Final Amounts 2.07
Final Penalty Subscribers 2.07
Financial Statements 3.05
Identified Representations 2.10
Indemnified Party 11.03
Indemnifying Party 11.03
Indemnity Escrow Account 2.10
14
Term Section
Indemnity Escrow Amount 2.06
Initial Adjustment Certificate 2.06
Initial Compensated Amount 2.10
Initial Release Date 2.06
Initial Sellers' Portion 2.10
Intellectual Property Rights 2.01
Lost Subscriber 2.10
Maryland Assets 2.08
Maryland Liabilities 2.08
Maryland LLC Shares 2.08
Month 18 Date 2.10
Month 24 Date 2.10
Multi-Employer Plan 9.01
Non Subscriber Loss Claim 2.10
Non Subscriber Loss Damages 2.10
Objection Notice 2.07
Owned Property 2.01
Penalty Sub Amount 2.07
Pending Licenses 5.18
Permitted Liens 3.13
Post-Closing Tax Period 8.03
Potential Payment Event 12.01
Pre-Closing Tax Period 8.01
Purchased Assets 2.01
Purchase Price 2.06
Rate Regulatory Matter 5.05
Real Property Interests 2.01
Reduction Subscriber Number 2.06
Release Date Subscriber Shortfall 2.10
Relevant Amount 2.10
Relevant Date 2.10
Required Consents 3.04
Required Private Agreement 2.05
RMTS 3.14
Short Term Escrow Amount 2.06
Short Term Private Agreement 2.06
Shortfall Sensitive Agreement 2.10
Stay Bonus 9.02
Subsequent Transfer 2.05
Systems Contracts 2.01
Systems Employee 9.02
15
Term Section
Systems Franchises 2.01
Systems Intellectual Property Rights 2.01
Systems Licenses 2.01
Systems Options 3. 2 3
Taking 5.12
Tax 8.01
Taxing Authority 8.01
Third Party Claim 11.03
Transfer Date 2.05
Transfer Taxes 8.03
Transferred Employees 9.03
Transitional Billing Services 5.04
WARN Act 7.04
Year 2000 Compliant 3.22
ARTICLE 2
PURCHASE AND SALE
SECTION 2.01. Purchase and Sale. Except as otherwise provided below,
upon the terms and subject to the conditions of this Agreement, the Buyer
agrees to purchase from the Sellers and the Sellers jointly and severally agree
to sell, convey, transfer, assign and deliver, or cause to be sold, conveyed,
transferred, assigned and delivered, to the Buyer at the Closing, free and
clear of all Liens, other than Permitted Liens, all of the Sellers' right,
title and interest in, to and under the assets, properties and business, of
every kind and description, wherever located, real, personal or mixed, tangible
or intangible, owned, held or used in the operation of the Systems by the
Sellers as the same shall exist on the Closing Date that are not Excluded
Assets (the "Purchased Assets"), and including, without limitation, all right,
title and interest of the Sellers in, to and under:
(a) all owned real property (the "Owned Property") and all
other leases, easements, owned rights of access and other interests in
real property (the "Real Property Interests"), in each case used or
held for use in the operation of the Systems, and in each case
together with all buildings, fixtures, and improvements erected
thereon, including without limitation the items listed on Schedule
3.13(a),-
(b) all tangible personal property, including towers, tower
equipment, aboveground and underground cable, distribution systems and
equipment, head-end equipment, line amplifiers, microwave equipment,
16
converters, testing equipment, motor vehicles, machinery, off-ice
equipment, furniture, fixtures, supplies, inventory, cable system
plant and other physical assets owned, held or used in the operation
of the Systems, including without limitation the items listed on
Schedule 33.13(b);
(c) all pole line and joint line agreements, underground
conduit agreements, crossing agreements, Private Cable Service
Agreements, commercial service agreements, commercial leased access
agreements, must-carry elections and retransmission consents, and
other contracts, agreements, arrangements, leases, licenses,
commitments, sales and purchase orders, bonds and other instruments in
each case relating to the operation of the Systems (collectively, and
together with all agreements in respect of Real Property Interests,
the "Systems Contracts"), including without limitation the items
listed on Schedule 3.08;
(d) all Subscriber, trade and other accounts, notes and
other receivables (including advertising accounts receivable);
(e) all prepaid expenses, including but not limited to ad
valorem taxes, leases and rentals in each case relating to the
operation of the Systems;
(f) all of the Sellers' rights, claims, credits, causes of
action or rights of set-off against third parties relating to the
Purchased Assets or the Systems, including, without limitation,
unliquidated rights under manufacturers' and vendors' warranties;
(g) all patents, copyrights, trademarks, trade names, mask
works, servicemarks, service names, technology, know-how, processes,
trade secrets, inventions, proprietary data, formulae, research and
development data, computer software programs and other intangible
property and any registrations or applications for the same
("Intellectual Property Rights"), in each case owned by or licensed to
any of the Sellers and used or held or held for use in the operation
of the Systems (the "Systems Intellectual Property Rights");
(h) all franchises and similar authorizations or similar
permits issued by any Governmental Authority, in each case relating to
the operation of the Systems (the "Systems Franchises"), including
without limitation the items listed on Schedule 3.08(a)(ii);
(i) all business radio licenses, copyright notices and other
licenses, authorizations, consents or permits issued by the FCC or,
any
17
other Governmental Authority, excluding the Systems Franchises (the
"Systems Licenses"), but including without limitation the items listed
on Schedule 3.08(a)(iii);
(j) (i) all books, records, files and papers, whether in
hard copy or computer format, used in the operation of the Systems,
including, without limitation, sales and promotional literature,
engineering records, files, drawings, blueprints, schematics, reports,
lists, plans and processes and all files of correspondence, lists,
records and reports concerning Subscribers and former and prospective
Subscribers of the Systems, signal and program carriage or dealings
with Governmental Authorities, including all reports filed with the
FCC and statements of account filed with the U.S. Copyright Office in
each case by any Seller and (ii) copies of all account books of
original entry, general ledgers and financial records, all personnel
and employment records, and any information relating to any Tax ((i)
and (ii) together, the "Books and Records");
(k) all goodwill associated with the Systems or the
Purchased Assets, together with the right to represent to third
parties that the Buyer is the successor to the Systems; and
(1) all rights to insurance proceeds receivable after the
Closing in respect of any Assumed Liabilities insured on a "claims
made" basis and all insurance proceeds (to the extent not already
expended by the Sellers to restore or replace the lost or damaged
asset, which replacement asset shall be a Purchased Asset) received
before or after Closing in respect of any asset that is or would have
been a Purchased Asset.
SECTION 2.02. Excluded Assets. The Buyer expressly understands and
agrees that the following assets and properties of the Sellers (the "Excluded
Assets") shall be excluded from the Purchased Assets:
(a) all of the Sellers' cash and cash equivalents except as
set forth in Section 2.01 (1);
(b) the Excluded Names;
(c) the Vehicle Leasing Contract, but not the vehicles which
are the subject thereof, which shall be Purchased Assets;
(d) (i) the Delaire Apartment Purchase and Sale Contract,
(ii) the Delaire Management Agreement and (iii) any subscribers or
assets acquired or serviced under such Contract or such Agreement;
18
(e) insurance policies except asset forth in Section
2.01(l); and
(f) those assets described in Schedule 2.02(f);
provided that if the Delaire Litigation Satisfaction Event shall have
occurred prior to the Closing Date, the Delaire Apartment Purchase and
Sale Contract and the subscribers and assets acquired by the Systems
pursuant to the terms thereof shall not be Excluded Assets and shall
be Purchased Assets.
SECTION 2.03. Assumed Liabilities. Upon the terms and subject to the
conditions of this Agreement, the Buyer agrees, effective at the time of the
Closing, to assume the following liabilities (the "Assumed Liabilities"):
(a) to the extent attributable to actions occurring or
conditions first occurring after the time of the Closing, all
liabilities and obligations of any Seller arising under the Systems
Contracts, the Systems Franchises or the Systems Licenses (other than
liabilities or obligations attributable to any failure by any Seller
to comply with the terms thereof); and
(b) the liabilities of the Sellers as of the Closing for all
Subscriber deposits and advance payments related primarily to the
Systems, all accounts payable related primarily to the Systems
incurred in the ordinary course of business, all payments received by
the Sellers on or prior to the Closing Date for services to be
rendered by the Systems after the Closing Date, and all other
customary current liabilities arising in the ordinary course of
business and related primarily to the Systems but in each case only to
extent that the foregoing are included in the calculation of Total
Liabilities for the purposes of Section 2.06(b).
SECTION 2.04. Excluded Liabilities. Notwithstanding any provision in
this Agreement or any other writing to the contrary, the Buyer is assuming only
the Assumed Liabilities and is not assuming any other liability or obligation
of any Seller (or any predecessor of any Seller or any prior owner of all or
part of any of the businesses or assets of any of them or, for the avoidance of
doubt, the Sellers' Agent) of whatever nature, whether presently in existence
or arising hereafter. All such other liabilities and obligations shall be
retained by and remain obligations and liabilities of the Sellers (all such
liabilities and obligations not being assumed being herein referred to as the
"Excluded Liabilities"), Notwithstanding anything to the contrary in this
Agreement, the Excluded Liabilities include, without limitation, the following:
19
(a) except to the extent (and only up to such amount)
included in the calculation of Total Liabilities, any obligation or
liability with respect to periods prior to and including the time of
Closing, including liabilities
0 11.1
for the refund of monies to Subscribers;
(b) any liability or obligation for Taxes attributable to the
Systems or the Purchased Assets, which are incurred in or attributable
to any Pre-Closing Tax Period, except to the extent (and only up to
such amount) included in the calculation of Total Liabilities;
provided, however, that Apportioned Obligations shall be apportioned
and paid in the manner set forth in Section 8.03(b) hereof,
(c) except to the extent (and only up to such amount)
included in the calculation of Total Liabilities, any liability or
obligation relating to employee benefits or compensation arrangements
existing on or prior to the Closing Date, including, without
limitation, any liability or obligation under any employee benefit
agreements, plans or other arrangements of any of the Sellers listed
on Schedule 9.02(a);
(d) any Non Subscriber Loss Damages;
(e) any Y2K Controller Liability;
(f) any Environmental Liability;
(g) any Chain of Title Damages;
(h) any Upgrade Commitments Damages;
(i) any Delivery Damages;
any Metro Cable Damages;
(k) any liability or obligation relating to any Excluded
Asset including, without limitation, any liability or obligation
arising out of a claim by any party to any agreement which is an
Excluded Asset arising out of the failure to transfer such Excluded
Asset;
(1) any liability arising from or relating to the Southern
Management Litigation; and
(m) any liability arising from or relating to (i) the Delaire
Landing Litigation, (ii) the Delaire Apartment Purchase and Sale
Contract,
20
(iii) the Delaware Management Agreement, or (iv) any Delaire Landing
Contract other than the obligation under any such Delaire Landing
Contract to provide service after the Closing to any Delaire
Condominium Subscriber; provided that if the Delaire Litigation
Satisfaction Event shall have occurred prior to the Closing Date, the
obligation to provide service to Delaire Apartment Subscribers
pursuant to the Delaire Access Agreement or the subscriber agreements
transferred pursuant to the terms of the Delaire Apartment Purchase
and Sale Contract after the Closing shall not be an Excluded
Liability.
For the avoidance of doubt, the fact that any of the foregoing Excluded
Liabilities are set forth or described on a Schedule to this Agreement will not
change their status as Excluded Liabilities.
SECTION 2.05. Assignment of Contracts and Rights. (a) Anything in this
Agreement to the contrary notwithstanding, this Agreement shall not constitute
an agreement to assign at the Closing any Purchased Asset or any claim or right
or any benefit arising thereunder or resulting therefrom without, where
required, a Required Consent, if such assignment, without such consent, would
constitute a breach or other contravention of such Purchased Asset or in any
way adversely affect the rights of the Buyer or any Seller thereunder.
(b) In the event the Closing occurs and fewer than all of the consents
under Private Cable Service Agreements which require consent to assignment have
been received, then: (1) each Private Cable Service Agreement as to which
consent to assignment is required and has not been received by the Closing
(each, a "Required Private Agreement") (and any Purchased Assets and Assumed
Liabilities primarily related thereto which, pursuant to the terms of such
agreement, cannot be assigned at the Closing) will not be assigned at the
Closing, (11) the Buyer and the Sellers will use commercially reasonable
efforts to obtain the required consents following the Closing, (iii) promptly
following receipt of each required consent in form and substance reasonably
satisfactory to the Buyer the Sellers will transfer to the Buyer the relevant
Required Private Agreement (each such transfer, a "Subsequent Transfer") (and,
in accordance with Section 2,05(c), certain assets and liabilities), (iv) for
each Required Private Agreement, the Buyer and the Sellers will, until the
Subsequent Transfer in respect of such Required Private Agreement, cooperate in
a mutually agreeable arrangement under which the Buyer would obtain the
benefits of and be responsible for the obligations under each such Required
Private Agreement and the related Purchased Assets and Assumed Liabilities that
cannot be assigned at Closing, which arrangement shall, in respect of each
Required Private Agreement and in the absence of an agreement between the
parties to the contrary, take the form of the Buyer managing the related
systems in accordance with the terms set out in
21
Schedule 2.05(b) for so long as the Systems provide service to such location;
(v) the Sellers shall not take any prejudicial action with respect to a
Required Private Agreement (or any of the Subscribers, assets or liabilities
relating thereto); and (vi) at any time after the Month 18 Date, the Buyer may
without liability terminate any arrangement described in (iv) above with
respect to any or all of the Required Private Agreements that are Contested
Contracts at the relevant time, including without limitation any management
agreement in the terms of Schedule 2.05(b), and may refuse to accept a
Subsequent Transfer of any such Private Cable Service Agreement (and any assets
or liabilities related thereto). For avoidance of doubt, the fact that any
Required Private Agreements or any Subscribers, assets or liabilities related
to a Required Private Agreement have not been transferred to the Buyer on the
Closing Date shall be disregarded for purposes of (A) the representations and
warranties contained in Article 3 other than Section 3.14(b), and (B) the
calculation of Current Assets and Total Liabilities.
(c) The following shall apply with respect to each Required Private
Agreement in respect of which a Subsequent Transfer occurs. On the date on
which the Subsequent Transfer occurs (the "Transfer Date") (i) the applicable
Seller will convey to the Buyer all assets related to the Required Private
Agreement that, as of the Transfer Date, are Purchased Assets and (11) the
Buyer will assume the liabilities related to the Required Private Agreement
that, as of the Transfer Date, are Assumed Liabilities. For the purposes of
this Section 2.05(c), the definitions of Purchased Assets and Assumed
Liabilities shall be construed as if any reference to "Closing" or the "Closing
Date" in the definitions of those terms were a reference to the "Transfer
Date". If the Systems cease to provide service under a given Required Private
Agreement without a Subsequent Transfer with respect thereto occurring, then
the date on which such service ceases will be treated as a Transfer Date for
purposes of transferring related assets and liabilities in accordance with this
Section 2.05(c).
(d) If any other consent under any Purchased Asset is not obtained by
the Closing, if an attempted assignment of such Purchased Asset without the
consent would be ineffective or would adversely affect the rights or
obligations thereunder so that the Buyer would not in fact receive all such
rights or would have greater obligations, the Sellers and the Buyer will
cooperate in a mutually agreeable arrangement under which the Buyer would
obtain the benefits and assume the obligations thereunder in accordance with
this Agreement, including sub-contracting, sub-licensing or sub-leasing to the
Buyer, or under which the Sellers would enforce for the benefit of the Buyer,
with the Buyer assuming the Sellers' obligations, any and all rights of the
Sellers against a third party thereto.
22
(e) The Sellers will promptly pay to the Buyer when received all
monies received by the Sellers under any Purchased Asset or any claim or right
or any benefit arising thereunder.
SECTION 2.06. Purchase Price. (a) In consideration of the sale and
transfer by the Sellers to the Buyer of the Purchased Assets, the amount
payable by the Buyer shall equal $150,000,000 in cash (the "Purchase Price"),
subject to adjustment as provided in Section 2.06(b) (the "Adjusted Purchase
Price").
(b) The Purchase Price shall be adjusted as follows:
(i) If the Current Assets as of the Closing Date are in
excess of the Total Liabilities as of the Closing Date, the Purchase
Price shall be increased by an amount equal to the Closing Adjustment
Amount.
(ii) If the Current Assets as of the Closing Date are less
than the Total Liabilities as of the Closing Date, the Purchase Price
shall be decreased by an amount equal to the Closing Adjustment
Amount.
(iii) If the Closing Basic Subscriber Number for all the
Systems is less than 53,700, then the Purchase Price shall be reduced
by an amount equal to $2,793 multiplied by the difference between
53,700 and the Closing Basic Subscriber Number for all of the Systems
(such difference being the "Reduction Subscriber Number").
(c) The amount of the net adjustment to the Purchase Price pursuant to
Section 2,06(b), hereunder shall, for the purposes of the payment to be made by
the Buyer at the Closing, (i) be estimated in good faith by the Sellers (after
consultation with the Buyer) and (ii) assume that the number of Relevant New
Subscribers is zero. The Sellers shall deliver to the Buyer a certificate
executed by a duly authorized representative of each of the Sellers (the
"Initial Adjustment Certificate") setting out such estimate (including an
estimate of the Current Assets, the Total Liabilities, the Reduction Subscriber
Number, the Closing Basic Subscriber Number and with respect to each Required
Private Agreement and each Private Cable Services Agreement, the Closing Basic
Subscriber Number for the Subscribers thereunder) and containing a list of the
Potential Penalty Subscribers at least 5 (five) days prior to the Closing Date,
indicating in detail the basis for its estimate. Such certificate shall be
accompanied by appropriate documentation supporting the estimates and the
calculation of Potential Penalty Subscribers contained therein. Such
certificate shall be reasonably satisfactory to the Buyer. Subject to the
foregoing, the good faith estimate of the net adjustment to the Purchase Price
pursuant to Section 2.06(b) in the Initial Adjustment Certificate shall be
conclusive for the purposes
23
of the payment to be made by the Buyer at the Closing, but shall be subject to
adjustment after the Closing in accordance with the provisions of Section 2.07.
(d) The Purchase Price, as adjusted pursuant to Section 2.06(b) in
accordance with the Initial Adjustment Certificate is referred to herein as the
"Estimated Purchase Price". The Estimated Purchase Price will be payable by the
Buyer at Closing as follows:
(i) $10,000,000 will be deposited into an interest-bearing
escrow account with a mutually agreed independent escrowee (the
"Escrow Agent") to secure the Sellers' indemnity obligations to the
Buyer under Sections 11.02(a)(i), (ii), and (iii) (such amount the
"Indemnity Escrow Amount"). The release of the Indemnity Escrow Amount
shall be determined in accordance with Section 2. 10 (a), and the
terms of the Escrow Agreement.
(ii) An amount (the "Short Term Escrow Amount"), determined
as set forth below, will be deposited in a second interest-bearing
escrow account with the Escrow Agent to be released beginning on the
date which is the one-year anniversary of the Closing Date (the
"Initial Release Date"). The Short Term Escrow Amount will equal the
amount (if any) arrived at by the result of multiplying: (A) 50%,
times (B) the aggregate Sub Value for all Private Cable Service
Agreements (other than (i) any Risk Contract and (ii) the Xxxxxxx
Contract), which (as of the Closing Date) have an expiration date on
or prior to the Initial Release Date (each, a "Short Term Private
Agreement"). For purposes hereof, if a multiple dwelling unit, planned
unit development or complex is being served by a System pursuant to an
expired Private Cable Service Agreement or pursuant to no Private
Cable Service Agreement, such multiple dwelling unit or complex will
be treated as if it is being serviced pursuant to a Short Term Private
Agreement. The release of the Short Term Escrow Amount shall be
determined in accordance with Section 2. 10 (d) and the terms of the
Escrow Agreement.
(iii) The Consent Escrow Amount, determined as set forth
below, if any, will be deposited in a third interest-bearing escrow
account with the Escrow Agent. The "Consent Escrow Amount" will equal
the aggregate Sub Value for all Required Private Agreements (other
than the Xxxxxxx Contract). The release of the Consent Escrow Amount
shall be determined in accordance with Section 2. 10(c) and the terms
of the Escrow Agreement.
24
(iv) An amount (the "Boiling Escrow Amount"), determined as
set forth below, will be deposited into a fourth interest-bearing
escrow account with the Escrow Agent. The Xxxxxxx Escrow Amount will
equal the Sub Value for the Xxxxxxx Contract. The release of the
Xxxxxxx Escrow Amount shall be determined in accordance with Section
2. 10(d) and the terms of the Escrow Agreement.
0
(v) The balance of the Estimated Purchase Price will be paid
to Sellers' Agent, as agent for the Sellers in immediately available
funds by wire transfer to an account of the Sellers' Agent with a
bank in New York City designated by the Sellers' Agent, by notice to
the Buyer, not later than two business days prior to the Closing Date
(or if not so designated, then by certified or official bank check
payable in immediately available funds to the order of the Sellers'
Agent in such amount). Such payment by the Buyer to the Sellers'
Agent shall discharge the Buyer of any further obligations with
respect to the delivery of the Estimated Purchase Price.
SECTION 2.07. Post-closing Adjustment. (a) Within 90 days after the
Closing, the Buyer will deliver to the Sellers a certificate (the "Buyer's
Adjustment Certificate") showing in such detail as shall be reasonably
satisfactory to the Sellers the Buyer's final determination of the number of
.Penalty Subscribers, the Current Assets, the Total Liabilities, the Closing
Adjustment Amount, the Reduction Subscriber Number, the Closing Basic
Subscriber Number, and with respect to each Required Private Agreement and each
Private Cable Services Agreement, the Closing Basic Subscriber Number for the
Subscribers thereunder, which certificate will be accompanied by appropriate
documentation supporting the amounts and numbers proposed in such certificate.
Each party will provide the other reasonable ' access to all records in its
possession which were used in the preparation of the Initial and Buyer's
Adjustment Certificates or which may otherwise be necessary for the preparation
thereof The Sellers will review the Buyer's Adjustment Certificate and will
give written notice (an "Objection Notice") to the Buyer of any objections it
has to the calculations shown in such Certificate within 30 days after receipt.
Such notice will set forth Sellers' proposal as to each item to which it
objects together with appropriate support for such objections. If the Sellers
do not deliver an Objection Notice within such 30-day period, then the Buyer's
Adjustment Certificate shall be deemed to be conclusive, final and binding on
the parties. The Buyer and the Sellers will endeavor in good faith to resolve
any objections within 30 days after the receipt by the Buyer of the Sellers'
timely objections. If such objections or disputes have not been resolved at the
end of such 30-day period, the disputed portion only of the items contained in
the Buyer's Adjustment Certificate will be determined within the following 30
days by Xxxxxx Xxxxxxxx LLP or, if Xxxxxx Xxxxxxxx LLP is unwilling or unable
to serve on commercially reasonable terms,
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by a national accounting firm that is mutually acceptable to the Buyer and the
Sellers (in either case, the "Arbitrator"). The determination of the Arbitrator
will, with respect to each item in dispute, be within the range for such item
as proposed by the Buyer in the Buyer's Adjustment Certificate and the Sellers
in the Objection Notice. The determination of the Arbitrator will be final and
will be binding upon both parties. The Buyer and the Sellers will bear equally
the expenses of such auditor incurred in connection with such determination.
(b) Within two Business Days after the date on which the items
contained in the Buyer's Adjustment Certificate have been finally determined in
accordance with Section 2.07(a) (such amounts as so finally determined (other
than the number of Penalty Subscribers), the "Final Amounts"), the Buyer and
the Sellers shall take such action as is necessary (including the payment of a
cash amount to the other or to the Escrow Agent or the execution of a joint
instruction to the Escrow Agent to release funds or transfer funds to a
different escrow account) to ensure that, ignoring any entitlement or
obligation of any Person to receive or pay interest on any amounts, (A) the
Buyer has paid to the Sellers' Agent and the Escrow Agent the amounts (and no
more) it would have paid under Section 2.06(d) to each of them, (B) the Buyer
and the Sellers' Agent have received the amounts each of them would have
received from escrow (and no more) under Section 2. 10, and (C) there has been
deposited into each escrow account the amount (and no more) that would have
been deposited into each account under Section 2.06(d), if in each case such
amounts had been based on the Final Amounts rather than the amounts set forth
in the Initial Adjustment Certificate. For the avoidance of doubt, clause (ii)
of the first sentence of Section 2.06(c) shall be disregarded for purposes of
this Section 2.07.
(c) If pursuant to Section 2.07(b), the ' Buyer makes a payment to
the Sellers' Agent or the Escrow Agent, or the Sellers' Agent makes a payment
to the Buyer or the Escrow Agent, (i) such payment shall bear interest at the
Prime Rate from and including the Closing Date to but excluding the date of
payment and shall be paid by wire or accounts transfer of immediately available
funds to the account designated by the recipient by two days advanced written
notice to the party owing such payment and (ii) any interest so received by the
Escrow Agent will be treated as interest earned on the account into which the
payment is deposited. If pursuant to 2.07(b) the Escrow Agent makes a payment
to the Buyer or the Sellers' Agent, such payment will include interest earned
on such amount while deposited in the escrow account. If pursuant to Section
2.07(b) the Escrow Agent transfers funds between escrow accounts, the amount
transferred shall include interest earned on such amount while in the escrow
account from which it is transferred and such interest will be treated as
interest earned on the account into which it is transferred.
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(d) Within two Business Days after the date on which the number of
Penalty Subscribers has been finally determined in accordance with Section
2.07(a) (the number of Penalty Subscribers as so finally determined being the
"Final Penalty Subscribers") the Sellers jointly and severally agree to pay to
the Buyer in immediately available funds by wire transfer to an account
specified in advance by the Buyer an amount equal to (a) $5,586, multiplied by
(b) the number of Final Penalty Subscribers (the "Penalty Sub Amount").
Notwithstanding anything to the contrary in this Agreement, without prejudice
to the ability of the Buyer to make a claim against the Sellers to pay the
Penalty Sub Amount, to the extent the Sellers shall not have paid the Buyer the
Penalty Sub Amount in accordance with the terms of this Section 2.07(d), the
Buyer shall be entitled, without prejudice to any other remedy that it may have
under this Agreement or otherwise, to receive the Penalty Sub Amount from one
or more (at the Buyer's election) of the escrow amounts described in Section
2.06(d), in which event such amount shall be released to the Buyer together
with any interest earned on such amount and such amount shall not be treated as
an amount released to the Buyer for the purposes of Section 2. 10.
SECTION 2.08. Maryland LLC. (a) The parties agree that in lieu of
Sellers selling, assigning, transferring and delivering to Buyer at Closing the
Purchased Assets located in the State of Maryland (the "Maryland Assets") and
in lieu of Buyer assuming the Assumed Liabilities primarily related to the
Maryland Assets (the "Maryland Liabilities"), the following will apply:
Immediately prior to the Closing, Sellers will sell, convey, transfer, assign
and deliver to Maryland LLC all of the Maryland Assets and Maryland LLC will
assume all of the Maryland Liabilities, all on terms and conditions
satisfactory to Buyer. At the Closing, Sellers will sell to Buyer and Buyer
will purchase from Sellers 100 limited liability company shares in Maryland LLC
(the "Maryland LLC Shares"), which shall constitute 100% of the limited
liability company interests in Maryland LLC, free and clear of any Liens.
(b) At the request of the Buyer, in lieu of the arrangements in
Section 2.08(a), the Sellers (1) shall form one or more limited liability
companies in the State of Maryland in addition to Maryland LLC, (ii) shall
sell, convey, transfer, assign and deliver to Maryland LLC and any such
additional limited liability company or companies all of the Maryland Assets as
directed by and on terms and conditions satisfactory to the Buyer, and (iii)
shall procure that Maryland LLC and any such additional limited liability
company or companies shall assume all of the Maryland Liabilities as directed
by and on terms and conditions satisfactory to the Buyer. In such event, (A) at
the Closing, the Sellers shall sell to the Buyer and the Buyer will purchase
from the Sellers all of the outstanding limited liability company interests in
Maryland LLC and each such limited liability company, free and clear of any
Liens, (B) "Maryland LLC Shares" shall mean
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100 limited liability company shares in Maryland LLC and 100 limited liability
company shares in each such limited liability company which in each case shall
constitute 100% of the limited liability company interests in Maryland LLC or
such other limited liability company or companies, free and clear of any Liens
and (C) the references to Maryland LLC in Sections 2.09 and 7.01 and in Article
3 shall be construed as including Maryland LLC and each such limited liability
company.
(c) Except as the context may otherwise require, the terms "Seller" as
used in Article 3 shall include Maryland LLC and any other limited liability
company formed under the terms of Section 2.08(b). Prior to Closing, the
Sellers will cause Maryland LLC and any such other limited liability company to
comply with the covenants in Articles 5, 7, 8 and 9 as if it were a Seller.
Except as contemplated herein, Sellers will not take, or permit to be taken,
any actions with respect to Maryland LLC, or any such other limited liability
company without the consent of the Buyer. The Sellers will comply with any
reasonable request of the Buyer to amend the certificate of formation or
operating agreement of Maryland LLC or any such other limited liability
company.
SECTION 2.09. Closing. The closing (the "Closing") of the purchase and
sale of the Purchased Assets and the Maryland LLC Shares and the assumption of
the Assumed Liabilities hereunder shall take place at the offices of Xxxxx Xxxx
& Xxxxxxxx, 000 Xxxxxxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000, on the last day of
the month which includes the tenth day after the date on which all the
conditions set forth in Article 10 have been satisfied, or where applicable,
waived by the party for whose benefit they are established, or if such month
shall be October or November of 1999, the last day of December 1999, or at such
other time or place as the Buyer and the Sellers may agree. At the Closing:
(a) The Buyer shall deliver the Estimated Purchase Price.
(b) (i) The Sellers and the Buyer shall enter into an Assignment and
Assumption Agreement substantially in the form attached hereto as Exhibit B,
(ii) the Sellers shall deliver to the Buyer certificates for the Maryland LLC
Shares duly endorsed, or accompanied by an assignment duly endorsed, in blank,
with any required transfer stamps affixed thereto, and (iii) the Sellers shall
deliver to the Buyer special warranty deeds reasonably satisfactory to the
Buyer and the Sellers conveying to the Buyer each parcel of Owned Property and
such other bills of sale, endorsements, consents, assignments and other good
and sufficient instruments of conveyance and assignment as the parties and
their respective counsel shall deem reasonably necessary or appropriate to vest
in the Buyer all right, title and interest in, to and under the other Purchased
Assets that, pursuant to the terms of this Agreement, are to be transferred at
the Closing.
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(c) The Buyer, the Sellers, the Sellers' Agent and the Escrow Agent
will deliver the Escrow Agreement duly executed by the parties thereto.
(d) The Sellers and Buyer will deliver the Non-Competition Agreement
substantially in the form of Exhibit C hereto, duly executed by the parties
thereto.
SECTION 2. 10. Release of Amounts from Escrow. Amounts shall be
released from the escrow accounts described in Section 2.06(d) in accordance
with Section 2.07(d) and as follows:
(a) (i) Amounts in the account into which the Indemnity Escrow Amount
is deposited (the "Indemnity Escrow Account") shall be released to the Buyer to
satisfy (A) claims made by the Buyer pursuant to Section 11.02(a) and (B) any
Anticipated COBRA Damages Claim made by the Buyer in the 15 days prior to the
Initial Release Date, in accordance with the terms of the Escrow Agreement.
(11) Subject to Section 2.07(d), the Buyer and the Sellers
agree that:
(A) except in respect of any Damages arising out of
any misrepresentation or breach of warranty under Sections
3.01, 3.02, 3.03, 3.04, 3.08(e), 3.14(c), 3.21, 3.24, 3.25,
3.26, 3.27 or 3.31 or contained in Articles 8 or 9 (the
"Identified Representations"), the Indemnity Escrow Account
will be the exclusive source of payment for claims arising
under Section 11.02(a)(i),
(B) The Indemnity Escrow Account will not be the
exclusive source of payment for claims arising under Sections
I 1.02(a)(ii) and I 1.02(a)(iii) or, to the extent relating
to the Identified Representations, Section 11.02(a)(i);
(C) Subject to (D) and (E) below, the Buyer may
elect to obtain recovery in respect of any claims arising
under Sections I 1.02(a)(ii) and I 1.02(a)(iii) or, to the
extent relating to the Identified Representations, Section
11.02(a)(i) from the Indemnity Escrow Account, from one or
more of the Sellers, or from any combination of the
foregoing;
(D) the Consent Escrow Amount will be the exclusive
source of payment for any Non Subscriber Loss Claim in
respect of any Required Private Agreement other than the
Xxxxxxx Contract.
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For the avoidance of doubt, no Non Subscriber Loss Claim may
be made in respect of the Xxxxxxx Contract against the
Consent Escrow Amount;
(E) The Xxxxxxx Escrow Amount shall be the exclusive
source of payment with respect to Damages suffered or
incurred by the Buyer resulting from the Xxxxxxx Contract not
being transferred to the Buyer at Closing or from the
expiration or termination of the Xxxxxxx Contract; and
(F) The Buyer Compensation Amount in respect of any
given Required Private Agreement (other than the Xxxxxxx
Contract) shall not exceed the Sub Value for such Required
Private Agreement. This means, for the avoidance of doubt,
that the maximum amount recoverable with respect to Damages
suffered or incurred by the Buyer resulting from any given
Required Private Agreement not being transferred to the Buyer
at Closing or from the expiration or termination of such
Required Private Agreement is the Sub Value for such Required
Private Agreement.
"Buyer Compensation Amount" means in respect of any Required
Private Agreement (other than the Xxxxxxx Contract), the aggregate of
(a) the amount released to the Buyer in respect of such Required
Private Agreement from the Short Term Escrow Amount pursuant to
Section 2. 1 0(b)(ii) (excluding any amount representing interest paid
to the Buyer pursuant to Section 2. 1 O(b)(iv)), and (b) the aggregate
amount that the Buyer has received from the Consent Escrow Amount in
respect of such Required Private Agreement (excluding any amount
representing interest paid to the Buyer pursuant to Section 2. 1
0(c)(vi)).
"Non Subscriber Loss Claim" means a claim made by the Buyer
in respect of any Non Subscriber Loss Damages. A Non Subscriber Loss
Claim may be made by the Buyer in respect of Non Subscriber Loss
Damages that the Buyer reasonably anticipates it or any of its
Affiliates will suffer.
"Non Subscriber Loss Damages" means any Damages suffered or
incurred by the Buyer or any of its Affiliates and arising from or
relating to a Required Private Agreement (or assets or liabilities
relating thereto) not being transferred to the Buyer at the Closing
(other than any Damages suffered or incurred by the Buyer in respect
of lost revenue or profits attributable to a Lost Subscriber) or from
the arrangements made pursuant to Section 2.05(b) with respect
thereto. For purposes hereof, a "Lost
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Subscriber" is a Person that ceases to be a Subscriber as a result of
a Required Private Agreement (or assets or liabilities relating
thereto) not being transferred to the Buyer pursuant to this
Agreement.
I
(111) On the Initial Release Date, the amount (if any)
remaining in the Indemnity Escrow Account and not subject to any
pending claim by the Buyer, will be released to the Sellers' Agent.
(b) (i) The Short Term Escrow Amount shall be released to the
Sellers' Agent as follows:
(A) A portion of the Short Term Escrow Amount (the
"Initial Sellers' Portion"), determined as set forth in this
Section 2. 10(b)(1)(A), will be released to the Sellers'
Agent on the Initial Release Date. The Initial Sellers'
Portion will equal the amount (if any) arrived at by the
result of multiplying: (1) 50%, times (2) the Sub Value for
each Short Term Private Agreement which on the Initial
Release Date has an expiration date at any time following the
Initial Release Date (having been extended or renewed prior
to the Initial Release Date on terms and conditions
satisfactory to the Buyer).
(B) In respect of each Short Term Private Agreement
which both expires and is not extended or renewed on terms
and conditions satisfactory to the Buyer between the Closing
Date and the Initial Release Date and in respect of each
Short Term Private Agreement that is treated as such pursuant
to the penultimate sentence of Section 2.06(d)(ii), the
Relevant Amount in respect of such Short Term Private
Agreement shall be released to the Sellers' Agent on the
Relevant Date in respect of such Short Term Private Agreement
provided that: (1) following such expiration until the
Relevant Date in respect of such Short Term Private
Agreement, the Buyer has continued to provide service
pursuant to the terms and conditions thereof (as if it had
not expired); (2) there is not at the Relevant Date pending a
formal legal action of the other party thereto challenging
the Buyer's right to continue to provide service (which
action is then being actively pursued by the other party);
and (3) the other party thereto has not at the Relevant Date
(x) itself commenced competition with the Buyer, (y) entered
into a private cable service or access agreement with another
cable service provider or (z) taken active steps to itself
commence cable service or enter into a private cable service
or access agreement with another cable service provider.
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The "Relevant Date" for a Short Term Private
Agreement is the first to occur of (1) the date on which such
Short Term Private Agreement is extended or renewed on terms
and conditions satisfactory to the Bayer and (2) the date
which is the one year anniversary of the later of (A) the
expiration of such Short Term Private Agreement and (B) the
Closing Date.
The "Relevant Amount" in respect of a Short Term
Private Agreement is (1) 50%; times (2) the Sub Value for
that Short Term Private Agreement.
(ii) Subject to Section 2.10(a)(ii)(F), any portion of the
Short Term Escrow Amount not released to the Sellers' Agent pursuant
to Section 2. 1 0(b)(i) on or before the two-year anniversary of the
Closing Date (the "Month 24 Date") will be released to the Buyer on
the Month 24 Date.
(iii) Any portion of the Short Term Escrow Amount that would
have been released to the Buyer pursuant to Section 2. 1 0(b)(ii) but
for the effect of Section 2. 1 0(a)(ii)(F) shall be released to the
Sellers' Agent on the Month 24 Date.
(iv) When any given portion of the Short Term Escrow Amount
is released to the Sellers' Agent or the Buyer the interest earned on
such portion will be released to such party at such time.
(c) The Consent Escrow Amount shall be released as follows:
(i) At any time prior to the 18-month anniversary of the
Closing Date (the "Month 18 Date"):
(A) Subject to Section 2.10(a)(ii)(D), one or more
portions of the Consent Escrow Amount shall, in accordance
with the terms of the Escrow Agreement, be released to the
Buyer to satisfy Non Subscriber Loss Claims;
(B) One or more portions of the Consent Escrow
Amount (each, a "Consent Portion") determined as set forth in
this Section 2. 1 0(c)(i)(B), will be released to the
Sellers' Agent on each date on which a required consent to
the assignment of a Required Private Agreement (other than
the Xxxxxxx Contract) is obtained in form and substance
reasonably satisfactory to the Buyer and a
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Subsequent Transfer occurs. Each Consent Portion will equal
(1) the Sub Value for the Required Private Agreement as to
which the Subsequent Transfer occurs, less (2) the aggregate
amount of (i) any amount which has been released to the Buyer
pursuant to Section 2. 1 0(c)(1)(A) (for such Required
Private Agreement the "Initial Compensated Amount"), and (ii)
the amount of any pending Non Subscriber Loss Claims in
respect of such Required Private Agreement.
(ii) On the Month 18 Date:
(A) In respect of each Required Private Agreement
(other than the Xxxxxxx Contract) that at the Month 18 Date
is not a Contested Contract and has not terminated or expired
(in circumstances where Buyer either is no longer providing
service to the buildings the subject of such Required Private
Agreement or has received notice that it will be required to
cease such service) (a "Deemed Consented Contract"), an
amount will be released to Sellers' Agent equal to (1) the
Sub Value for such Required Private Agreement, less (2) the
Initial Compensated Amount if any, in respect of such
Required Private Agreement, less (3) the product of (i) $
1,000, multiplied by (ii) the Closing Basic Subscriber Number
for Subscribers served under such Deemed Consented Contract.
(B) If there shall be a Release Date Subscriber
Shortfall, then in respect of each Required Private Agreement
(other than the Xxxxxxx Contract) that either (1) at the
Month 18 Date is a Contested Contract or (2) was terminated
or expired (in circumstances where Buyer either is no longer
providing service to the buildings the subject of such
Required Private Agreement or has received notice that it
will be required to cease such service) on or prior to the
Month 18 Date (each such agreement, a "Shortfall Sensitive
Agreement"), an amount shall be released to the Buyer equal
to (x) the Sub Value for such Shortfall Sensitive Agreement
less (y) the Initial Compensated Amount in respect of such
Required Private Agreement.
(C) If there shall not be a Release Date Subscriber
Shortfall, then in respect of each Shortfall Sensitive
Agreement an amount shall be released to the Sellers' Agent
equal to (1) the Sub Value for such Shortfall Sensitive
Agreement less (2) the Initial Compensated Amount in respect
of such Required Private Agreement, less (3) the greater of
(i) the amount of any pending
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Non Subscriber Loss Claims in respect of such Shortfall
Sensitive Agreement and (ii) the product of $1,000 multiplied
by the Closing Basic Subscriber Number for Subscribers under
such Shortfall Sensitive Agreement.
"Contested Contract" means any Required Private Agreement (1)
with a Person who (a) has sought to challenge the arrangements made
pursuant to Section 2.05(b) of this Agreement with respect to such
Required Private Agreement (b) is a party to any formal legal action
challenging the Buyer's right to continue to provide service (and is
actively pursuing such action), (c) has itself commenced competition
with the Buyer, (d) has entered into a private cable service or access
agreement with another cable service provider, or (e) has taken active
steps to itself commence cable service or enter into a private cable
service or access agreement with another cable service provider, or
(2) in respect of which there is outstanding a Non Subscriber Loss
Claim.
"Release Date Subscriber Shortfall"shall occur if 53,700
exceeds the aggregate of (a) the Transferred Closing Subscriber
Number, (b) the Closing Basic Subscriber Number for Subscribers served
under Required Private Agreements (other than the Xxxxxxx Contract) as
to which a Subsequent Transfer has occurred prior to the Month 18
Date, and (c) the Closing Basic Subscriber Number for each Deemed
Consented Contract.
(iii) After the Month 18 Date but prior to the Month 24 Date,
subject to Section 2. 1 0(a)(ii)(D), one or more portions of the
Consent Escrow Amount shall, in accordance with the terms of the
Escrow Agreement, be released to the Buyer to satisfy any Non
Subscriber Loss Claims.
(iv) On the Month 24 Date an amount will be released to the
Sellers' Agent equal to (A) the remaining portion of the Consent
Escrow Amount at that date, less (B) the aggregate amount of all Non
Subscriber Loss Claims pending at that date.
(v) After the Month 24 Date:
(A) Subject to Section 2.10(a)(ii)(D), one or more
portions of the Consent Escrow Amount shall, in accordance
with the terms of the Escrow Agreement, be released to the
Buyer to satisfy any Non Subscriber Loss Claims which were
pending on the Month 24 Date.
34
(B) On the date that the last Non Subscriber Loss
Claim pending against the Consent Escrow Amount is finally
determined in accordance with the terms of the Escrow
Agreement, and the amounts to be paid in respect thereof have
been paid, the remaining portion of the Consent Escrow Amount
shall be released to the Seller's Agent.
(C) If on the date upon which any given Non
Subscriber Loss Claim pending against the Consent Escrow
Amount is finally determined in accordance with the terms of
the Escrow Agreement and all amounts to be paid in respect
thereof have been paid, the remaining portion of the Consent
Escrow Amount exceeds the aggregate amount of all Non
Subscriber Loss Claims pending against the Consent Escrow
Amount, such excess shall be released to the Seller's Agent.
(vi) When any given portion of the Consent Escrow Amount is
released to the Sellers' Agent or the Buyer the interest earned on
such portion will be released to such party at such time.
(d) (i) At any time prior to the Xxxxxxx Extension, if the
Xxxxxxx Contract shall be a Required Private Agreement, one or more
portions of the Xxxxxxx Escrow Amount shall be released to the Buyer
to satisfy Non Subscriber Loss Claims in respect of the Xxxxxxx
Contract.
(ii) The amount, if any, remaining of the Xxxxxxx Escrow
Amount which is not the subject of a pending Non Subscriber Loss Claim
pursuant to Section 2. 10(d)(i), will be released to the Sellers'
Agent as soon as practicable after the date on which the Xxxxxxx
Contract is extended or renewed on terms and conditions reasonably
satisfactory to the Buyer (the "Xxxxxxx Extension"). If the Xxxxxxx
Extension is received, then on any date thereafter that any Non
Subscriber Loss Claim is finally determined in accordance with the
terms of the Escrow Agreement, amounts shall be released from the
Xxxxxxx Escrow Amount to the Buyer or the Sellers' Agent in accordance
with such determination; provided that amounts shall be released to
the Sellers' Agent only to the extent the remaining portion of the
Xxxxxxx Escrow Amount is sufficient to satisfy any then-pending Non
Subscriber Loss Claims in respect of the Xxxxxxx Contract.
(iii) The amount, if any, remaining of the Xxxxxxx Escrow
Amount will be released to the Buyer as soon as practicable after the
earlier of the dates on which (A) the Systems cease to provide service
to any of the buildings that are the subject of the Xxxxxxx Contract
(B) there is a formal
35
legal action by the counterparty to the Xxxxxxx Contract challenging
the Buyer's right to continue to provide service, or (C) the
counterparty to the Xxxxxxx Contract commences competition with the
Buyer or enters into a private cable service or access agreement with
another cable service provider or takes any steps to do so.
(1v) When any given portion of the Xxxxxxx Escrow Amount is
released to the Sellers' Agent or the Buyer the interest earned on
such portion will be released to such party at such time.
(e) Any amount released from escrow to the Buyer pursuant to this
Section 2. 10 shall be treated for tax purposes as a reduction to the Adjusted
Purchase Price.
SECTION 2.11. Allocation q Purchase Price. (a) The Adjusted Purchase
Price and Assumed Liabilities shall be allocated among the Purchased Assets
acquired by each of the Buyer and its assignees, if any, as agreed upon by the
Buyer and the Sellers after the Closing. The Buyer, its assignees, if any and
the Sellers agree to be bound by such allocation and to file, according to
Section 1060 of the Code, all returns and reports with respect to the
transactions contemplated by this Agreement, including, but not limited to, all
federal, state and local tax returns on the basis of such allocation.
(b) If an adjustment is made with respect to the Adjusted Purchase
Price pursuant to Section 2.07 or, if an amount is released from escrow to the
Buyer pursuant to Section 2. 10, the allocation determined in accordance with
Section 2. 11 (a) shall be adjusted in accordance with Section 1060 of the Code
and as mutually agreed by the Sellers and the Buyer., The Sellers, the Buyer
and its assignees, if any, agree to file, or cause to be filed, any additional
information return required to be filed pursuant to the Treasury regulations
promulgated under Section 1060 of the Code. Not later than 30 days prior to the
filing of their respective Forms 8594 relating to this transaction, each party
shall deliver to the other party a copy of its Form 8594.
SECTION 2.12. Sellers' Agent. Each Seller hereby irrevocably appoints
the Sellers' Agent as its respective attorney in fact to act on behalf of such
Seller, and in such Seller's name, place and stead, in any and all capacities
to do and perform every act and thing required or permitted to be done in
connection with the transactions contemplated by this Agreement whether before,
at or after the Closing. This power shall be deemed to be a power coupled with
an interest which cannot be revoked. Each Seller hereby ratifies all actions
taken by the Sellers' Agent as it may lawfully do or cause to be done under
this Agreement and hereby declares that any such action shall be binding upon
such Seller, its heirs,
36
successors and assigns. Buyer shall be entitled to rely on the actions of
Sellers' Agent notwithstanding contrary instructions from any Seller. Sellers'
Agent shall also act as agent for the Sellers in connection with the
preparation, payment or receipt of any monies, certificates or other documents
in connection with this Agreement. Buyer shall be entitled to rely on any
action, consent or agreement of the Sellers' Agent as being the action consent
or agreement of all of the Sellers for purposes of this Agreement. Sellers
shall be deemed to have knowledge of any matter of which any Affiliate of any
Seller is aware.
ARTICLE 3
REPRESENTATIONS AND WARRANTEES OF SELLER
The Sellers (but not Maryland LLC) jointly and severally represent
and warrant to the Buyer as of the date hereof and as of the Closing Date that:
SECTION 101. Existence and Power. The Sellers and the Sellers' Agent
are limited partnerships or, in the case of Mid-Atlantic Telecom Plus, LLC, a
limited liability company, and Maryland LLC is a limited liability company, in
each case validly existing and in good standing under the laws of their
respective jurisdictions of organization and have all limited partnership or
limited liability company powers and all material governmental licenses,
authorizations, permits, consents and approvals required to carry on their
business as now conducted. The Sellers and the Sellers' Agent are duly
qualified to do business as foreign entities and are in good standing in each
jurisdiction where such qualification is necessary, subject to such exceptions
as would not individually or in the aggregate, have a Material Adverse Effect.
SECTION 3.02. Authorization. Except as set forth on Schedule 3.02,
the execution, delivery and performance by the Sellers and the Sellers' Agent
of this Agreement and the consummation of the transactions contemplated hereby
are within their respective powers and have been duly authorized by all
necessary action on the part of the Sellers and the Sellers' Agent. This
Agreement constitutes a valid and binding agreement of the Sellers and the
Sellers' Agent.
SECTION 3.03. Noncontravention. The execution, delivery and
performance by the Sellers and the Sellers' Agent of this Agreement and the
consummation of the transactions contemplated hereby do not and will not (i)
violate the organizational documents of any Seller or the Sellers' Agent, (ii)
assuming compliance with any applicable requirements of the HSR Act and
assuming the receipt of all Required Consents, violate any applicable law,
rule,
37
regulation, judgment, injunction, order or decree, or require any action by or
filing with any Governmental Authority, (iii) assuming the receipt of all
Required Consents, (and without regard to any notice, lapse of time or election
requirements) constitute a default under or give rise to any right of
termination, cancellation or acceleration of any right or obligation of the
Buyer or to a loss of any benefit relating to the Systems to which any Seller
or the Sellers' Agent is entitled under any provision of any agreement or other
instrument binding upon any Seller or the Sellers' Agent or by which any of the
Purchased Assets is or may be bound or (iv) assuming the receipt of all
Required Consents, result in the creation or imposition of any Lien on any
Purchased Asset.
SECTION 3.04. Required Consents. Schedule 3.04 sets forth each
Material Contract binding upon any Seller in each case requiring a consent or
other action by any Person as a result of the execution, delivery and
performance of this Agreement (the "Required Consents").
SECTION 3.05. Financial Statements; No Adverse Change. (a) The Sellers
have provided to the Buyer (a) combined financial statements for the Systems
consisting of an unaudited balance sheet and statement of operations as of and
for the 12 months ended December 31, 1998 and an unaudited balance sheet and
statement of operations as of and for the six months ended June 30, 1999, and
(b) financial statements for Mid-Atlantic Telecom Plus, LLC consisting of an
audited balance sheet and statement of operations as of and for the 12 months
ended December 31, 1998 and an unaudited balance sheet and statement of
operations as of and for the six months ended June 30, 1999 ((a) and (b)
together, the "Financial Statements"). The Financial Statements fairly present
in accordance with GAAP the financial condition and the results of operations
of the Systems or Mid-Atlantic Telecom Plus, LLC, as the case ' may be, as of
the dates and for the periods indicated therein. Mid-Atlantic Telecom Plus, LLC
is engaged in no material business or activities other than the ownership and
operation of the Systems.
SECTION 3.06. Absence of Certain Changes. Except as disclosed in
Schedule 3.06, since June 30, 1999, the Systems have been conducted in the
ordinary course consistent with past practice and there has not been:
(a) any event, occurrence, development or state of
circumstances or facts which, individually or in the aggregate, has
had or could reasonably be expected to have a Material Adverse Effect;
or
(b) any action, event occurrence or omission that would have
been prohibited under Section 5.01 or 5.02 if those covenants had been
in effect at the time.
38
SECTION 3.07. No Undisclosed Material Liabilities. There are no
liabilities relating to the Systems, and the Sellers have no liabilities, of
any kind whatsoever, whether accrued, contingent, absolute, determined,
determinable or otherwise, and, to the knowledge of the Sellers, there is no
existing condition, situation or set of circumstances which could reasonably be
expected to result in such a liability, other than:
(a) liabilities provided for in the Financial Statements or
disclosed in the notes thereto;
(b) liabilities disclosed on Schedule 3.07; and
(c) other undisclosed liabilities which, individually or in
the aggregate, are not material to the Systems or to the Sellers.
SECTION 3.08. Systems Franchises, Systems Licenses, Systems Contracts,
Owned Property and Real Property Interests. (a) Except as described in Schedule
3.08(a) or 2.02(f), none of the Sellers is bound or affected by or hold any of
the following that relate in whole or in part to the Purchased Assets or the
Systems: (i) leases of all real property or material personal property
including all capital leases; (ii) franchises, and similar authorizations or
permits for the construction or operation of cable television systems, or
Systems Contracts of substantially equivalent effect; (iii) licenses,
authorizations, consents or permits of the FCC, (iv) material licenses,
authorizations, consents or permits of any other Governmental Authority
(including each Environmental Permit); (v) material crossing agreements,
easements and rights of way; (vi) pole line or joint line agreements or
underground conduit agreements; (vii) Private Cable Service Agreements or other
bulk service or access agreements under which service is provided to commercial
locations; (viii) any System specific programming agreements or signal supply
agreements; (ix) any agreement with the FCC or any other Governmental Authority
relating to the operation or construction of the Systems that are not fully
reflected in the Systems Franchises, or any agreements with community groups or
similar third parties restricting or limiting the types of programming that may
be shown on any of the Systems; (x) any partnership, joint venture or other
similar agreement or arrangement; (xi) any agreement that limits, other than by
virtue of the express terms of the Private Cable Service Agreements listed on
Schedule 3.12 which limit service in any building served pursuant to such
agreement, the freedom of the Systems to compete in any line of business or
with any Person or in any area or which would so limit the freedom of the Buyer
after the Closing Date; (xii) any Systems Contract relating to the use of the
Purchased Assets to provide, or the provision by the Systems of, telephone or
high speed data services; (xiii) any must-carry elections or retransmission
consents
39
relating to the Systems or the Purchased Assets; (xiv) any advertising
interconnect agreements; (xv) any agreement with any employee of the Systems,
or (xvi) any Systems Contract other than those described in any other clause of
this Section 3.08(a) which either (A) will remain effective for more than one
year after the Closing Date or (B) individually provides for payments by or to
any Seller exceeding $25,000 over the term of the Systems Contract or (C) which
is otherwise material to the Systems.
(b) The Sellers have provided to the Buyer true and complete copies of
each of the Material Contracts (other than those which are Excluded Assets and
subscription agreements with individual residential Subscribers) (together with
any notices alleging non-compliance with the requirements thereof). Except as
described in Schedule 3.08(b): (i) the Sellers are in compliance in all
material respects with each of the Material Contracts; (ii) the Sellers have
fulfilled when due, or have taken all action necessary to enable them to
fulfill when due, all of their material obligations under each of the Material
Contracts-, (iii) there has not occurred any material default by any Seller
and, to the knowledge of any of the Sellers, there has not occurred any
material default (without regard to lapse of time or the giving of notice, or
both) by any other Person, under any of the Material Contracts; (iv) the
Material Contracts are valid and binding agreements and are in full force and
effect and have not been revoked, canceled, encumbered or adversely affected in
any manner; and (v) no buildings are served by any System other than pursuant
to a written contract.
(c) Schedule 3.08(c) lists the date on which each Systems Franchise
and each Private Cable Service Agreement will expire. There is no application
relating to any Systems Franchise or Systems License pending before any
Governmental Authority that is material to any of such Systems. None of the
Sellers has received, nor has any of them received notice that any of them will
receive, from any Governmental Authority a preliminary assessment that a
Systems Franchise should not be renewed as provided in Section 626(c)(1) of the
Communications Act. Neither any Seller nor any Governmental Authority has
commenced or requested the commencement of an administrative proceeding
concerning the renewal of a Systems Franchise as provided in Section 626(c)(1)
of the Communications Act. The Sellers have timely filed notices of renewal in
accordance with the Communications Act with all Governmental Authorities with
respect to each Systems Franchise expiring within 36 months of the date of this
Agreement. Such notices of renewal have been filed pursuant to the formal
renewal procedures established by Section 626(a) of the Communications Act.
Except as disclosed in Schedule 3.08(c), to the knowledge of any of the
Sellers, there exist no facts or circumstances that make it likely that any
Systems ' Franchise or Private Cable Service Agreement will not be renewed or
extended on commercially reasonable terms. As of the date hereof, no
Governmental
40
Authority has commenced, or given notice that it intends to commence, a
proceeding to revoke or suspend a Systems Franchise.
(d) Schedule 3.12 hereto sets out each System of each Seller, each
Systems Franchise of each such System and a description of each Private Cable
Service Agreement of each such System distinguishing whether such agreement is
inside or outside a Franchise Area.
(e) Except as set forth on Schedule 3.08(e), there are no agreements,
arrangements or understandings pursuant to which any of the Systems or any of
the property or assets used or held for use in the operation of the Systems are
managed by any Person and no agreements, arrangements or understandings
pursuant to which any Seller manages any of the property or assets of any other
Person. All of the agreements, arrangements or understandings listed on
Schedule 3.08(e) shall have terminated prior to the Closing.
SECTION 3.09. Litigation. Except as set forth in Schedule 3.09, there
is no action, suit, investigation or proceeding (or any basis therefor) pending
against, or to the knowledge of any Seller, threatened against or affecting,
the Sellers, Maryland LLC, the Systems or any other Purchased Asset or
otherwise challenging the transactions contemplated by this Agreement before
any court or arbitrator or any governmental body, agency or official.
SECTION 3.10. Compliance with Legal Requirements. (a)Except as set
forth in Schedule 3. 1 0(a), the operation of the Systems do not and have not
violated or infringed in any material respect any Legal Requirement. The
Sellers and the Systems are maintaining and operating the Systems in compliance
in all material respects with all applicable federal, state, and local laws,
ordinances, codes and regulations. None of the Sellers have received notice of
any violation by any of them or the Systems of any material Legal Requirement
applicable to the operation of the Systems, as currently conducted.
(b) Except asset forth in Schedule 3.10(b) and subject to such
exceptions as would not individually or in the aggregate have a Material
Adverse Effect, with respect to the Systems, the Sellers are and have been in
compliance with the Communications Act and the Cable Act, including
requirements of those Acts specifically referred to herein; there have been
submitted to the FCC all required filings, including cable television
registration statements, annual reports and aeronautical frequency usage
notices, to utilize all frequencies currently used in the frequency bands
108-137 and 225-400 MEHZ in the manner currently used that are required under
the rules and regulations of the FCC; the operation of the Systems has been and
is in compliance with the rules and regulations of the FCC, and none of the
Sellers have received notice from the FCC of any violation of its
41
rules and regulations with respect to the Systems; the Sellers are and since
1991 have been with respect to the Systems certified as in compliance with the
FCC's equal employment opportunity ("EEO") rules and have received no written
notices with respect to non-compliance with EEO rules; the Systems are in
compliance with all signal leakage, proof-of-performance and technical criteria
prescribed by the FCC; the Sellers have filed all FCC Forms 320 for the Systems
for the last two reporting periods; the Systems are in compliance with all
applicable grounding requirements applicable to the Sellers; and all such Forms
320 show "passing" or "satisfactory" signal leakage scores; for each
semi-annual reporting period since 1996-1, the Sellers have filed with the
United States Copyright Office all required Statements of Account in proper
form, and have paid when due all required copyright royalty fee payments,
relating to the Systems' carriage of television and radio broadcast signals;
and the Sellers are otherwise in compliance with the requirements of the
compulsory copyright license described in Section 111 of the Copyright Act and
with all applicable rules and regulations of the Copyright Office. The Sellers
have provided to the Buyer true and complete copies of all reports and filings
for the past year and with regard to cable copyright filings for the past three
years, made or filed pursuant to FCC and Copyright Office rules and regulations
by the Sellers with respect to the Systems and will provide to the Buyer, upon
the Buyer's request, all other past reports and filings made or filed pursuant
to FCC rules and regulations by the Sellers with respect to the Systems within
the past five (5) years. The Sellers hold all material licenses, registrations
or permits from the FCC for business radio, satellite earth receiving
facilities and CARS or private operational fixed service microwave facilities,
that are necessary or appropriate to carry on the business of the Systems as
currently conducted.
(c) Subject to such exceptions as would not individually or in the
aggregate have a Material Adverse Effect: (i) The Systems have provided all
required Subscriber privacy notices to new Subscribers at the time of
installation and to all Subscribers on an annual basis, and the Systems have
taken -commercially reasonable steps to prevent unauthorized access to
personally identifiable information, (ii) the Systems have provided all
customer notices required by the Cable Act, including customer service, notices
of availability of basic service, and equipment compatibility and (iii) all
notifications to the FAA have been made with respect to the antenna structures
which are being used in connection with the operation of the Systems, each
System holds all necessary FAA authorizations to operate such structures and
all such structures that require registration with the FCC have been so
registered by the Sellers. None of the Sellers have received any request for
commercial leased access with respect to the Systems within the past 120 days,
except for those requests set forth in Schedule 3. 1 0(c). There are no
complaints or other proceedings instituted before the FCC
42
concerning commercial leased access, program access, or any other aspect of the
Systems' operations.
(d) Except set forth in Schedule 3.10(d) and subject to such
exceptions as would not individually or in the aggregate have a Material
Adverse Effect, with respect to the Systems, the Sellers are in compliance with
the must carry and retransmission consent provisions of the Cable Act,
including, (i) duly and timely notifying "local commercial television stations"
of inadequate signal strength or increased copyright liability, if applicable,
(ii) to the extent now required, duly and timely notifying non-commercial
educational stations of the location of the cable system's principal head-end,
(iii) duly and timely notifying Subscribers of the channel alignment on the
Systems, (iv) duly and timely notifying "local commercial and noncommercial
television stations" of the broadcast signals carried on the Systems and their
channel positions, if applicable, (v) maintaining the requisite public file
identifying broadcast signal carriage, (vi) carrying the broadcast signals
after December 31, 1996, on the Systems for all "local commercial television
stations" which elected must carry status and, if required, up to two
"qualified low power stations," (vii) complying with applicable channel
placement obligations, and (viii) obtaining retransmission consent for all
commercial broadcast signals carried on the Systems after December 31, 1996,
except for the signals carried pursuant to a must carry election. No oral or
written notices have been received from the FCC, the United States Copyright
Office, any local or other television station or system or from any other
person or entity, station or Governmental Authority claiming to have a right of
objection challenging or questioning the right of the Sellers or the Systems to
carry or furnish, or not to carry or furnish, any of the signals or any other
station or service to any Subscriber. None of the Sellers have received with
respect to any of the Systems any notification of any petition or submission
that is currently pending before the FCC to modify any television market or for
a waiver of any rules or regulations of the FCC as they apply to such System.
The Sellers have complied with all written requests any of them have received
for network nonduplication, syndicated exclusivity, and sports blackout
protection which are applicable to the Systems.
(e) Except as provided in Schedule 3.10(e), the Sellers have
established and charged rates that are allowable under the Cable Act. The
Sellers have provided to the Buyer true and complete copies of all rate Forms
(and any associated Forms 1200, any successive Forms 1210, and Forms 1205 for
1997, 1998 and 1999) that have been prepared with respect to the Systems,
copies of all correspondence with any Governmental Authority relating to rate
regulation generally or specific rates charged to Subscribers of the Systems,
and any other documentation supporting an exemption from the rate regulation
provisions of the Cable Act claimed by any of the Sellers with respect to the
Systems. Schedule
43
3. 1 O(e) sets forth a list of (i) all pending complaints with respect to any
rates which have been filed with the FCC for the Systems, (ii) those
franchising authorities that have been certified upon filing FCC Form 328 or
have filed FCC Form 328 with the FCC for certification to regulate any of the
Systems' rates and (111) any pending appeals of rate orders issued by any
Governmental Authority. Except as set forth in Schedule 3. 1 O(e), each System
is operating pursuant to a valid franchise or similar authorization or permit
issued by the appropriate Governmental Authority in every market in which such
System is supplying cable television service.
(f) Except as provided in Schedule 3.10(f), the Sellers have complied
in all material respects with any customer service standards applicable to it
with respect to the Systems. None of the Sellers has received written notice
with respect to the Systems from any Governmental Authority with respect to an
intention to enforce customer service standards pursuant to the Cable Act and
none of the Sellers has agreed with any Governmental Authority to establish
customer service standards in respect of the Systems that exceed the FCC
standards promulgated pursuant to the Cable Act.
SECTION 3.11. [Intentionally Blank].
SECTION 3.12. Systems Information. Schedule 3.12 sets forth a true
and complete description in all material respects of the following information:
(a) as of July 31, 1999, for each of the Systems, the approximate
number of miles (underground and aerial) of plant of Systems in Franchise
Areas, and the technical capacity of the plant of each System expressed in
N1HZ, included in each case in the Purchased Assets;
(b) as of July 31, 1999, for each of the Systems, the number of Basic
Subscribers served;
(c) as of July 31, 1999, the approximate number of Homes Passed by
each of the Systems as reflected in the Sellers' records for such date;
(d) as of July 31, 1999, a description of basic and optional or tier
services available from each of the Systems, the rates charged by the Sellers
for each and the number of Subscribers receiving each optional or tier service,
each as reflected in the Sellers' billing system records for such date,
(e) the stations and signals carried by each of the Systems and the
channel position of each such signal and station;
44
(f) the community identification numbers of the municipalities
served by each of the Systems;
(g) as of July 31, 1999, for each System, the name of each utility
company or other entity which has agreed to pole attachments with respect to
such System and the number of pole attachments of such System relating to each
such utility or other entity;
(h) as of the date hereof, for each Private Cable Service Agreement
(i) the contract type (whether bulk service or access only), (ii) the name of
the counterparty to such agreement, (iii) the address of such counterparty,
(iv) the name of the building, planned unit development or complex which is the
subject of the agreement, (v) the address of such building, planned unit
development or complex, (vi) the expiration date of the agreement, (vii) the
number of individual units in such building, planned unit development or
complex, (viii) the rates charged to units in such building, planned unit
development or complex whether specified in the agreement or otherwise, (ix)
the municipality in which that building, planned unit development or complex is
located, (x) the location of the head-end providing signal delivery to such
building, planned unit development or complex (if other than in such building,
planned unit development or complex) and (xi) the method of signal provision to
such building, planned unit development or complex;
(i) as of the date hereof, each System that is provided signals by
Direct TV, or any other third party source, specifying the nature of such
source and which buildings, planned unit developments or complexes in each
System are provided service by such source;
the channel capacity of each of the Systems;
(k) with respect to each commercial establishment (e.g., hotel or
motel) served by the Systems that pays a bulk rate for cable television
service, (i) the name and address of, and the number of units in, such
commercial establishment (ii) a description of the services provided to such
establishment; (iii) the rates charged for each such service; (iv) the location
of the head-end providing signal delivery to such establishment (if other than
in such establishment) and (v) the method of signal provision to such
establishment; and
(1) The Sellers have provided to the Buyer a description of basic and
optional tier services available from each of the Systems, the rates charged by
the Sellers for each of the stations and signals carried by each of the Systems
and the channel position of each such station and signal.
45
SECTION 3.13. Purchased Assets. (a) Schedule 3. 13 )(a) correctly
describes (including address, type of improvements and use) all Owned Property,
all Leased Property and all material other Real Property Interests, any title
insurance policies and surveys with respect thereto, and any Liens thereon,
specifying in the case of leases or subleases, the name of the lessor or
sublessor and the lease term.
(b) Schedule 3.13(b) correctly describes all material personal
property included in the Purchased Assets, and any Liens thereon, specifying in
the case of leases or subleases, the name of the lessor or sublessor and the
lease term.
Schedule 3.13(b) separately identifies each capital lease included in the
Purchased Assets.
(c) The Sellers have good and marketable, indefeasible, fee simple
title to, or in the case of leased real property or personal property has valid
leasehold interests in, all Purchased Assets (whether real, personal, tangible
or intangible). No Purchased Asset is, or when delivered to Buyer (either
directly or indirectly through the delivery of the Maryland LLC Shares) will
be, subject to any Lien, except:
(i) Liens disclosed in the Financial Statements;
(ii) Liens for taxes not yet due or being contested in good
faith (and for which adequate accruals or reserves have been
established in the Financial Statements); or
(iii) Liens which do not materially detract from the value of
such Purchased Asset, or materially interfere with any present or
intended use of such Purchased Asset (clauses (i) -,(iii) of this
Section 3.13(c) are, collectively, the "Permitted Liens").
(d) Subject to such exceptions as would not individually or in the
aggregate have a Material Adverse Effect and other than such developments or
facts which are disclosed to Buyer within the terms of this Agreement or
Schedules thereto, there are no developments affecting any of the material
Purchased Assets pending or, to the knowledge or the Sellers threatened, which
might materially detract from the value, materially interfere with any present
or intended use or materially adversely affect the marketability of such
Purchased Assets.
(e) Subject to such exceptions as would not individually or in the
aggregate have a Material Adverse Effect and except as reflected on Schedule
3.13(e), the plants, buildings, structures and equipment included in the
Purchased Assets have no defects, are in good operating condition and repair
and have been
46
reasonably maintained consistent with standards generally followed in the
franchise and private cable industry as applicable (giving due account to the
age and length of use of same, ordinary wear and tear excepted), are adequate
and suitable for their present uses and, in the case of plants, buildings and
other structures, are structurally sound.
(f) The plants, buildings and structures included in the Purchased
Assets currently have access to (i) public roads or valid easements over
private streets or private property for such ingress to and egress from all
such plants, buildings and structures and (ii) water supply, storm and sanitary
sewer facilities, telephone, gas and electrical connections, fire protection,
drainage and other public utilities, in each case as is necessary for the
conduct of the Systems in all material respects as they have heretofore been
conducted. None of the structures on the Owned Property or the Real Property
Interests encroaches upon real property of another Person, and no structure of
any other Person substantially encroaches upon any other real property in each
case to the extent such encroachment is or may be material.
(g) To the knowledge of the Sellers, the Owned Property and the Real
Property Interests, and their continued use, occupancy and operation as
currently used, occupied and operated, does not in any material respect
constitute a nonconforming use under all applicable building, zoning,
subdivision and other land use and similar laws, regulations and ordinances.
SECTION 3.14. Sufficiency of and Title to the Purchased Assets. (a)
Except for the Excluded Assets, the Purchased Assets constitute all of the
property and assets of the Sellers and their Affiliates used or held for use in
the operation of the Systems and the right, title and interest in the Purchased
Assets that will be conveyed to Buyer (or held by Maryland LLC) at Closing will
be adequate and suitable to conduct the operation of the Systems as currently
conducted. The Sellers own all of the property and assets used or held for use
in the operation of the Systems directly and not through any partnership,
limited partnership, limited liability company, corporation or other entity.
None of the Excluded Assets at the Largo Operations Center are required to
operate the Systems or any of the Purchased Assets.
(b) Except as shown on Schedule 3.14(b), none of the assets that may
be retained by a Seller pursuant to Section 2.05(b) as a result of the
non-transfer of a Required Private Agreement are used or held for use in
connection with any other portion of the Systems.
(c) Except as disclosed in Schedule 3.14(c), none of the Purchased
Assets are used by any Affiliate of any Seller other than the Sellers and after
47
Closing none of the Purchased Assets will be the subject of any obligations or
restrictions of any kind with respect to the wireline telephony business of
OnePoint Communications, LLC (f/k/a VIC-RMTS Holdco, LLQ or any of its
Affiliates (collectively, "RMTS") or the business of any other person or
entity. RMTS has no interest of any kind in or other rights over or title to
any of the property or assets used or held for use in the operation of the
Systems that are not Excluded Assets.
(d) The Delaire Condominium Purchase and Sale Contract has been
consummated in accordance with its terms and all right, title and interest in,
to and under the subscribers and assets transferred to any Sellers thereunder,
including, without limitation, the Delaire Access Agreement, will be conveyed
to the Buyer at the Closing. The assets so conveyed are adequate and suitable
to enable the Buyer to provide service to each Delaire Condominium Subscriber
as currently provided.
SECTION 3.15. Intellectual Property. (a) Schedule 3.15 contains a list
of all Systems Intellectual Property Rights, specifying as to each, as
applicable: (i) the nature of such Systems Intellectual Property Right, (ii)
the owner of such Systems Intellectual Property Right, (iii) the jurisdictions
by or in which such Systems Intellectual Property Right (A) is recognized
(without regard to registration) or (B) has been issued or registered or in
which an application for such issuance or registration has been filed, (iv) the
registration or application numbers and (v) the termination or expiration
dates.
(b) Schedule 3.15 sets forth a list of all licenses, sublicenses and
other agreements as to which any Seller or any Affiliate of any Seller is a
party and pursuant to which any Person is authorized to use any Systems
Intellectual Property Right, including (i) the identity of all parties thereto,
(ii) a description of the nature and subject matter thereof, (iii) the
applicable royalty and (iv) the term thereof
(c) (i) Since June 30, 1996, none of the Sellers have been a
defendant in any action, suit, investigation or proceeding relating to, or
otherwise have been notified of, any alleged claim of infringement of an
Intellectual Property Right, and none of the Sellers have knowledge of any
other such infringement by any of them, and (ii) none of the Sellers have
outstanding any claim or suit for, nor any knowledge of, any continuing
infringement by any other Person of any Systems Intellectual Property Rights.
(d) Since May 30, 1999, none of the Systems has operated under or used
the name "OnePoint" or any derivation thereof. Before such date, Telcom Plus
also operated under or used the name "OnePoint Communications". Since May
48
30, 1999, Telcom Plus has also operated under or used the name "Mid-Atlantic
Communications".
SECTION 3.16. Insurance Coverage. The Sellers have furnished to the
Buyer a list of, and true and complete copies of, all insurance policies and
fidelity bonds relating to the Purchased Assets, the business and operation of
the Systems and its officers and employees. There is no claim by any Seller
pending under any of such policies or bonds as to which coverage has been
questioned, denied or disputed by the underwriters of such policies or bonds or
in respect of which such underwriters have reserved their rights. All premiums
payable under all such policies and bonds have been timely paid and the Sellers
have otherwise complied fully with the terms and conditions of all such
policies and bonds. Such policies of insurance and bonds (or other policies and
bonds providing substantially similar insurance coverage) are in full force and
effect. Such policies and bonds are of the type and in amounts customarily
carried by Persons conducting businesses similar to the operation of the
Systems. None of the Sellers know of any threatened termination of, premium
increase with respect to, or material alteration of coverage under, any of such
policies or bonds. Except as disclosed in Schedule 3.16, after the Closing the
Sellers shall continue to have coverage under such policies and bonds with
respect to events occurring prior to the Closing.
SECTION 3.17. Inventories. On the Closing Date the Purchased Assets
will include inventory that (i) will consist of items of a quality usable or
saleable in the normal course of business consistent with past practices and
(ii) will be in quantities sufficient for the normal operation of the Systems
in accordance with past practice.
SECTION 3.18. Receivables. All of the accounts receivable that are
included in the Purchased Assets will have arisen from bona fide transactions
in the ordinary course of business of the Systems consistent with past
practice.
SECTION 3.19. Finders' Fees. Except for Communications Equity
Associates, whose fees and expenses will be paid by the Sellers, there is no
investment banker, broker, finder or other intermediary which has been retained
by or is authorized to act on behalf of the Sellers who might be entitled to
any fee or commission in connection with the transactions contemplated by this
Agreement.
SECTION 3.20. Employees. As of September 30, 1999, Schedule 3.20 sets
forth a true and complete list of (a) the names, titles, wage rates or annual
salaries, and other compensation of all persons employed in the operation of
the Systems and (b) the geographical area in which such employees are employed.
49
SECTION 3.21. Environmental Compliance. (a) Except as disclosed on
Schedule 3.21:
(i) in connection with or relating to the Purchased Assets,
the Systems, the Owned Property or the Real Property Interests, no
notice, notification, demand, request for information, citation,
summons or order has been received, no complaint has been filed, no
penalty has been assessed and no investigation, action, claim, suit,
proceeding or review is pending or, to the knowledge of any Seller,
threatened by any governmental entity or other Person with respect to
any matters relating to the Purchased Assets, the Systems, the Owned
Property or the Real Property Interests and relating to or arising out
of any Environmental Law;
(ii) there are no liabilities that have arisen in connection
with or in any way relating to the Purchased Assets, the Systems, the
Owned Property or the Real Property Interests of any kind whatsoever,
whether accrued, contingent, absolute, determined, determinable or
otherwise, arising under or relating to any Environmental Law, and to
the knowledge of any Seller, there are no facts, events, conditions,
situations or set of circumstances which could reasonably be expected
to result in or be the basis for any such liability'.
(iii) to the knowledge of any Seller, no polychlorinated
biphenyls, radioactive material, lead, asbestos-containing material,
incinerator, sump, surface impoundment, lagoon, landfill, septic,
wastewater treatment or other disposal system or underground storage
tank (active or inactive) is or has been present at, on or under any
Owned Property or Real Property Interest or any other Purchased Asset
or -any other property now or previously owned, leased or operated by
the Sellers;
(iv) to the knowledge of any Seller, no Hazardous Substance
has been discharged, disposed of, dumped, injected, pumped, deposited,
spilled, leaked, emitted or released at, on or under any Owned
Property or Real Property Interest or any other property now or
previously owned, leased or operated by the Sellers;
(v) to the knowledge of any Seller, no Owned Property or
Real Property Interest no property now or previously owned, leased or
operated by any Seller nor any property to which Hazardous Substances
located on or resulting from the use of any Purchased Asset or the
Owned Property or any Real Property Interest or in any way relating to
the Systems have been transported nor any property to which the
Sellers have, directly or indirectly, been transported or arranged for
the transportation of any
50
Hazardous Substances is listed or, to the knowledge of any Seller,
proposed for listing on the National Priorities List promulgated
pursuant to CERCLA, on CERCLIS (as defined in CERCLA) or on any
similar federal, state, local or foreign list of sites requiring
investigation or cleanup; and
(vi) to the knowledge of any Seller, in connection with the
Purchased Assets, the Systems, the Owned Property and the Real
Property Interests, the Sellers are in compliance with all
Environmental Laws and are in compliance with all Environmental
Permits; such Environmental Permits are valid and in full force and
effect and assuming the related Required Consents have been obtained
prior to the Closing Date, are transferable and will not be terminated
or impaired or become terminable as a result of the transactions
contemplated hereby.
(b) There has been no environmental investigation, study, audit, test,
review or other analysis conducted of which any Seller has knowledge in
relation to any Purchased Asset or the Owned Property or the Real Property
Interests or any other property or facility now or previously owned or leased
by the Sellers which has not been delivered to the Buyer at least ten days
prior to the date hereof The consummation of the transactions contemplated by
this Agreement will not trigger any obligations of any Seller or the Buyer
pursuant to any state environmental transfer act statutes, including those
promulgated under the laws of New Jersey and Connecticut.
(c) For purposes of this Section, the terms "Seller" or "Sellers"
shall include any entity which is, in whole or in part, a predecessor of any
Seller.
SECTION 3.22. Year 2000 Compliance. (a) Except as disclosed on
Schedule 3.22, each item of hardware, software or firmware that is used in
connection with the Systems is, or by the earlier of the Closing Date and
December 31, 1999 will be, Year 2000 Compliant, with such exceptions (and
disregarding insurance or similar coverage) as would not, individually or in
the aggregate, reasonably be expected to have a Material Adverse Effect. "Year
2000 Compliant" means that such hardware, software and firmware shall be able
accurately to process (including, without limitation, calculate, compare and
sequence) date and time data from, into and between the years 1999 and 2000 and
any other years in the 20th and 21st centuries.
(b) Based on a reasonable inquiry of all material suppliers, customers
and service providers of the Systems, except as disclosed on Schedule 3.22, to
the knowledge of the Sellers, there is no inability on the part of any such
supplier, customer or service provider to timely ensure that its items of
hardware, software
51
and firmware are Year 2000 Compliant which inability, individually or in the
aggregate, would reasonably be expected to have a Material Adverse Effect.
SECTION 3.23. Systems Options. Except as disclosed on Schedule 3.23,
none of the Systems or any material Purchased Assets are subject to any
purchase option, right of first refusal or similar arrangement ("Systems
Options").
SECTION 3.24. Transactions with Affiliates. Except as set forth on
Schedule 3.24, with respect to the Systems, none of the Sellers is a party to
any contract, agreement or any other arrangement of any kind whatsoever with
any Affiliate.
SECTION 3.25. Capitalization of Maryland LLC. TheMaryland LLC Shares
constitute 100% of the equity interests in Maryland LLC. The Maryland LLC
Shares have been duly authorized, validly issued and fully paid. Except as set
forth in this Section, there are outstanding (a) no securities of Maryland LLC
convertible into or exchangeable for equity interests of Maryland LLC, and (b)
no options or other rights to acquire and no obligation of Maryland LLC to
issue any equity interests.
SECTION 3.26. Ownership of the Maryland LLC Shares. Telcom Plus is the
holder of record and the beneficial owner of the Maryland LLC Shares, free and
clear of any Lien and any other limitation or restriction (including any
restriction on the right to sell, vote or otherwise dispose of the Maryland LLC
Shares) and at the Closing the Sellers will transfer and deliver to the Buyer
valid title to the Maryland LLC Shares free and clear of any Lien and any such
limitation or restriction.
SECTION 3.27. Maryland LLC Assets and Liabilities. To the knowledge of
the Sellers, Maryland LLC has no assets, no employees and no liabilities of any
kind whatsoever, whether accrued, contingent absolute, determined,
determinable, or otherwise, and there is no existing condition, situation or
set of circumstances which could reasonably be expected to result in such a
liability, in each case, other than the Maryland Assets and the Maryland
Liabilities transferred to Maryland LLC immediately prior to the Closing.
Maryland LLC has engaged in no activities or business other than (1) customary
activities in connection with its organization and (ii) the transactions
contemplated hereby.
SECTION 3.28. Bonds. Schedule 3.28 contains a list of all franchise,
construction, fidelity, performance or other bonds and copies of all letters of
credit posted by the Sellers or their Affiliates in connection with the Systems
or the Purchased Assets.
52
SECTION 3.29. Cut-off Dates. In each month there is only one Cut-off
Date that applies to all of the Systems.
SECTION 33.30. Representations. To the knowledge of the Sellers, the
representations and warranties of the Sellers contained in this Agreement,
disregarding all qualifications and exceptions contained therein relating to
materiality or Material Adverse Effect, are true and correct with only such
exceptions as would not in the aggregate reasonably be expected to have a
Material Adverse Effect.
SECTION 3.31. Affiliates. None of the Affiliates of any Seller (apart
from its own management) participates in the management of any Seller.
SECTION 3.32. DirecTV Agreement. Schedule 3.32 lists (i) each building
which is the subject of any marketing, signal provision or other obligation of
any Seller or any System under the DirecTV Agreement and (ii) each building
which pursuant to the DirecTV Agreement is being provided with DirecTV signal
at the date of this Agreement.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF THE BUYER
The Buyer represents and warrants to the Sellers as of the date hereof
and as of the Closing Date that:
SECTION 4.01. Corporate Existence and Power. The Buyer is a
corporation duly incorporated, validly existing and in good standing under the
laws of Pennsylvania and has all corporate powers and all material governmental
licenses, authorizations, permits, consents and approvals required to carry on
its business as now conducted.
SECTION 4.02. Corporate Authorization. The execution, delivery and
performance by the Buyer of this Agreement and the consummation of the
transactions contemplated hereby are within the corporate powers of the Buyer
and have been duly authorized by all necessary corporate action on the part of
Buyer. This Agreement constitutes a valid and binding agreement of the Buyer.
SECTION 4.03. Noncontravention. The execution, delivery and
performance by the Buyer of this Agreement and the consummation of the
transactions contemplated hereby do not and will not (i) violate the
certificate of
(NY) 05726/097/AGT!xxxx.xX&ps.agLcoaonn.wpd
53
incorporation or bylaws of the Buyer, (ii) assuming receipt of all consents and
the taking of all other actions under the Systems Licenses and the Systems
Franchises, violate any applicable material law, rule, regulation, judgment,
injunction, order or decree or require any action by or filing with any
Governmental Authority other than compliance with any applicable requirements
of the HSR Act or (iii) constitute a default under any agreement or contract
binding on the Buyer or any of its Affiliates.
SECTION 4.04. Financing. The Buyer has, or will have prior to the
Closing, sufficient cash, available lines of credit or other sources of
immediately available funds to enable it to make payment of the Estimated
Purchase Price and any other amounts to be paid by it hereunder.
SECTION 4.05. Litigation. There is no action, suit, investigation or
proceeding pending against, or to the knowledge of the Buyer threatened against
or affecting, the Buyer before any court or arbitrator or any governmental
body, agency or official which in any manner challenges or seeks to prevent,
enjoin, alter or materially- delay the transactions contemplated by this
Agreement.
SECTION 4.06. Finders' Fees. There is no investment banker, broker,
finder or other intermediary which has been retained by or is authorized to act
on behalf of the Buyer who might be entitled to any fee or commission from the
Sellers or any of their Affiliates upon consummation of the transactions
contemplated by this Agreement.
ARTICLE 5
COVENANTS OF SELLER
The Sellers jointly and severally agree that:
SEC'noN5.01. Conduct of the Business. From the date hereof until the
Closing Date, the Sellers shall (i) operate the Systems in the ordinary course
consistent with past practice (including completing line extensions, placing
conduit or cable in new developments, fulfilling installation requests and
continuing work on existing construction projects and including subscriber
acquisition and retention); (ii) use their reasonable best efforts to preserve
intact their business organizations and relationships with third parties and to
keep available the services of the employees presently employed in the
operation of the Systems; (iii) continue normal marketing, advertising and
promotional expenditures with respect to the Systems; and (1v) make capital
expenditures
54
consistent with past practice. Without limiting the generality of the
foregoing, from the date hereof until the Closing Date, except as set forth on
Schedule 5.01, none of the Sellers will, without the consent of the Buyer, not
to be unreasonably withheld:
(a) modify, terminate, renew, suspend or abrogate any
contract which, if entered into prior to Closing, would be a Material
Contract (except as contemplated in Section 5.06) or enter into any
such contract;
(b) enter into any transaction or take any action that would
result in any of its representations and warranties in this Agreement
or in any of the documents required to be delivered by this Agreement
(without any qualification as to materiality or Material Adverse
Effect) not being true and correct in all material respects when made
or at Closing (unless and to the extent that any such representation
or warranty speaks specifically as of an earlier date, in which case,
at such earlier date),-
(c) - engage in any marketing, Subscriber installation or
collection practices other than in the ordinary course of business and
consistent with past practice;
(d) change the rate charged for any level of cable
television service including, without limitation, any level of basic,
tiered or pay cable television service, or retire its channels-,
(e) add or delete any channels from any System, or change
the channel lineup in any System or commit to do so in the future;
(f) enter into or amend any contact or commitment of any
kind (including any renewal of any existing contract) relating to the
Systems which would be binding on the Buyer after Closing and which
relates to the use of the Purchased Assets to provide, or the
provision by the Systems of, telephone or high speed data services;
(g) add a television broadcast signal which would qualify as
a distant signal under Section III of the Copyright Act and the rules,
regulations, and policies of the United States Copyright Office if
carried on (i) a System; or (ii) any cable television system operated
by the Buyer which is contiguous to a System;
(h) other than sticking or stay bonuses paid by Sellers
prior to or at the Closing, grant or agree to grant to any employee of
the Systems any increase in (i) wages or bonuses except in the
ordinary course of business,
55
or (ii) any severance, profit sharing, retirement, deferred
compensation, insurance or other compensation or benefits;
(i) enter into any contract with any current or prospective
employee of the Systems;
(j) enter into any contract or commitment which would
require capital expenditure to be made in respect of the Systems at
any time after the Closing;
(k) sell, assign, license, transfer or otherwise dispose of
any personal property that would be included in the Purchased Assets
if owned at Closing except for (i) the disposition of obsolete or
worn-out equipment, or (ii) dispositions of equipment replaced with
equipment of at least equal value;
(1) mortgage, pledge or subject to any material Lien that
would survive the Closing any of its Purchased Assets or the Systems
other than Permitted Liens;
(m) except as disclosed in writing to the Buyer prior to the
date hereof, make any cost-of-service or hardship election under the
Rules and Regulations adopted under the Cable Television Consumer
Protection and Competition Act of 1992; or
(n) agree or commit to do any of the foregoing;
provided that in the case of (a), (b), (d) and (e) above, such action
will be permitted to the extent it is (i) in the ordinary course of business,
(ii) consistent with the past practice of the Systems, (iii) would not
reasonably be expected to adversely affect the Systems or any of the Purchased
Assets and (iv) in the case of (d) and (e), related only to Private Cable
Agreements in areas where there is no Systems Franchise. Immediately prior to
Closing, Sellers shall be permitted to update the Schedules hereto to reflect
any actions permitted under the proviso to the preceding sentence.
Without prejudice to any other remedy that the Buyer may have in
respect of any breach of this Agreement in the event that any Seller takes any
action specified in Section 5.010) without the consent of the Buyer, the
parties agree that the Buyer shall in its absolute discretion be entitled to
treat the relevant contract or commitment made in contravention of Section
5.010) and any contracts or other assets related thereto as Excluded Assets,
and any liability or obligation in respect of any such contract, commitment or
asset as an Excluded Liability in
56
which event, any Subscriber or revenue under any such contract shall not be
counted in determining Relevant Subscribers or Revenue for any purpose.
SECTION 5.02. Affirmative Covenants. Between the date of this
Agreement and the Closing, each of the Sellers will, with respect to each of
the Systems and each of the Purchased Assets:
(a) perform all of its obligations under all of the Systems
Franchises, Systems Licenses and Systems Contracts without material
breach or default and in compliance with all material Legal
Requirements;
(b) maintain or cause to be maintained (i) the Purchased
Assets in good condition and repair, ordinary wear and tear excepted,
and (ii) in full force and effect all existing policies of insurance
with respect to the Purchased Assets and the operation of the Systems,
in such amounts and with respect to such risks as are customarily
maintained by operators of cable television systems of the size and in
the geographic location of the Systems; -
(c) maintain or cause to be maintained its books, records and
accounts with respect to the Purchased Assets and the operation of the
Systems in the usual, regular and ordinary manner on a basis
consistent with past practices;
(d) (i) give or cause to be given to the Buyer, and its
counsel, accountants and other representatives, reasonable access
during normal business hours to the Systems, the Owned Property, the
Leased Property, the Purchased Assets, its Books and Records (to the
extent relating to the Purchased Assets or the Systems) and the
Systems' personnel; (ii) furnish or cause to be furnished to the Buyer
and such representatives all such additional documents, financial
information and other information as the other from time to time
reasonably may request; and (iii) instruct its employees and agents to
cooperate with the Buyer in its investigation; provided that no
investigation will affect or limit the scope of any of the
representations and warranties;
(e) within 10 Business Days after provision by the Buyer of
all necessary documentation required from it to allow the Sellers to
file FCC Forms 394 with respect to the Systems Franchises, file all
such FCC Forms 394 and in any event, use its commercially reasonable
efforts to obtain in writing as promptly as possible the Required
Consents and any other consents, required for the transfer of any
Purchased Asset and any other authorization or approval required to be
obtained by the Sellers in
57
connection with the transactions contemplated hereunder (and will
deliver to the Buyer copies of any such Required Consents,
authorizations or approvals as it obtains, in each case in form and
substance reasonably satisfactory to the Buyer; provided, however,
that the Sellers will afford the Buyer the opportunity to review and
approve the form of any Required Consent prior to delivery to the
party whose consent is sought and the Sellers will not accept or agree
or accede to any modifications or amendments to, or any conditions to
the transfer of, any of the Systems Franchises, Systems Licenses,
Systems Contracts or Real Property Interests of the Systems that are
not approved in writing by the Buyer. The Sellers agree, upon
reasonable prior notice, to allow representatives of the Buyer to
attend meetings and hearings before applicable Governmental
Authorities in connection with the transfer of any Systems License or
Systems Franchise;
(f) give or cause to be given to the Buyer, and its counsel,
accountants and other representatives, as soon as reasonably possible
but in any event prior to the date of submission to the appropriate
Governmental Authority, copies of all FCC Forms 1200, 1205, 1210,
1215, 1220 and 1240 or any other FCC Forms required under the
regulations of the FCC promulgated under the Cable Act that are
prepared with respect to the Systems; and before such Forms are filed,
the parties will consult in good faith concerning the contents of such
forms;
(g) give, or cause to be given to the Buyer, and its
counsel, (i) a copy of all copyright returns to be filed by any Seller
in connection with the Systems at least 10 days prior to filing such
copyright returns (and consult with the Buyer in relation thereto) and
(ii) a copy of all notifications received with respect to Subscriber
complaints;
(h) give, or cause to be given to the Buyer, and its counsel
all correspondence from television broadcast stations with respect to
must carry and retransmission consents or obligations and consult in
advance with the Buyer or cause the Buyer to be consulted in advance
in respect of all correspondence to television broadcast stations with
respect to such consents or obligations;
(i) maintain inventory sufficient for the operation of the
Systems in the ordinary course of business for a period of at least 30
days;
(j) promptly notify the Buyer of any circumstance, event or
action (i) which, if known at the date of this Agreement would have
been required to be disclosed in or pursuant to this Agreement, or
(ii) the
58
existence, occurrence or taking of which would result in any of its
representations or warranties in this Agreement (without any
qualification as to materiality or Material Adverse Effect) not being
true and correct in all material respects when made or at Closing
(unless and to the extent that any such representation or warranty
speaks specifically as of an earlier date, in which case, at such
earlier date), and, with respect to clause (ii), use its commercially
reasonable efforts to remedy the same;
(k) renew or extend the Program Affiliation Agreement with
Home Team Sports Limited Partnership dated April 1, 1997 on such terms
that (i) the Systems shall continue to be entitled to provide the Home
Team Sports Channel to their Subscribers for the period between
December 31, 1999 (the current expiration of such agreement) and the
Closing Date, (ii) the agreement will, effective as of the Closing
Date, cease and terminate without any further liability or obligation
on the part of any party thereto and (iii) are otherwise reasonably
acceptable to Buyer;
(1) (i) use commercially reasonable efforts to ensure that
on or prior to the Closing Date, the Southern Management Litigation
will have been resolved by a binding settlement between the parties
thereto (on terms reasonably satisfactory to the Buyer) or a
nonappealable, final order of a court of competent jurisdiction which
(A) terminates any and all claims of both parties thereto against each
other, (B) allows for the provision of services by Telcom Plus, its
assigns and successors to the Southern Management Buildings pursuant
to the terms and conditions of the Southern Management Agreement, and
(C) enjoins Southern Management from removing Telcom Plus' rooftop
facilities from the Middletowne apartments serviced pursuant to the
Southern Management Agreement, (ii) take such actions as are necessary
so that on the Closing Date, Sellers will not be in breach of any
agreements existing between Southern Management and Telcom Plus as of
such date and (iii) use commercially reasonable efforts to obtain
consent of RMTS and Southern Management to assign all rights and
liabilities under the Southern Management Agreement with respect to
the provision of cable service, to Buyer, and with respect to the
provision of telephony service, to RMTS and to enter into such
arrangements conditional upon the Closing and otherwise on terms and
conditions reasonably satisfactory to the Buyer, and
(m) use commercially reasonable efforts to obtain consents for
(i) the existing installation by the Systems of antennas,
transmitters, pole mounts, microwave facilities, satellites and any
other similar equipment on the rooftops of the Roof Rights Buildings
and (ii) the operation of such
59
equipment for the purpose of providing cable television service,
telecommunication service or any services related thereto to
Subscribers of the Systems, such consents to be on terms and
conditions reasonably satisfactory to Buyer.
SECTION 5.03. Certain Notices. The Sellers will cause to be timely
filed a request for renewal under Section 626 of the Cable Act with the proper
Governmental Authority with respect to cable franchises that will expire within
36 months after any date between the date of this Agreement and the Closing
Date.
SECTION 5.04. Subscriber Billing Services. The Sellers will provide to
the Buyer, upon written request received by the Sellers no later than the date
the Buyer reasonably believes is 30 days prior to Closing, Subscriber billing
services in connection with the Systems for a period of up to 180 days
following Closing to allow for conversion of existing or replacement billing
arrangements ("Transitional Billing Services"). All Transitional Billing
Services will be provided at the Buyer's expense on terms and conditions
reasonably satisfactory to both parties and at the actual out-of-pocket cost to
the Sellers.
SECTION 5.05. Cooperation as to Rates. (a) If at any time prior to
Closing, any Governmental Authority commences a Rate Regulatory Matter (as
defined below) with respect to the Systems, the Sellers will (i) promptly
notify the Buyer, and (ii) keep the Buyer informed as to the progress of any
such proceeding. Without the prior consent of the Buyer, which consent shall
not be unreasonably withheld, the Sellers will not settle any such Rate
Regulatory Matter, either before or after Closing, if (a) the Buyer would have
any obligation under such settlement, or (b) such settlement would reduce the
rates permitted to be charged by the Buyer after Closing below the rates set
forth on Schedule 3.12, as applicable. Notwithstanding anything to the contrary
herein, after Closing the Buyer will have the right at its own expense, to
assume control of the defense of any pending Rate Regulatory Matter.
(b) For purposes hereof, "Rate Regulatory Matter" means any proceeding
or investigation with respect to the Systems arising out of or related to the
Cable Act dealing with, limiting or affecting the rates which can be charged by
the Systems for programming, equipment, installation, service or otherwise.
SECTION 5.06. Franchise Expirations. Prior to Closing, the Sellers
will use commercially reasonable efforts to obtain renewals or valid extensions
of Systems Franchises in the ordinary course of business, such renewals or
extensions to be on terms reasonably satisfactory to the Buyer. The Sellers
will not agree or accede to any modifications or amendments to, or the
imposition of any condition to the transfer of, any of the System Franchises
that are not
60
acceptable to the Buyer. The Sellers agree, upon reasonable prior notice, to
allow representatives of the Buyer to attend meetings and hearings before
applicable Governmental Authorities in connection with the renewal or extension
of any Systems License or Systems Franchise.
SECTION 5.07. Distant Broadcast Signals. If Closing shall occur on or
after December 31, 1999, unless otherwise restricted or prohibited by any
Governmental Authority or applicable Legal Requirement, each Seller will delete
prior to midnight on December 31, 1999 or if Closing is on December 31, 1999,
prior to Closing, any distant broadcast signals set out in Schedule 5.07 and,
if requested by the Buyer, any other distant broadcast signals which Buyer
determines will result in unacceptable liability on the part of the Buyer for
copyright payments with respect to continued carriage of such signals after
such date.
SECTION 5.08. Confidentiality. After the Closing, the Sellers and
their Affiliates will hold, and will use their best efforts to cause their
respective officers, directors,- employees, accountants, counsel, consultants,
advisors and agents to hold, in confidence, unless compelled to disclose by
judicial or administrative process or by other requirements of law, all
confidential documents and information concerning the Systems, except to the
extent that such information can be shown to have been (i) in the public domain
through no fault of any Seller or any of their Affiliates or (ii) later
lawfully acquired by the Sellers from sources other than those related to their
prior ownership of the Systems. The obligation of the Sellers to hold any such
information in confidence shall be satisfied if they exercise the same care
with respect to such information as they would take to preserve the
confidentiality of their own similar information.
SECTION 5.09. Notices of Certain Events. The Sellers shall promptly
notify the Buyer of
(a) any notice or other communication from any Person
alleging that the consent of such Person is or may be required in
connection with the transactions contemplated by this Agreement;
(b) any notice or other communication from any governmental
or regulatory agency or authority in connection with the transactions
contemplated by this Agreement; and
(c) the damage or destruction by fire or other casualty of
any Purchased Asset or part thereof or in the event that any Purchased
Asset or part thereof becomes the subject of any proceeding or, to the
knowledge of it or any Seller, threatened proceeding for the taking
thereof or any pan
61
thereof or of any right relating thereto by condemnation, eminent
domain or other similar governmental action.
SECTION 5.10. RMTS. If the Buyer terminates this Agreement pursuant to
Section 12.01 (c), then without prejudice to any other right of the Buyer under
this Agreement or any other remedy available to the Buyer, the Sellers shall
within 2 Business Days of such termination pay to the Buyer in immediately
available funds by wire transfer the amount of $1,500,000 to an account
designated by the Buyer. In addition, if Closing does not occur as a result of
any action taken by or omission of RMTS (including the failure to give any
consent or authorization or to sign any necessary documentation necessary for
the consummation of the transaction contemplated hereby), then: (a) the Sellers
jointly and severally agree to reimburse the Buyer for the Buyer's
out-of-pocket expenses incurred in connection with the transactions
contemplated hereby including the preparation and negotiation of the letter of
intent between the parties dated August 5, 1999 and this Agreement and in
conducting its due diligence exercise; and (b) in the event RMTS or any other
person or entity directly or indirectly acquires any or all of the Systems
within 18 months of the date hereof (in any form of transaction), then the
Sellers jointly and severally agree to pay the Buyer an amount in cash with
respect to each System acquired equal to: (i) (A) the purchase price paid in
such acquisition (including any consideration received by any of the Sellers
(or any of their affiliates, partners, officers or employees) in any other
transactions which relate to or are on account of the acquisition and including
any debt assumed in such acquisition), less (B) the portion of the Purchase
Price that the Buyer would have paid for such System under this Agreement if
this Agreement had been consummated in accordance with its terms (assuming for
these purposes that the proportion of the Purchase Price attributable to such
System was equal to the proportion of the Closing Basic Subscriber Number for
all of the Systems that would have been attributable to such acquired System)
multiplied by (ii) I minus the percentage ownership of all other owners in the
entity selling the System as of the date of such acquisition.
SECTION 5.11. Non-competition Agreement. Sellers will cause each of
the parties to the Non-Competition Agreement other than the Buyer to execute
and deliver to the Buyer at the Closing the Non-Competition Agreement.
SECTION 5.12. Risk of Loss; Condemnation. (a) The Sellers will bear
the risk of any loss or damage to the Purchased Assets at all times prior to
the Closing. If the Buyer elects to consummate the transactions contemplated by
this Agreement notwithstanding any such loss or damage that has not been
repaired prior to the Closing, and does so, all insurance proceeds payable as a
result of the occurrence of the event resulting in such loss or damage will be
delivered by the
62
Sellers to the Buyer, or the rights to such proceeds will be assigned by the
Sellers to the Buyer if not yet paid over to the Sellers.
(b) If, prior to the Closing, all or any part of or interest in the
Purchased Assets is taken or condemned as a result of the exercise of the power
of eminent domain, or if a Governmental Authority having such power informs a
Seller or the Buyer that it intends to condemn all or any part of or interest
in the Purchased Assets and such taking is so substantial as to prevent normal
operation of any material portion of any of the Systems (such event being
called, in either case, a "Taking"), then the Buyer may terminate this
Agreement. If the Buyer does not elect to terminate this Agreement, then (i)
the Buyer will have the sole right, in the name of the Sellers, if the Buyer so
elects, to negotiate for, claim, contest and receive all damages with respect
to the Taking, (ii) the Sellers will be relieved of their obligation to convey
to the Buyer the Purchased Assets or interests that are the subject of the
Taking, (iii) at the Closing, the Sellers will assign to the Buyer all of their
rights to all damages payable with respect to such Taking and will pay to the
Buyer all damages previously paid to the Sellers with respect to the Taking and
(iv) following the Closing, the Sellers will give the Buyer such further
assurances of such rights and assignment with respect to the Taking as the
Buyer may from time to time reasonably request.
SECTION 5.13. Delivery of Financial Information. The Sellers shall
deliver to the Buyer within 45 days after the end of each month ending between
the date of this Agreement and the Closing Date a statement of revenue relating
to the Systems for the month previously ended and such other financial
information relating to the Systems as the Buyer may reasonably request. The
revenue statements delivered by the Sellers to the Buyer pursuant to this
Section shall be in accordance with the books and records of the Systems and
shall present fairly in all material respects the revenue of the Systems for
the year-to-date periods then ended. Promptly after the preparation thereof,
the Sellers shall deliver to the Buyer copies of any other financial
statements, Subscriber counts, management reports and other operational data
regularly prepared by any Seller for internal use.
SECTION 5.14. Use of Sellers' Names and Logos. For a period of six
months after the Closing, the Buyer shall be entitled to use the trademarks,
trade names, service marks, service names, logos and similar proprietary rights
of the Sellers that are not to be acquired by the Buyer pursuant to this
Agreement (including the Excluded Names) to the extent incorporated in or on
the Purchased Assets transferred to the Buyer at the Closing, provided that the
Buyer shall exercise reasonable efforts to remove all such names, marks, logos
and similar proprietary rights from such Purchased Assets as soon as reasonably
practicable following Closing. Notwithstanding the foregoing, the Buyer will
not be required
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to remove or discontinue using any such name or xxxx that is affixed to
converters or other items in or to be used in customer homes or properties, or
as are used in similar fashion, to the extent that such removal or
discontinuation is impracticable for the Buyers.
SECTION 5.15. Capital Leases. On or prior to Closing, the Sellers
shall pay the remaining balance of any capital lease, if any, for any Purchased
Asset and deliver the title to such Purchased Asset free and clear of all Liens
under any such lease to the Buyer at the Closing.
SECTION 5.16. Access. Buyer shall, for a period of seven years from
the Closing Date, have access to, and the right to copy, at its expense, for
bonafide business purposes and during usual business hours upon reasonable
prior notice to the Sellers, all books and records of the Sellers and their
Affiliates relating to the Sellers, the Purchased Assets or the operation of
the Systems prior to the Closing. The Sellers and their Affiliates shall retain
and preserve, and cause to be retained and preserved, all such books and
records for such seven year period; provided that they may destroy any such
books and records if they notify the Buyer of their intention to do so and
offer the Buyer an opportunity to take any such books and records that they
intend to destroy.
SECTION 5.17. Proceeds Sharing Arrangements, One-off Fees Etc. To the
extent the execution of this Agreement or the transfer of any of the Purchased
Assets gives rise to an obligation on the part of the Systems or any Seller to
make a payment to any Person, then such obligation, including, without
limitation, any such obligation in any of the contracts listed on Schedule
3.08(a)(x), shall be the responsibility of the Sellers and shall be discharged
by the Sellers prior to the Closing. Any commitment entered into by any Seller
at any time prior to Closing to make any one-time marketing fee, door fee,
access fee or other similar payment shall be for the account of and paid by the
Sellers.
SECTION 5.18. FCC Applications. The Sellers shall fully cooperate in
filing applications for the consent to assignment of the FCC licenses and the
pending licenses disclosed in Schedule 3,08(a)(iii) to the Buyer or its
designee. At the Buyer's request the Sellers shall cooperate with the Buyer in
the preparation of applications by the Buyer to obtain the FCC licenses
necessary to operate the facilities for which applications have been filed by
the Sellers (the "Pending Licenses") and which are designated in Schedule
3.08(a)(iii). Such cooperation shall include, but shall not be limited to,
prior to Closing (i) withdrawal of Sellers' applications for the Pending
Licenses and (ii) notification to Sellers' frequency coordinator that Sellers
intend to withdraw the applications for the Pending Licenses and that such
coordinator shall substitute the Buyer in the coordination study as the
designated applicant for the Pending Licenses. The
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timing of any such withdrawal of Sellers' pending applications shall be at the
Buyer's election.
ARTICLE 6
COVENANTS OF BUYER
The Buyer agrees that:
SECTION 6.01. Confidentiality. Prior to the Closing Date and after any
termination of this Agreement, the Buyer and its Affiliates will hold, and will
use their best efforts to cause their respective officers, directors,
employees, accountants, counsel, consultants, advisors and agents to hold, in
confidence, unless compelled to disclose by judicial or administrative process
or by other requirements of law, all confidential documents and information
concerning the Systems furnished to the Buyer or its Affiliates in connection
with the transactions contemplated by this Agreement, except to the extent that
such information can be shown to have been (i) previously known on a
nonconfidential basis by the Buyer, (ii) in the public domain through no fault
of the Buyer or (iii) later lawfully acquired by the Buyer from sources other
than any Seller; provided that the Buyer may disclose such information to its
officers, directors, employees, accountants, counsel, consultants, advisors and
agents in connection with the transactions contemplated by this Agreement and
to its lenders or other Persons in connection with obtaining financing so long
as such Persons are informed by the Buyer of the confidential nature of such
information and are directed by the Buyer to treat such information
confidentially. The obligation of the Buyer and its Affiliates to hold any such
information in confidence shall be satisfied if they exercise the same care
with respect to such information as they would take to preserve the
confidentiality of their own similar information. If this Agreement is
terminated, the Buyer and its Affiliates will, and will use their best efforts
to cause their respective officers, directors, employees, accountants, counsel,
consultants, advisors and agents to, destroy or deliver to the Sellers, upon
request, all documents and other materials, and all copies thereof, obtained by
the Buyer or its Affiliates or on their behalf from the Sellers in connection
with this Agreement that are subject to such confidence.
SECTION 6.02. Non-Solicitation of Employees. From the date hereof
until one year from the date hereof or, if later, the date upon which this
Agreement is terminated in accordance with its terms, the Buyer will not employ
or actively solicit for employment (including as an independent contractor) any
person who is on the date of this Agreement an employee of any Seller and who
is not within 30
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days after Closing a Transferred Employee; provided that the Buyer may employ
or actively solicit any such employee (i) whose employment is terminated by
such Seller or (ii) whose employment otherwise ceases with such Seller,
provided that in the case of clause (ii), the Buyer may not employ or actively
solicit any such employee until after the six-month anniversary of the date of
such employee's separation from such Seller.
SECTION 6.03. Access. For a period of seven years after the Closing
Date, the Buyer will afford promptly to any Seller and its agents reasonable
access to its properties, books, records, employees and auditors to the extent
necessary to permit such Seller to determine any matter relating to its rights
and obligations hereunder or to any period ending on or before the Closing
Date; provided that any such access by Sellers shall not unreasonably interfere
with the conduct of the business of the Buyer. The Sellers will hold, and will
use their best efforts to cause their officers, directors, employees,
accountants, counsel, consultants, advisors and agents to hold, in confidence,
unless compelled to disclose by judicial or administrative process or by other
requirements of law, all confidential documents and information concerning the
Buyer or the Systems provided to any of them pursuant to this Section.
ARTICLE 7
COVENANTS OF BUYER AND SELLER
The Buyer and the Sellers agree that:
SECTION 7.01. Commercially Reasonable Efforts; Further Assurances.
(a) Subject to the terms and conditions of this Agreement, they will each use
commercially reasonable efforts to take, or cause to be taken, all actions and
to do, or cause to be done, all things necessary or desirable under applicable
laws and regulations to consummate the transactions contemplated by this
Agreement. The Sellers and the Buyer agree to execute and deliver such other
documents, certificates, agreements and other writings and to take such other
actions as may be necessary or desirable in order to consummate or implement
expeditiously the transactions contemplated by this Agreement and to vest in
the Buyer (or, in the case of the Maryland Assets, Maryland LLC) good and
marketable title to the Purchased Assets and the Maryland Shares. The Buyer
and Seller will cooperate in good faith and use commercially reasonable
efforts to obtain the consents, effectuate the transfers and consummate the
contract renewals contemplated in this Agreement before and after the Closing
provided that such consents, transfers or renewals shall be free from any
materially adverse conditions (in the reasonable
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judgment of the Buyer) and provided that the Buyer shall not be obliged to take
any action and none of the Sellers shall take any action that may adversely
affect the Buyer, the Systems or any Purchased Asset.
(b) The Sellers each hereby constitute and appoint, effective as of
the Closing Date, the Buyer and its successors and assigns as their true and
lawful attorney with full power of substitution in the name of the Buyer, or in
their name but for the benefit of the Buyer, (i) to collect for the account of
the Buyer any items of Purchased Assets and (ii) to institute and prosecute all
proceedings which the Buyer may in its sole discretion deem proper in order to
assert or enforce any right, title or interest in, to or under the Purchased
Assets, and to defend or compromise any and all actions, suits or proceedings
in respect of the Purchased Assets. The Buyer shall be entitled to retain for
its own account any amounts collected pursuant to the foregoing powers,
including any amounts payable as interest in respect thereof.
SECTION 7.02. Certain Filings. (a) The Sellers and the Buyer shall
cooperate with one another (i) in determining whether any action by or in
respect of, or filing with, any governmental body, agency, official or
authority is required, or any actions, consents, approvals or waivers are
required to be obtained from parties to any material contracts, in connection
with the consummation of the transactions contemplated by this Agreement and
(ii) in taking such actions or making any such filings, furnishing information
required in connection therewith and seeking timely to obtain any such
actions, consents, approvals or waivers.
(b) The Buyer agrees to make an appropriate filing of a Notification
and Report Form pursuant to the HSR Act with respect to the transactions
contemplated hereby within 15 days after the date of execution of this
Agreement. Notwithstanding any other provision of this Agreement the Buyer
shall not be required to enter into any consent decree or to dispose or hold
separate any assets or otherwise agree to any action which may adversely affect
the Buyer, the Systems or any Purchased Asset in order to satisfy the
objections of any Governmental Authority in connection with the HSR Act. All
filing fees under the HSR Act shall be paid by the Buyer.
SECTION 7.03. Public Announcements. The parties agree to consult with
each other before issuing any press release or making any public statement with
respect to this Agreement or the transactions contemplated hereby and, except
as may be required by applicable law or any listing agreement with any national
securities exchange or quotation system, will not issue any such press release
or make any such public statement prior to such consultation.
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SECTION 7.04. Warn Act. The parties agree to cooperate in good faith
to determine whether any notification may be required under the Worker
Adjustment and Retraining Notification Act (the "WARN Act") as a result of the
transactions contemplated by this Agreement. The Buyer will be responsible for
providing any notification that may be required under the WARN Act with respect
to any Transferred Employees. The Sellers will be responsible for providing any
notification that may be required under the WARN Act with respect to any
employees of the Systems that are not Transferred Employees.
ARTICLE 8
TAX MATTERS
SECTION 8.01. Tax Definitions. The following terms, as used herein, have
the following meanings:
"Code" means the Internal Revenue Code of 1986, as amended.
"Pre-Closing Tax Period" means (i) any Tax Period ending on or before
the Closing Date and (ii) with respect to a Tax Period that commences before
but ends after the Closing Date, the portion of such period up to and including
the Closing Date.
"Tax" means (i) any net income, alternative or add-on minimum tax,
gross income, gross receipts, sales, use, ad valorem, value added, transfer,
franchise, profits, license, registration, recording, documentary,
conveyancing, gains, withholding on amounts paid to or by any Seller, payroll,
employment, excise, severance, stamp, occupation, premium, property,
environmental or windfall profit tax, custom duty, any payment required to be
made to any state abandoned property administrator or other public official
pursuant to an abandoned property, escheat or similar law or other tax,
governmental fee or other like assessment or charge of any kind whatsoever,
together with any interest, penalty, addition to tax or additional amount
imposed by any governmental authority (a "Taxing Authority") responsible for
the imposition of any such tax (domestic or foreign), or (ii) liability for the
payment of any amounts of the type described in (i) as a result of being party
to any agreement or any express or implied obligation to indemnify any other
Person.
SECTION 8.02. Tax Matters. The Sellers hereby jointly and severally
represent and warrant to the Buyer that:
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(a) each of the Sellers has timely paid all Taxes, and all
interest and penalties due thereon and payable by it for the
Pre-Closing Tax Period which will have been required to be paid on or
prior to the Closing Date, the non-payment of which would result in a
Lien on any Purchased Asset, would otherwise adversely affect the
Systems or would result in the Buyer becoming liable or responsible
therefor.
(b) each of the Sellers has established, in accordance with
generally accepted accounting principles applied on a basis consistent
with that of preceding periods, adequate reserves for the payment of,
and will timely pay all Tax liabilities, assessments, 'interest and
penalties which arise from or with respect to the Purchased Assets or
the operation of the Systems and are incurred in or attributable to
the Pre-Closing Tax Period, the non-payment of which would result in a
Lien on any Purchased Asset, would otherwise adversely affect the
Systems or would result in the Buyer becoming liable therefor.
SECTION 8.03. Tax Cooperation; Allocation of Taxes. (a) The Buyer and
the Sellers agree to furnish or cause to be furnished to each other, upon
request, as promptly as practicable, such information and assistance relating
to the Systems and the Purchased Assets (including, without limitation, access
to books and records) as is reasonably necessary for the filing of all Tax
returns, the making of any election relating to Taxes, the preparation for any
audit by any taxing authority, and the prosecution or defense of any claim,
suit or proceeding relating to any Tax. The Buyer and the Sellers shall retain
all books and records with respect to Taxes pertaining to the Purchased Assets
for a period of at least six years following the Closing Date. At the end of
such period, each party shall provide the other with at least ten days prior
written notice before destroying any such books and records, during which
period the party receiving such notice can elect to take possession, at its own
expense, of such books and records. The Sellers, the Sellers' Agent and the
Buyer shall cooperate with each other in the conduct of any audit or other
proceeding relating to Taxes involving the Purchased Assets or the Systems.
(b) All real property taxes, personal property Taxes and similar ad
valorem obligations levied with respect to the Purchased Assets for a taxable
period which includes (but does not end on) the Closing Date (collectively, the
"Apportioned Obligations") shall be apportioned between the Sellers and the
Buyer based on the number of days of such taxable period included 'in the
Pre-Closing Tax Period and the number of days of such taxable period after the
Closing Date (with respect to any such taxable period, the "Post-Closing Tax
Period"). The Sellers shall be liable for the proportionate amount of such
Taxes that is attributable to the Pre-Closing Tax Period, and the Buyer shall
be liable for
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the proportionate amount of such Taxes that is attributable to the Post-Closing
Tax Period. Upon receipt of any xxxx or payment of any amount with respect to
any Apportioned Obligations for which it is entitled to reimbursement under
this Section 8.03(b), each of the Sellers' Agent and the Buyer shall present a
statement to the other setting forth the amount of reimbursement to which each
is entitled under this Section 8.03(b) together with such supporting evidence
as is reasonably necessary to calculate the proration amount. The proration
amount shall be paid by the party owing it to the other within 10 days after
delivery of such statement.
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(c) Subject to Section 13. 10, all excise, sales, use, value added,
registration stamp, recording, documentary, conveyancing, franchise, property,
transfer, gains and similar Taxes, levies, charges and fees (collectively,
"Transfer Taxes") incurred in connection with the transactions contemplated by
this Agreement shall be borne by the Sellers. The Buyer and Seller shall
cooperate in providing each other with any appropriate resale exemption
certifications and other similar documentation. The party that is required by
applicable law to make the filings, reports, or returns with respect to any
applicable Transfer Taxes shall do so, and the other party shall cooperate with
respect thereto as necessary.
ARTICLE 9
EMPLOYEE BENEFITS
SECTION 9.01. Employee Benefits Definitions. The following terms, as
used herein, having the following meanings:
"Employee Plans" means the plans referred to in the first sentence of
Section 9.02.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"ERISA Affiliate" of any entity means any other entity which,
together with such entity, would be treated as a single employer under Section
414 of the Code.
"Multiemployer Plan" means each Employee Plan that is a multiemployer
plan, as defined in Section 3(37) of ERISA.
SECTION 9.02. ERISA Representations. The Sellers hereby jointly and
severally represent and warrant to the Buyer that:
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(a) Schedule 9.02(a) lists each employee benefit plan, as
such term is defined in Section 3(3) of ERISA, each employment,
severance or similar contract, plan, arrangement or policy and each
other plan or arrangement providing for compensation, bonuses,
profit-sharing, stock option or other stock-related rights or other
forms of incentive or deferred compensation, health or medical
benefits, disability benefits, workers' compensation, supplemental
unemployment benefits, severance benefits or post-employment pension
or welfare benefits, which (i) is maintained, administered or
contributed to by any Seller or any of their ERISA Affiliates and (ii)
covers any individual primarily employed in connection with the
Systems (a "Systems Employee") (hereinafter referred to collectively
as the "Employee Plans"). Notwithstanding the foregoing, the term
"Employee Plans" shall not include, and Schedule 9.02(a) shall not be
required to list, any "stay" or "sticking" bonus or similar
arrangement intended to provide incentives for employees to remain
employed through the Closing Date, and for which Sellers will retain
all liability on and after the Closing Date (a "Stay Bonus"). With
respect to each Employee Plan, the Sellers have provided the Buyer
with a true and complete copy of such plan document.
(b) No Employee Plan is a Multiemployer Plan and no Employee
Plan is subject to Title IV of ERISA. Neither any Seller nor any of
their Affiliates has incurred any liability under Title IV of ERISA
arising in connection with the termination of any plan covered or
previously covered by Title IV of ERISA that could become, after the
Closing Date, an obligation of Buyer or any of its Affiliates.
(c) Each Employee Plan which is intended to be qualified
under Section 401 (a) of the Code is so qualified and has been so
qualified during the period from its adoption to date, and each trust
forming a part thereof is exempt from tax pursuant to Section 501 (a)
of the Code. The Sellers have furnished to the Buyer copies of the
most recent Internal Revenue Service determination letters with
respect to each such Plan.
(d) With respect to Systems Employees, there are no employee
post-retirement medical or health plans in effect, except as required
by Section 601 of ERISA.
(e) The Purchased Assets are not now nor will they after the
passage of time be subject to any Lien imposed under Code Section
412(n) by reason of the failure of any Seller or any of their
Affiliates to make timely installments or other payments required by
Code Section 412.
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(f) Except as disclosed in Schedule 9.02 or pursuant to a
Stay Bonus, no Systems Employee will become entitled to any
retirement, severance or similar benefit or enhanced benefit solely as
a result of the transactions contemplated hereby.
(g) As of the Closing Date, neither any Seller nor any of
their Affiliates will have any liability in respect of accrued
vacation pay for any Systems Employee.
SECTION 9.03. Employees and Offers of Employment. As of the Closing
Date, the Buyer may, in its sole discretion, offer employment to any or all
Systems Employees; provided, that the Buyer may terminate at any time after the
Closing Date the employment of any employee who accepts such offer. The Buyer
shall, no later than 60 days after the date of this Agreement, give notice to
the Sellers of the Systems Employees to whom the Buyer intends to offer
employment. Any such offers shall be at such salary or wage and benefit levels
and on such other terms and conditions as the Buyer shall in its sole
discretion deem appropriate. The Systems Employees who accept and commence
employment with the Buyer are hereinafter collectively referred to as the
"Transferred Employees". Neither the Sellers nor any of their Affiliates will
take any action which would impede, hinder, interfere or otherwise compete with
the Buyer's effort to hire any Systems Employees. The Buyer shall not assume
responsibility for any Systems Employee until such employee commences
employment with the Buyer and, for the avoidance of doubt the Buyer shall not
be obligated to employ any Systems Employee.
SECTION 9.04. Sellers' Employee Benefit Plans. (a) The Sellers shall
retain all obligations and liabilities, including ail obligations in connection
with continuation of group health coverage required pursuant to Section 4980B
of the Code or Section 601, et seq., of ERISA, in respect of each employee or
former employee (including any beneficiary thereof) who is not a Transferred
Employee ("COBRA Obligations"). Except as expressly set forth herein, Seller or
its designated Affiliate shall retain all liabilities and obligations in
respect of benefits accrued as of the Closing Date by Transferred Employees
under its employee benefit and compensatory plans and arrangements (including
without limitation the Employee Plans), and neither the Buyer nor any of its
Affiliates shall have any liability with respect thereto. Except as expressly
set forth herein, no assets of any such plan or arrangement shall be
transferred to the Buyer or any of its Affiliates or to any plan of the Buyer
or any of its Affiliates. Accrued benefits or account balances of Transferred
Employees under any retirement or deferred compensation plan of the Sellers or
any of their Affiliates shall be fully vested as of the Closing Date.
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(b) Without limiting Section 9.04(a), with respect to the Transferred
Employees (including any beneficiary or dependent thereof), the Sellers shall
retain (i) all liabilities and obligations arising under any group life,
accident, medical, dental or disability plan or similar arrangement (whether or
not insured) to the extent that such liability or obligation relates to
contributions or premiums accrued (whether or not payable), or to claims
incurred (whether or not reported), on or prior to the Closing Date, (ii) all
liabilities and obligations arising under any worker's compensation arrangement
to the extent such liability or obligation relates to the period prior to the
Closing Date, including liability for any retroactive worker's compensation
premiums attributable to such period, (iii) all liabilities and obligations
arising under any "sticking" or "stay" bonus or severance or similar plan or
arrangement, and (iv) subject to Section 9.04(c), all other liabilities and
obligations arising under the employee benefit and compensatory plans and
arrangements of the Sellers and any of their Affiliates (including without
limitation the Employee Plans), to the extent any such liability or obligation
relates to the period prior to the Closing Date, including proportional
accruals through the Closing Date and including, without limitation,
liabilities and obligations in respect of accruals through the Closing Date
under any bonus plan or arrangement.
(c) On or prior to the Closing Date, the Sellers shall make any
payments necessary to ensure the accuracy of Section 9.02(g) above.
(d) With respect to any Transferred Employee (including any
beneficiary or dependent thereof) who enters a hospital or is on short-term
disability under any Employee Plan on or prior to the Closing Date and
continues in a hospital or on short-term disability after the Closing Date, the
Sellers shall be responsible (either directly or through the purchase of
insurance) for claims and expenses incurred both before and after the Closing
Date in connection with such Person, to the extent that such claims and
expenses are covered by an Employee Plan, until such time, (if any) that, in
the case of a Transferred Employee, such Person resumes full-time employment
with the Buyer or one of its Affiliates and, in the case of any beneficiary or
dependent of a Transferred Employee, such Person's hospitalization has
terminated. For the avoidance of doubt, the foregoing provisions are not
intended to impose on the Sellers obligations or liabilities except to the
extent required under the terms of any benefit plan or arrangement maintained
by the Sellers or their Affiliates.
(e) With respect to the COBRA Obligations retained by the Sellers
pursuant to the first sentence of Section 9.04(a), the Sellers shall jointly
and severally indemnify the Buyer, against any and all Damages (as defined in
Section 11. 02) arising out of the Sellers' failure to satisfy such COBRA
Obligations.
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SECTION 9.05. Buyer Benefit Plans. (a) The Buyer or one of its
Affiliates y will recognize all service of the Transferred Employees with any
Seller or any of its Affiliates, only for purposes of vesting and eligibility
to participate in those employee benefit plans, within the meaning of Section
3(3) of ERISA, in which the Transferred Employees are enrolled by the Buyer or
one of its Affiliates immediately after the Closing Date.
(b) The Sellers shall cause the Code Section 401(k) plan maintained
for Systems Employees to permit plan distributions, in accordance with
applicable law and regulations, to Transferred Employees as soon as practicable
after the Closing Date. If an employer contribution (other than a deferral or
matching contribution) is made by the Sellers to such plan for 1999, each
Transferred Employee shall be entitled to a pro rata allocation of such
contribution.
SECTION 9.06. No Third Party Beneficiaries. No provision of this
Article shall create any third party beneficiary or other rights in any
employee or former employee (including any beneficiary or dependent thereof) of
any Seller or of any of its subsidiaries in respect of continued employment (or
resumed employment) with either the Buyer or the Systems or any of their
Affiliates and no provision of this Article 9 shall create any such rights in
any such Persons in respect of any benefits that may be provided, directly or
indirectly, under any Employee Plan or any plan or arrangement which may be
established by the Buyer or any of its Affiliates. No provision of this
Agreement shall constitute a limitation on rights to amend, modify or terminate
after the Closing Date any such plans or arrangements of the Buyer or any of
its Affiliates.
ARTICLE 10
CONDITIONS TO CLOSING
SECTION 10.01. Conditions to Obligations of the Buyer and the Sellers.
The obligations of the Buyer and the Sellers to consummate the Closing are
subject to the satisfaction of the following conditions:
(a) Any applicable waiting period under the HSR Act relating
to the transactions contemplated hereby shall have expired or been
terminated.
(b) No provision of any applicable law or regulation and no
judgment, injunction, order or decree shall prohibit the consummation
of the Closing.
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SECTION 10.02. Conditions to Obligation of the Buyer. The obligation
of the Buyer to consummate the Closing is subject to the satisfaction, or
waiver by the Buyer at its absolute discretion, of the following further
conditions:
(a) The Sellers having obtained in form and substance
reasonably satisfactory to the Buyer: (i) all required consents to the
transfer to the Buyer of: (A) the Systems Franchises; (B) a number of
Private Cable Service Agreements, such that the Closing Basic
Subscriber Number for Subscribers served under Private Cable Service
Agreements which did not require consent to assignment or where the
required consent to assignment was received by Closing, is not less
than 95% of the Closing Basic Subscriber Number for Subscribers being
served under all Private Cable Service Agreements, (C) the agreements
set forth on Schedule 10.02(a) and (D) all other material Systems
Licenses and material Systems Contracts; (ii) any required consent of
RMTS to the transactions contemplated by this Agreement; and (iii) the
waiver of any purchase right, right of first refusal or similar right
contained in any contract or agreement triggered by such transfer,
including those set forth on Schedule 3.23; in each case (i) and (ii)
free from any materially adverse conditions (in the judgment of the
Buyer).
(b) The Systems having at Closing at least: (i) a
Transferred Closing Subscriber Number of 45,000 assuming the number of
Relevant New Subscribers is zero; (ii) 95,900 Homes Passed as of the
month-end prior to the Closing Date; and (iii) Three Month Average Per
Subscriber Revenue as of the Closing Date of $31.90.
(c) The Buyer having obtained at its expense on or prior to
the Closing Date a Phase I environmental assessment report confirming
that the Owned Property and the Leased Property included in the
Purchased Assets is free of hazardous materials, oil and other
contaminants.
(d) The Sellers having maintained commercially reasonable
inventory levels consistent with past practices, which will include
sufficient quantities of amplifiers, installation materials and
converters to operate the Systems in the ordinary course.
(e) There having been no material adverse change in the
business, financial condition or prospects of the Purchased Assets or
the Systems.
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(f) (i) Each of the Sellers shall have performed in all
material respects all of each of their obligations hereunder required
to be performed by any of them on or prior to the Closing Date, (11)
the representations and warranties of the Sellers contained in this
Agreement and in any certificate or other writing delivered by any of
them pursuant hereto (x) that are qualified by materiality or Material
Adverse Effect shall be true at and as of the Closing Date, as if made
at and as of such date (or if made as of a specific date, as of such
date), and (y) that are not qualified by materiality or Material
Adverse Effect shall be true in all material respects at and as of the
Closing Date, as if made at and as of such date (or if made as of a
specific date, as of such date), and (iii) Buyer shall have received a
certificate signed by an executive officer of each of the Sellers to
the foregoing effect.
(g) There shall not be threatened, instituted or pending any
action or proceeding by any Person before any court or governmental
authority or agency, domestic or foreign, seeking (i) to restrain,
prohibit or otherwise interfere with the transactions provided for
herein or ownership or operation by the Buyer or any of its Affiliates
of all or any material portion of the Purchased Assets or (ii) to
compel the Buyer or any of its Affiliates to dispose of or hold
separate all or any material portion of the Purchased Assets.
(h) There shall not be any action taken, or any statute,
rule, regulation, injunction, order or decree proposed, enacted,
enforced, promulgated, issued or deemed applicable to the purchase of
the Purchased Assets, by any Governmental Authority, other than the
application of the waiting period provisions of the HSR Act to the
purchase of the Purchased Assets, that, in the reasonable judgment of
the Buyer could, directly or indirectly, result in any of the
consequences referred to in clause 10.02(g) above.
(i) The Buyer shall have received an opinion of Stone,
XxXxxxx & Xxxxxxxx, counsel to the Sellers, dated the Closing Date to
the effect specified in Sections 3.01, 3.02, 3.03 and 3.04. In
rendering such opinion, such counsel may rely upon certificates of
public officers, as to matters governed by the laws of jurisdictions
other than Illinois or the federal laws of the United States of
America, upon opinions of counsel reasonably satisfactory to the
Buyer, and, as to matters of fact, upon certificates of officers of
the Sellers, copies of which opinions and certificates shall be
contemporaneously delivered to the Buyer.
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(j) The Buyer shall have received an opinion of Arent Fox
Xxxxxxx Xxxxxxx & Xxxx, PLLC in the form set forth in Exhibit 10.020)
with only such exceptions thereto as are consistent with the
information set forth in any of the Schedules hereto.
(k) The delivery of the Escrow Agreement and the
Non-Competition Agreement dated as of the Closing Date duly executed
by the parties thereto other than the Buyer.
(1) The Buyer shall have received all
documents it may reasonably request relating to the
existence of the Sellers' Agent and the 0 Sellers and
the authority of each of them for this Agreement, all in
form and substance reasonably satisfactory to the Buyer.
(m) [Intentionally Blank]
(n) Except as set forth in Schedule 10.02(n), each of the
buildings being provided with service by a System and receiving signal
by means of a multi-point multichannel distribution system shall have
been converted so that it is receiving signal direct from satellite.
(o) Each of the head-end leases listed on Schedule 10.02(o)
shall have been renewed on terms and conditions reasonably
satisfactory to the Buyer, or Sellers shall have put in place
equivalent arrangements in respect of the location of the Purchased
Asset currently operated on the demised premises under such leases on
terms and conditions reasonably satisfactory to the Buyer.
(p) Each of the Sellers shall have deleted the distant
broadcast signals specified in Schedule 5.07 prior to midnight on
December 31, 1999 or if Closing is on December 31, 1999, prior to
Closing.
(q) [Intentionally Blank]
(r) Sellers shall have filed all outstanding FCC Forms 320
with a "passing" or "satisfactory" leakage score for each of the
Systems.
(s) Sellers shall have complied with their obligations under
Section 5.02(k) of this Agreement.
(t) Sellers shall have received a written waiver (in a form
reasonably satisfactory to the Buyer) from the relevant Governmental
77
Authority of the requirement contained in Section 5.5-10 of the
Systems Franchise for Xxxxxxxx County.
(u) (A) The Southern Management Litigation shall have been
resolved by a binding settlement between the parties thereto (in terms
reasonably satisfactory to the Buyer) or a nonappealable, final order
of a court of competent jurisdiction (ii) terminating any and all
claims of both parties thereto against each other, (iii) allowing for
the provision of services by Telcom Plus, its assigns or successors to
the Southern Management Buildings pursuant to the terms and conditions
of the Southern Management Agreement, and (iv) enjoining Southern
Management from removing Telcom Plus' rooftop facilities from the
Middletowne apartments serviced pursuant to the Southern Management
Agreement, (B) Sellers shall not be in breach of any agreements then
existing between Southern Management and Telcom Plus and (C) consent
of RMTS and Southern Management shall have been received to assign all
rights and liabilities under the Southern Management Agreement with
respect to the provision of cable service, to Buyer, and with respect
to the provision of telephony service, to RMTS and such assignments
shall have been entered into conditional upon the Closing and
otherwise on terms and conditions reasonably satisfactory to the
Buyer.
(v) The Sellers shall have obtained consents for (i) the
existing installation by the Systems of antennas, transmitters, pole
mounts, microwave facilities, satellites and any other similar
equipment on the rooftops of the Roof Rights Buildings and (ii) the
operation of such equipment for the purpose of providing cable
television service, telecommunication service or any services related
thereto to Subscribers of the Systems, such consents to be on terms
and conditions reasonably satisfactory to Buyer.
SECTION 10.03. Conditions to Obligation of the Sellers. The obligation
of the Sellers to consummate the Closing is subject to the satisfaction of the
following further conditions:
(a) (i) The Buyer shall have performed in all material
respects all of its obligations hereunder required to be performed by
it at or prior to the Closing Date, (ii) the representations and
warranties of the Buyer contained in this Agreement and in any
certificate or other writing delivered by the Buyer pursuant hereto
shall be true in all material respects (disregarding any materiality
qualifiers therein) at and as of the Closing Date, as if made at and
as of such date and (iii) the Sellers shall have
78
received a certificate signed by an executive officer of the Buyer to
the foregoing effect.
(b) The Sellers shall have received an opinion of Xxxxxx
Xxxxx, in-house counsel to the Buyer, dated the Closing Date that the
matters specified in Sections 4.01, 4.02, and 4.03 are accurate in
all material respects. In rendering such opinion, such counsel may
rely upon certificates of public officers, as to matters governed by
the laws of jurisdictions other than Pennsylvania or the federal laws
of the United States of America, upon opinions of counsel reasonably
satisfactory to the Sellers, and, as to matters of fact, upon
certificates of officers of the Buyer, copies of which opinions and
certificates shall be contemporaneously delivered to the Sellers.
(c) The delivery of the Escrow Agreement executed by the
Buyer and the Escrow Agent and the Non-Competition Agreement executed
by the Buyer. -
(d) The Sellers shall have received all documents it may
reasonably request relating to the existence of the Buyer and the
authority of the Buyer for this Agreement, all in form and substance
reasonably satisfactory to the Sellers.
ARTICLE 11
SURVIVAL; INDEMNIFICATION
SECTION 11.01. Survival The representations and warranties of the
parties hereto contained in this Agreement or in any certificate or other
writing delivered pursuant hereto or in connection herewith shall survive the
Closing until the first anniversary of the Closing Date; provided that (i) the
representations and warranties in the Identified Provisions and Sections 4.01,
4.02, 4.03, and 4.06 shall survive indefinitely and (ii) the representations
and warranties contained in Articles 8 or 9 shall survive until expiration of
the statute of limitations applicable to the matters covered thereby (giving
effect to any waiver, mitigation or extension thereof), if later.
Notwithstanding the preceding sentence, any representation or warranty in
respect of which indemnity may be sought under this Agreement shall survive the
time at which it would otherwise terminate pursuant to the preceding sentence,
if notice of the inaccuracy thereof giving rise to such right of indemnity
shall have been given to the party against whom such indemnity may be sought
prior to such time.
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SECTION 11.02. Indemnification. (a) The Sellers hereby jointly and
severally indemnify the Buyer and its Affiliates against and agree to hold each
of them harmless from any and all damage, loss, liability and expense
(including, without limitation, reasonable expenses of investigation and
reasonable attorneys' fees and expenses in connection with any action, suit or
proceeding, including any action, suit or proceeding to enforce an indemnity
obligation hereunder) ("Damages") incurred or suffered by the Buyer or any of
its Affiliates arising out of
(i) any misrepresentation or breach of warranty made by any
Seller pursuant to this Agreement (determined without regard to any
materiality or Material Adverse Effect qualification contained
therein);
(ii) any other breach of covenant or agreement made or to be
performed by any Seller pursuant to this Agreement; or
(iii) - any Excluded Liability;
provided that except in respect of any Damages arising out of any
misrepresentation or breach of warranty under the Identified Representations,
the Sellers shall not be liable under Section 11.02(a)(i) unless the aggregate
amount of Damages with respect to all matters referred to in Section
11.02(a)(i) (determined without regard to any materiality or Material Adverse
Effect qualification contained in any representation or warranty giving rise to
the claim for indemnity hereunder) exceeds $1,000,000, in which case the
Sellers shall be liable for the full amount of such Damages, including the
first $1,000,000. The foregoing is subject to the applicable provisions of
Section 2.10(a)(ii).
(b) The Buyer hereby indemnifies each of the Sellers and their
Affiliates against and agrees to hold each of them harmless from any and all
Damages
Z-
incurred or suffered by any of them arising out of
(i) any misrepresentation or breach of warranty made by the
Buyer pursuant to this Agreement (determined without regard to any
materiality qualification contained therein); and
(ii) any other breach of covenant or agreement made or to be
performbed by the Buyer pursuant to this Agreement;
provided that except in respect of any Damages arising out of any
misrepresentation or breach of warranty under Sections 4.01, 4.02, or 4.03 or
4.06 the Buyer shall not be liable under Section 11. 02(b)(i) unless the
aggregate amount of Damages with respect to all matters referred to in Section
I 1.02(b)(i)
80
(determined without regard to any materiality qualification contained in any
representation or warranty giving rise to the claim for indemnity hereunder)
exceeds $1,000,000, in which case the Buyer shall be liable for the full amount
of such Damages, including the first $1,000,000. The maximum amount recoverable
by the Sellers and their Affiliates for all claims under Section 11.02(b)(i)
shall in the aggregate be equal to $10,000,000.
(c) Amounts payable by a party in respect of any Damages that are
subject to the indemnification obligations of such party under Section 11.02(a)
or 11. 02(b) will be payable by the Indemnifying Party within five days of
receiving written notice of such Damages from the Indemnified Party, and will
bear interest at the Prime Rate plus three percent (3%) beginning on the sixth
day after receipt of such written notice and ending on the date of payment of
indemnification by the Indemnifying Party.
SECTION 11.03. Procedures. (a) The party seeking indemnification under
Section 11.02 (the "-Indemnified Party") agrees to give prompt notice to the
party against whom indemnity is sought (the "Indemnifying Party") of the
assertion of any claim or the commencement of any suit, action or proceeding
("Claim") in respect of which indemnity may be sought under such Section and
will provide the Indemnifying Party such information with respect thereto that
the Indemnifying Party may reasonably request. The failure to so notify the
Indemnifying Party shall not relieve the Indemnifying Party of its obligations
hereunder, except to the extent such failure shall have materially and
adversely prejudiced the Indemnifying Party.
(b) The Indemnifying Party shall be entitled to participate
in the defense of any Claim asserted by any third party ("Third Party
Claim") and, subject to the limitations set forth in this Section,
shall be entitled to control and appoint lead counsel for such
defense, in each case at its expense, provided that prior to assuming
control of such defense, the Indemnifying Party must acknowledge that
it will have an indemnity obligation for all Damages resulting from
such Third Party Claim as provided under this Article 11 without
regard to any limitation, deductible, "basket" or similar provision in
Section 11.02 hereof
(c) The Indemnifying Party shall not be entitled to assume or
maintain control of the defense of any Third Party Claim if (i) the
Third Party Claim relates to or arises in connection with any criminal
proceeding, action, indictment, allegation or investigation, (ii) the
Indemnified Party reasonably believes an adverse determination with
respect to the Third Party Claim would be detrimental to the
Indemnified Party's reputation or future business prospects, (iii) the
Third Party Claim
81
seeks an injunction or equitable relief against the Indemnified Party
or (iv) the Indemnifying Party has failed or is failing to prosecute
or defend vigorously the Third Party Claim.
(d) If the Indemnifying Party shall assume the control of
the defense of any Third Party Claim in accordance with the provisions
of this Section 11. 03, the Indemnifying Party shall obtain the prior
written consent of the Indemnified Party before entering into any
settlement of such Third Party Claim, if the settlement does not
expressly unconditionally release the Indemnified Party from all
liabilities and obligations with respect to such Third Party Claim or
the settlement imposes injunctive or other equitable relief against or
imposes any obligation on the Indemnified Party.
(e) The Indemnified Party shall be entitled to participate
in the defense of any Third Party Claim and to employ separate counsel
of its choice for such purpose. The reasonable fees and expenses of
such separate counsel shall be borne by the Indemnifying Party.
(f) Each party shall cooperate, and cause their respective
Affiliates to cooperate, in the defense or prosecution of any Third
Party Claim and shall furnish or cause to be furnished such records,
information and testimony, and attend such conferences, discovery
proceedings, hearings, trials or appeals, as may be reasonably
requested in connection therewith.
(g) The Sellers shall not be entitled to assume control of
the defense of any Third Party Claim if, in the reasonable judgment of
the Buyer, the Third Party Claim would, if resolved adversely to the
interests of the Buyer, be reasonably likely to result in an indemnity
obligation of the Sellers that would be greater than the amount in the
Indemnity Escrow Account at the relevant time that is not subject to
any pending claim by the Buyer.
ARTICLE 12
TERMINATION
SECTION 12.01. Grounds for Termination. This Agreement may be
terminated at any time prior to the Closing:
82
(a) by mutual written agreement of the Sellers and the
Buyer-,
(b) by either the Sellers or the Buyer if the conditions to
the consummation of the merger in Article 10 shall not have been
satisfied, or where applicable, waived by March 31, 2000, provided
that no party that is (or whose Affiliate is) 'in material breach of
its or their obligations under this Agreement may terminate this
Agreement and the Sellers may not terminate this Agreement for 15 days
after they have received a notice of a Potential Payment Event;
(c) by the Buyer if (i) the condition in Section
10.02(a)(ii) remains unfulfilled at a time when all other conditions
to this Agreement have been satisfied or waived (such time being the
"Potential Payment Event"), (ii) the Buyer has given notice of the
Potential Payment Event to the Sellers, and (iii) the condition in
Section 10.02(a)(ii) remains unfulfilled on the date falling 10 days
after the date of the notice in (ii) above. -
(d) by either the Sellers or the Buyer if consummation of
the transactions contemplated hereby would violate any nonappealable
final order, decree or judgment of any court or governmental body
having competent jurisdiction; or
(e) by Buyer if it receives a Request for Additional
Information or Documentary Material pursuant to the HSR Act in respect
of the transactions contemplated hereby.
The party desiring to terminate this Agreement pursuant to clauses
12.01 (b), 12.01 (c), 12.01 (d) or 12.01 (e) shall give notice of such
termination to the other party. For purposes of this Section 12.01, a condition
shall be deemed to have been satisfied if by its nature, it is to be satisfied
at Closing and it would in fact be satisfied at Closing.
SECTION 12.02. Effect of Termination, Subject to Sections 5. 10 and
12.02, if this Agreement is terminated as permitted by Section 12.01, such
termination shall be without liability of either party (or any stockholder,
partner, member, director, officer, employee, agent, consultant or
representative of such party) to any other party to this Agreement; provided
that if such termination shall result from the (i) willful failure of a party
to fulfill a condition to the performance of the obligations of another party,
(ii) willful failure to perform a covenant of this Agreement or (iii) willful
breach by any party hereto of any representation or warranty or agreement
contained herein, such party (and its Affiliates, if any, that are parties
hereto) shall be fully liable for any and all Damages incurred or
83
suffered by any other party as a result of such failure or breach. The
provisions of Sections 2.12, 5.10, 6,01, 6.02, 13.03, 13.05, 13.06 and 13.07
shall survive any termination hereof pursuant to Section 12.01.
ARTICLE 13
MISCELLANEOUS
SECTION 13.01. Notices. All notices, requests and other communications
to any party hereunder shall be in writing (including facsimile transmission)
and shall be given,
if to the Buyer, to:
Comcast Corporation
0000 Xxxxxx Xxxxxx
Xxxxxxxxxxxx, Xxxxxxxxxxxx 00000-0000
Attention: General Counsel
Fax: (000) 000-0000
Phone: (000) 000-0000
Copies to (which shall not constitute notice):
Xxxxx Xxxx & Xxxxxxxx
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 100 17
Attention: Xxxxxxx X. Xxxxxx
Fax: (000) 000-0000
Phone: (000) 000-0000
if to the Sellers or the Sellers' Agent, to:
Sellers' Agent
South Central Development Company, L.P.
0000 Xxxxxx Xxxxxx Xxxxx
Xxxxxxxxxx, X.X. 00000
Attention: Xxxx Xxxxxxx
Fax: (000) 000-0000
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Copies to: Stone XxXxxxx & Xxxxxxxx
000 Xxxxxx Xxxxxxxxx, Xxxxx 000
Xxxxxxxxxx, Xxxxxxxx 00000
Attention: Xxxx Xxxxxxxx
Fax: (000) 000-0000
All such notices, requests and other communications shall be deemed received on
the date of receipt by the recipient thereof if received prior to 5 p.m. in the
place of receipt and such day is a business day in the place of receipt.
Otherwise, any such notice, request or communication shall be deemed not to
have been received until the next succeeding business day in the place of
receipt. If Buyer shall make reasonable efforts to give notice to Sellers'
Agent at the details set out above and such notice is not received by Sellers'
Agent notice to Stone XxXxxxx & Xxxxxxxx shall be sufficient notice to the
Sellers.
SECTION 13.02. Amendments and Waivers. (a) Any provision of this
Agreement may be amended or waived if, but only if, such amendment or waiver is
in writing and is signed, in the case of an amendment, by each party to this
Agreement, or in the case of a waiver, by the party against whom the waiver is
to be effective.
(b) No failure or delay by any party in exercising any right, power
or privilege hereunder shall operate as a waiver thereof nor shall any single
or partial exercise thereof preclude any other or further exercise thereof or
the exercise of any other right, power or privilege. The rights and remedies
herein provided shall be cumulative and not exclusive of any rights or remedies
provided by law.
SECTION 13.03. Expenses. Except as provided in Section 5. 10, Section
7.02(b), Section 8.03(c) or otherwise herein, all costs and expenses incurred
in connection with this Agreement shall be paid by the party incurring such
cost or expense.
SECTION 13.04. Successors and Assigns. The provisions of this
Agreement shall be binding upon and inure to the benefit of the parties hereto
and their respective successors and assigns; provided that no party may assign,
delegate or otherwise transfer any of its rights or obligations under this
Agreement without the consent of each other party hereto, except that the Buyer
may transfer or assign, in whole or from time to time in part, to one or more
of its Affiliates, the right to purchase all or a portion of the Purchased
Assets; provided that no such assignment will relieve the Buyer of its
obligations hereunder.
85
SECTION 13.05. Governing Law. Agreement shall be governed by and
construed in accordance with the law of the State of New York, without regard
to the conflicts of law rules of such state.
SECTION 13.06. Jurisdiction. Except as otherwise expressly provided in
this Agreement, the parties hereto agree that any suit, action or proceeding
seeking to enforce any provision of, or based on any matter arising out of or
in connection with, this Agreement or the transactions contemplated hereby may
be brought in the United States District Court for the Southern District of New
York or any other New York State court sitting in New York City, and each of
the parties hereby consents to the jurisdiction of such courts (and of the
appropriate appellate courts therefrom) in any such suit, action or proceeding
and irrevocably waives, to the fullest extent permitted by law, any objection
which it may now or hereafter have to the laying of the venue of any such suit
action or proceeding in any such court or that any such suit, action or
proceeding which is brought in any such court has been brought in an
inconvenient forum. Process in any such suit, action or proceeding may be
served on any party anywhere in the world, whether within or without the
jurisdiction of any such court. Without limiting the foregoing, each party
agrees that service of process on such party as provided in Section 13.01 shall
be deemed effective service of process on such party.
SECTION 13.07. WAIVER OF JURY TRIAL. EACH OF THE PARTIES HERETO
HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL
PROCEEDING ARISING OUT OF OR RELATED TO THIS AGREEMENT OR THE TRANSACTIONS
CONTEMPLATED HEREBY.
SECTION 13.08. Counterparts; Third Party Beneficiaries. This Agreement
may be signed in any number of counterparts, each of which shall be an
original, with the same effect as if the signatures thereto and hereto were
upon the same instrument. This Agreement shall become effective when each party
hereto shall have received a counterpart hereof signed by the other party
hereto. No provision of this Agreement is intended to confer upon any Person
other than the parties hereto any rights or remedies hereunder.
SECTION 13.09. Entire Agreement. This Agreement constitutes the entire
agreement between the parties with respect to the subject matter of this
Agreement and supersedes all prior agreements and understandings, both oral and
written, between the parties with respect to the subject matter of this
Agreement.
SECTION 13. 10. Bulk Sales Laws. The Buyer and the Sellers each hereby
waive compliance by the Sellers with the provisions of the "bulk sales", "bulk
transfer" or similar laws of any state. The Sellers jointly and severally agree
to
86
indemnify and hold the Buyer harmless against any and all claims, losses,
damages, liabilities, costs and expenses incurred by the Buyer or any of its I
Affiliates as a result of any failure to comply with any such "bulk sales",
"bulk transfer" or similar laws.
SECTION 13.11. Captions. The captions herein are included for
convenience of reference only and shall be ignored in the construction or
interpretation hereof (N-N) 05726,'097,'AGT/niid.aLirpa.agtconform.wpd
87
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed by their respective authorized officers as of the day and year
first above written.
COMCAST CORPORATION
By: /s/ Xxxxxx X. Pick
Name: Xxxxxx X. Pick
Title: Vice President
SOUTH CENTRAL DEVELOPMENT
COMPANY, LP
By: /s/ Xxxx X. Xxxxxxx
Name: Xxxx X. Xxxxxxx
Title.- General Partner
MID-ATLANTIC TELCOM PLUS, LLC
By: /s/ Xxxx X. Xxxxxxx
Name: Xxxx X. Xxxxxxx
Title: Business Manager
MID-ATLANTIC CONNECTICUT I
LIMITED PARTNERSHIP
By: /s/ Xxxx X. Xxxxxxx
Name: Xxxx X. Xxxxxxx
Title: President,
Mid-Atlantic Connecticut, Inc.,
General Partner
(NY) 05726/097/AGT/rni"Lapa.
88
MID-ATLANTIC CABLE OPERATING
LIMITED PARTNERSHIP NO. 1 OF
PRINCE XXXXXXX COUNTY
By: /s/ Xxxx X. Xxxxxxx
Name: Xxxx X. Xxxxxxx
Title: President,
Mid-Atlantic Cable Service Co.,
General Partner
MID-ATLANTIC CABLE OPERATING
LIMITED PARTNERSHIP NO. 2
OF PRINCE XXXXXXX COUNTY
By: /s/ Xxxx X. Xxxxxxx
Name: Xxxx X. Xxxxxxx
Title: President,
Mid-Atlantic Cable Service Co.,
General Partner
of the General Partner
(NY) 05726/097/AGT/ntid.&Lapa.agLcmifomLwpd
89
