DOC #1344920.NY
1
LOWER DELAWARE/MARYLAND
ASSET PURCHASE AGREEMENT
BY AND BETWEEN
AMERICAN CABLE TV INVESTORS 5, LTD.
AND
MEDIACOM LLC
DATED AS OF
DECEMBER 24, 1996
TABLE OF CONTENTS
Page
ARTICLE I 1
1. Definitions 1
Accountants 1
Accounts Receivable 1
Ad Insertion Agreement 1
Adjustment Time 1
Affiliate 1
Alternative Transaction 1
Angola Consent 2
Assets 2
Assumed Liabilities 2
Basic Services 2
Basic Subscriber Rate 2
Best of Seller's Knowledge 2
Business 2
Business Day 2
Buyer 2
Buyer Financial Statement 3
Cable Act 3
Closing 3
Closing Date 3
Code 3
Communications Act 3
Commitment 3
Consents 3
Copyright Act 3
Deposit 3
Employer 3
Employer Plans 3
Encumbrance 3
Environmental Law 3
Equipment 4
Equivalent Basic Subscribers 4
ERISA 4
Escrow Agent 4
Escrow Agreement 4
Exchange Act 5
Excluded Assets 5
Excluded Liabilities 5
Exhibits 5
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Expanded Basic Services 5
FCC 5
Final Adjustments Report 5
Franchise Areas 5
GAAP 5
General Partner 5
Governmental Authority 5
Governmental Permits 5
Hazardous Substances 6
Homes Passed 6
HSR Act 6
Initial Termination Date 6
Intangibles 6
IRS 6
Legal Requirement 6
Limited Partners 6
Management Agreement 6
Material Adverse Change in the Financial Markets 7
Ocean Pines Consent 7
Partnership Agreement 7
Pay TV 7
Permitted Encumbrances 7
Person 7
Preliminary Adjustments Report 7
Prime Rate 7
Purchase Price 7
Real Property 7
Regulatory Requirement 8
Remediation 8
Required Consents 8
Schedules 8
Sea Colony Consent 8
SEC 8
Securities Act 8
Seller 8
Seller Contracts 8
Seller Financial Statements 8
Service Area 8
System 8
Taking 8
Tax Return 9
Taxes 9
TCI 9
Telecom Act 9
Termination Date 9
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Xxxxxxx Properties Consent 9
Units 9
WARN Act 9
ARTICLE II 9
2. Purchase and Sale of Assets 9
2.1 Purchase and Sale of Assets 9
2.2 Time and Place of Closing 10
ARTICLE III 10
3. Consideration 10
3.1 Consideration for the Assets 10
3.2 Purchase Price Prorations 10
3.3 Purchase Price Adjustments 11
3.4 Preliminary and Final Settlements 17
3.5 Disputed Liabilities 18
3.6 Allocation of Purchase Price 19
ARTICLE IV 19
4. Assumed Liabilities and Excluded Assets 19
4.1 Assignment and Assumption 19
4.2 Excluded Assets 20
ARTICLE V 20
5. Representations and Warranties of Seller 20
5.1 Organization and Qualification 20
5.2 Authority and Validity 21
5.3 Consents and Approvals; No Violation 21
5.4 Complete Systems 22
5.5 Title 22
5.6 Real Property 22
5.7 Environmental Matters 23
5.8 Compliance with Law; Governmental Permits 24
5.9 Seller Contracts 25
5.10 Copyright Compliance 25
5.11 Financial Statements 25
5.12 Legal Proceedings 26
5.13 Employment Matters 26
5.14 System Information 27
5.15 Finders and Brokers 28
5.16 Tax Matters 28
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5.17 Inventory 28
5.18 Insurance 28
5.19 Accounts Receivable 28
5.20 Restoration 28
5.21 Equipment 28
5.22 Microwave Replacement 28
ARTICLE VI 29
6. Buyer's Representations and Warranties 29
6.1 Organization and Qualification 29
6.2 Authority and Validity 29
6.3 No Breach or Violation 29
6.4 Litigation 30
6.5 Financial Statements 30
6.6 Adequate Financing 30
6.7 Finders and Brokers 30
6.8 Qualification of Buyer 30
ARTICLE VII 31
7. Additional Covenants 31
7.1 Access to Premises and Records 31
7.2 Continuity and Maintenance of Operations; Financial
Statements 31
7.3 Employee Matters 33
7.4 Franchise Extensions 34
7.5 Environmental Report 34
7.6 Consents 35
7.7 HSR Notification 36
7.8 Notification of Certain Matters 36
7.9 Risk of Loss; Condemnation 37
7.10 Adverse Changes 37
7.11 Action by Limited Partners 37
7.12 No Solicitation 38
7.13 Sales and Transfer Taxes and Fees 39
7.14 Commercially Reasonable Efforts 39
7.15 Title Insurance 39
7.16 Non-Competition 39
7.17 Financing Commitment 40
7.18 Forms 394 40
7.19 UCC Lien and Judgment Searches 40
7.20 Seller Financial Statements 40
7.21 Ad Insertion Agreement 41
ARTICLE VIII 41
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8. Conditions Precedent to Obligations of Buyer 41
8.1 HSR Act 41
8.2 Governmental or Legal Action 41
8.3 Accuracy of Representations and Warranties. 41
8.4 Performance of Agreements 41
8.5 No Material Adverse Change 41
8.6 Consents and Extensions 42
8.7 Transfer Documents 42
8.8 Opinions of Seller's Counsel 42
8.9 Discharge of Liens 42
8.10 Extension of Ad Insertion Agreement 42
8.11 Opinion of Seller's FCC Counsel 42
8.12 Additional Documents and Acts 42
8.13 Certificates 42
ARTICLE IX 43
9. Conditions Precedent to Obligations of Seller 43
9.1 HSR Act 43
9.2 Governmental or Legal Actions 43
9.3 Accuracy of Representations and Warranties 43
9.4 Performance of Agreements 43
9.5 Consents 43
9.6 Opinions of Buyer's Counsel 43
9.7 Limited Partner Approval 43
9.8 Payment of Purchase Price 44
9.9 Assumption of Liabilities 44
9.10 Closing of Another System 44
9.11 Additional Documents and Acts 44
9.12 Certificates 44
9.13 Fairness Opinion 44
ARTICLE X 44
10. Termination 44
10.1 Events of Termination 44
10.2 Manner of Exercise 46
10.3 Effect of Termination 46
10.4 Liquidated Damages 48
ARTICLE XI 48
11. Nature and Survival of Representations, Warranties and
Agreements 48
11.1 Nature of Representations, Warranties and Agreements48
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11.2 Survival of Representations and Warranties 48
11.3 Time Limitations 48
11.4 Limitations as to Xxxxxx 00
XXXXXXX XXX 00
00. Indemnification 49
12.1 Rights to Indemnification 49
12.2 Procedure for Indemnification. 50
12.3 Deposit 51
ARTICLE XIII 51
13. Miscellaneous 51
13.1 Parties Obligated and Benefitted 51
13.2 Press Releases and Confidentiality 51
13.3 Notices 52
13.4 Waiver 53
13.5 Captions 53
13.6 CHOICE OF LAW 53
13.7 Nonrecourse 53
13.8 Terms 53
13.9 Rights Cumulative 53
13.10 Further Actions 53
13.11 Time 54
13.12 Expenses 54
13.13 Specific Performance 54
13.14 Additional Remedies 54
13.15 Waiver of Remedies 54
13.16 Schedules 55
13.17 Counterparts 55
13.18 Entire Agreement 55
13.19 Severability 55
EXHIBITS
Exhibit A Geographic Areas of Seller's Business
Exhibit B Escrow Agreement
Exhibit C Form of Engagement Letter
Exhibit D Form for Opinion of Seller's Counsel
Exhibit E Form for Opinion of Buyer's Counsel
Exhibit F Form of Opinion of Seller's FCC Counsel
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SCHEDULES
Schedule 1.1 Subscriber Rates
Schedule 1.2 Consents
Schedule 1.3 Equipment
Schedule 1.4 Franchise Areas
Schedule 1.5 Governmental Permits
Schedule 1.6 Permitted Encumbrances
Schedule 1.7 Real Property
Schedule 1.8 Seller Contracts
Schedule 1.9 System
Schedule 4.2 Excluded Assets
Schedule 5.3(b) Violations of Partnership Agreement and
Legal Requirements
Schedule 5.4 Complete Systems
Schedule 5.5 Encumbrances on Seller's Title
Schedule 5.9 Seller Contracts
Schedule 5.12 Legal Proceedings
Schedule 5.13(c) Employment Matters
Schedule 5.13(d) Employees
Schedule 5.13(e) Employer Plans
Schedule 5.14 System Information
Schedule 5.16 Taxes
Schedule 6.3(a) Consents to be Obtained or Waived by
Closing Date
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ASSET PURCHASE AGREEMENT
This Asset Purchase Agreement ("Agreement") is made as
of the 24th day of December, 1996, by and between AMERICAN CABLE
TV INVESTORS 5, LTD., a Colorado limited partnership ("Seller"),
and MEDIACOM LLC, a New York limited liability company ("Buyer").
R E C I T A L S:
1. Seller is engaged in the business of providing
cable television service to subscribers in and around the
geographic areas set forth on Exhibit A.
2. Buyer desires to purchase and Seller desires to
sell the assets of Seller designated in this Agreement used or
held for use in connection with that business, upon the terms and
subject to the conditions set forth in this Agreement.
Accordingly, the parties agree as follows:
ARTICLE I
1. Definitions.
"Accountants" shall have the meaning set forth in Section 3.4.
"Accounts Receivable" shall mean all accounts receivable of Seller
representing amounts earned by Seller in connection with its operation of
the Business through the Adjustment Time.
"Ad Insertion Agreement" shall have the meaning set forth
in Section 7.21.
"Adjustment Time" shall have the meaning set forth in Section 3.2.
"Affiliate" shall mean, with respect to any Person, any other
Person controlling, controlled by or under common control with such Person,
with "control" for such purpose meaning the possession, directly or
indirectly, of the power to direct or cause the direction of the management
and policies of a Person, whether through the ownership of voting securities
or voting interests, by contract or otherwise.
"Alternative Transaction" shall mean any transaction which could
result in the transfer of control over, or ownership of, all or
substantially all the Assets, including (a) any merger or consolidation of
Seller in which another Person or group of Persons acquires 50% or
more of the partnership interests in Seller or the equity interests of the
surviving entity, as the case may be, (b) any tender offer or exchange offer
for partnership interests in Seller which, if consummated, would
result in a Person or group of Persons (other than the existing
partners in such entities as of the date of this Agreement)
owning 50% or more of the partnership interests in Seller or (c)
any sale or other disposition of all or substantially all the Assets.
"Angola Consent" shall mean the consent of Angola-by-
the-Bay Property Owners Association Inc. (or any successor
thereto) to permit the transfer to Buyer of the Agreement to
Construct, Maintain and Operate a Cable Television System, dated
September 8, 1975, between Angola-by-the-Bay Property Owners
Association Inc. and CATV Sussex Limited Partnership, as assigned
to Seller.
"Assets" shall mean all properties, privileges, rights,
interests and claims, real and personal, tangible and intangible,
of every type and description that are owned, leased, used or
held for use in the Business in which Seller has any right, title
or interest or in which Seller acquires any right, title or inter
est on or before the Closing Date, including Accounts Receivable,
Governmental Permits, Intangibles, Seller Contracts, Equipment
and Real Property but excluding any Excluded Assets and any
Assets disposed of by Seller in the ordinary course of business
prior to the Closing Date.
"Assumed Liabilities" shall have the meaning set forth
in Section 4.1.
"Basic Services" shall mean the lowest tier of cable
television programming sold to subscribers of the System for
which a subscriber served by the System pays a fixed monthly fee
to Seller, excluding Expanded Basic Services, Pay TV and any
charges for additional outlets and installation fees and revenues
derived from the rental of converters, remote control devices and
other like charges for equipment.
"Basic Subscriber Rate" shall mean, for the System, the
predominant monthly fees and charges derived from the provision
of Basic Services to single family households, as of June 30,
1996, as set forth on Schedule 1.1.
"Best of Seller's Knowledge" shall mean the actual
knowledge of Seller after reasonable inquiry of Xxxxxx Xxxxx,
Xxxxxx Xxxxxxx and Xxxxx Xxxx.
"Business" shall mean the cable television business con
ducted by Seller through the System in and around the Franchise
Areas.
"Business Day" shall mean any day other than Saturday,
Sunday or a day on which banking institutions in Denver, Colorado
or New York, New York are required or authorized to be closed.
"Buyer" shall mean the Person identified as such in the
preamble to this Agreement.
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"Buyer Financial Statement" shall have the meaning set
forth in Section 6.5.
"Cable Act" shall have the meaning set forth in Section 5.8.
"Closing" shall mean the consummation of the transactions
contemplated by this Agreement, as described in Article II.
"Closing Date" shall mean the date on which the Closing occurs.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Communications Act" shall have the meaning set forth in
Section 5.8(c).
"Commitment" shall have the meaning set forth in Section 7.17.
"Consents" shall mean any registration with, consent or
approval of, notice to, or action by any Person or Governmental
Authority required to permit the transfer of the Assets to Buyer
or permit Seller to perform any of its other obligations under
this Agreement, as set forth on Schedule 1.2.
"Copyright Act" shall mean Title 17 of the United
States Code, as amended, and all rules and regulations
thereunder.
"Deposit" shall have the meaning set forth in Section 3.1.
"Employer" shall have the meaning set forth in Section 5.13(a).
"Employer Plans" shall have the meaning set forth in Section 5.13(e).
"Encumbrance" shall mean any mortgage, lien, security
interest, security agreement, conditional sale or other title
retention agreement, limitation, pledge, option, charge,
assessment, restrictive agreement, restriction, encumbrance,
adverse interest, restriction on transfer or any exception
to or defect in title or other ownership interest (including
reservations, rights of way, possibilities of reverter, encroach
ments, easements, rights of entry, restrictive covenants, leases
and licenses).
"Environmental Law" shall mean any Legal Requirement
relating to pollution or protection of public health, safety
or welfare or the environment, including those relating to
emissions, discharges, releases or threatened releases of
Hazardous Substances into the environment (including ambient
air, surface water, ground water or land), or otherwise relating
to the manufacture, processing, distribution, use, treatment,
storage, disposal, transport or handling of Hazardous Substances.
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"Equipment" shall mean all electronic devices, trunk
and distribution coaxial and optical fiber cable, amplifiers,
power supplies, conduit, vaults and pedestals, grounding and pole
hardware, subscriber's devices (including converters, encoders,
transformers behind television sets and fittings), headend
hardware (including origination, earth stations, transmission and
distribution system), test equipment, vehicles and other tangible
personal property owned, leased, used or held for use by Seller
in connection with the Business, including the items described on
Schedule 1.3.
"Equivalent Basic Subscribers" shall mean, with respect
to each Franchise Area, as of any date, the number of active
customers for Basic Services either in a single household, a
commercial establishment or a multi-unit dwelling (including a
hotel unit); provided, however, that the number of customers in a
commercial establishment or multi-unit dwelling that obtain
service on a "bulk-rate" basis shall be determined for each
Franchise Area by dividing the gross bulk-rate xxxxxxxx for Basic
Services and Expanded Basic Services (but excluding xxxxxxxx from
a la carte tiers or premium services, installation or other non-
recurring charges, converter rental or any outlet or connection
other than the first outlet or connection, pass-through charges
for sales taxes, line-itemized franchise fees, fees charged by
the FCC and the like) attributable to such commercial
establishment or multi-unit dwelling during the most recent
billing period ended prior to the date of calculation (but
excluding xxxxxxxx in excess of a single month's charge) by the
rate charged at the date of determination to individual
households for the highest level of Basic Services and Expanded
Basic Services offered in the Franchise Area, such rate not to be
less than the rate for such Franchise Area set forth on Schedule
1.1 (excluding xxxxxxxx from a la carte tiers or premium
services, installation or other non-recurring charges, converter
rental, pass-through charges for sales taxes, line-itemized
franchise fees, fees charged by the FCC and the like). For
purposes of this definition, (i) an "active customer" shall mean,
as of any date, any person, commercial establishment or multi-
unit dwelling that is paying for and receiving Basic Services
from the System in that Franchise Area who has an account that is
not more than 60 days past due (except for past due amounts of
$10.00 or less, provided such account is otherwise current) but
excluding any person, commercial establishment or multi-unit
dwelling that as of the date of calculation has not paid in full
the charges for at least one month of the services ordered or who
has been obtained as a subscriber by offers made, promotions
conducted or discounts given outside of the ordinary course of
business, or whose account has been compromised or written off
other than in the ordinary course of business consistent with
past practices for reasons such as interrupted service but not
for the purpose of making it qualify as an "active customer," and
(ii) the number of days a customer account is past due shall be
calculated from the first day of the period for which the
applicable billing relates.
"ERISA" shall have the meaning set forth in Section 5.13(b).
"Escrow Agent" shall have the meaning set forth in Section 3.1.
"Escrow Agreement" shall have the meaning set forth in Section 3.1.
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"Exchange Act" shall mean the Securities and Exchange Act of 1934,
as amended.
"Excluded Assets" shall have the meaning set forth in Section 4.2.
"Excluded Liabilities" shall have the meaning set forth in
Section 4.1(b).
"Exhibits" shall mean the exhibits prepared and
delivered pursuant to this Agreement.
"Expanded Basic Services" shall mean any video programming
provided over the System, regardless of service tier,other than Basic
Services, any new product tier and video programming offered on a per
channel or per program basis, for which a subscriber served by the System pays
a fixed monthly fee to Seller, excluding Pay TV and any charges for additional
outlets and installation fees and revenues derived from the rental of
converters, remote control devices and other like charges for equipment.
"FCC" shall have the meaning set forth in Section 5.8(c).
"Final Adjustments Report" shall have the meaning set
forth in Section 3.4(b).
"Franchise Areas" shall mean those areas in which
Seller is authorized under one or more Governmental Permits
issued by the applicable franchising authorities to provide cable
television service to subscribers located in such areas through
the ownership and operation of the System, as set forth on
Schedule 1.4.
"GAAP" shall mean generally accepted accounting
principles as in effect in the United States of America on the
date of this Agreement.
"General Partner" shall mean IR-TCI Partners V, L.P.,
the general partner of Seller.
"Governmental Authority" shall mean any of the
following: (a) the United States of America; (b) any state,
commonwealth, territory or possession of the United States of
America and any political subdivision thereof (including
counties, municipalities and the like); or (c) any agency,
authority or instrumentality of any of the foregoing, including
any court, tribunal, department, bureau, commission or board.
"Governmental Permits" shall mean all franchises,
authorizations, permits, licenses, easements, registrations,
leases, variances and similar rights obtained from any
Governmental Authority which authorize or are required in
connection with the operation of the Business, as described on
Schedule 1.5.
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"Hazardous Substances" shall mean any pollutant,
contaminant, chemical, industrial, toxic, hazardous or noxious
substance or waste which is regulated by any Governmental
Authority, including, but not limited to (a) any petroleum or
petroleum compounds (refined or crude), flammable substances,
explosives, radioactive materials or any other materials or
pollutants which pose a hazard or potential hazard to the Real
Property or to Persons in or about the Real Property or cause the
Real Property to be in violation of any Legal Requirement of any
Governmental Authority, (b) asbestos or any asbestos-containing
material of any kind or character, (c) polychlorinated biphenyls
("PCBs"), as regulated by the Toxic Substances Control Act, 15
U.S.C. 2601 et seq., (d) any materials or substances designated
as "hazardous substances" pursuant to the Clean Water Act, 33
U.S.C. 1251 et seq., (e) "chemical substance," "new chemical
substance" or "hazardous chemical substance or mixture" as
defined in the Toxic Substances Control Act, referred to above,
(f) "hazardous substances" pursuant to the Comprehensive
Environmental Response, Compensation, and Liability Act, 42
U.S.C. 9601 et seq. and (g) "hazardous waste" pursuant to the
Resource Conservation and Recovery Act, 42 U.S.C. 6901 et seq.
"Homes Passed" shall mean, with respect to the System
and as of June 30, 1996, the total of (a) the number of single
family residences capable of being serviced without further line
construction, (b) the number of units in multi-family residential
buildings capable of being serviced without further line
construction and not then governed by bulk-service agreements and
(c) the number of bulk service agreements regardless of the
number of units serviced or the equivalent billing units.
"HSR Act" shall have the meaning set forth in Section 7.6.
"Initial Termination Date" shall mean June 30, 1997.
"Intangibles" shall mean all general intangibles,
including subscriber lists, claims (excluding any claims relating
to Excluded Assets), patents, copyrights and goodwill, if any,
owned, used or held for use by Seller in connection with the Business.
"IRS" shall mean the Internal Revenue Service.
"Legal Requirement" shall mean any statute, ordinance,
code, law, rule, regulation, order or other requirement, standard
or procedure enacted, adopted or applied by any Governmental
Authority, including judicial decisions applying common law or
interpreting any other Legal Requirement.
"Limited Partners" shall mean the Persons who own or
hold units of limited partnership interests in Seller.
"Management Agreement" shall mean the agreement related
to the operation of
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the System and the other cable systems owned by Seller between Seller and
TCI Cablevision Associates, Inc.(formerly known as Xxxxxxx & Associates, Inc.).
"Material Adverse Change in the Financial Markets"
shall mean a change in the U.S. financial markets that has a
material adverse effect, generally, on the ability to obtain debt
or equity financing.
"Ocean Pines Consent" shall mean the consent of Ocean
Pines Association (or any successor thereto) to permit the
transfer to Buyer of the Agreement for the Construction and
Operation of a Cable Television System, dated February 1, 1978,
between Triad CATV, Inc. and Ocean Pines Association, as assigned
to Seller.
"Partnership Agreement" shall mean the Amended and
Restated Limited Partnership Agreement of Seller, dated as of
January 1, 1987, by and between IR-TCI Partners V, L.P. (formerly
known as IR-Xxxxxxx Partners V, L.P.), as the general partner,
and Xxxxx X. Xxxxx, as the initial limited partner.
"Pay TV" shall mean premium programming services
selected by and sold to subscribers of the System for monthly
fees in addition to the fee for Basic Services.
"Permitted Encumbrances" shall mean the following:
(a) liens for taxes, assessments and governmental charges not yet
due and payable; (b) zoning laws and ordinances and similar Legal
Requirements; (c) rights reserved to any Governmental Authority
to regulate the affected property; (d) as to leased Assets,
interests of lessors and Encumbrances affecting the interests of
the lessors; (e) the Encumbrances described on Schedule 1.6; and
(f) any liens, easements, rights-of-way, servitudes, permits,
leases, restrictions and imperfections or irregularities in title
that do not in any material respect, individually or in the
aggregate, affect or impair the value or use of the affected
Asset as it is currently being used by Seller.
"Person" shall mean any natural person, corporation,
partnership, trust, unincorporated organization, association,
limited liability company, Governmental Authority or other
entity.
"Preliminary Adjustments Report" shall have the meaning
set forth in Section 3.4(a).
"Prime Rate" shall mean the rate of interest quoted
from time to time in The Wall Street Journal as the prime rate.
"Purchase Price" shall have the meaning set forth in
Section 3.1.
"Real Property" shall mean all Assets consisting of
interests in real property (including, to the extent applicable,
improvements, fixtures and appurtenances), including fee
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and leasehold interests, as described on Schedule 1.7.
"Regulatory Requirement" shall mean any filing required
pursuant to the Securities Act, the Exchange Act, the HSR Act,
state securities laws (including, but not limited to, state "blue
sky" laws) and state corporate laws (including, but not limited
to, takeover statutes).
"Remediation" shall have the meaning set forth in Section 7.5.
"Required Consents" shall mean the Consents designated
as such on Schedule 1.2 by an asterisk.
"Schedules" shall mean the schedules prepared and
delivered pursuant to this Agreement.
"Sea Colony Consent" shall mean an agreement between
Seller and Sea Colony Associates, Inc. (or any successor
thereto), assignable to Buyer, to provide Basic Services to the
Units with an expiration date no earlier than the second
anniversary of the Closing Date.
"SEC" shall mean the Securities and Exchange Commission.
"Securities Act" shall mean the Securities Act of 1933, as amended.
"Seller" shall mean the Person indicated as such in the
preamble to this Agreement.
"Seller Contracts" shall mean all contracts, agreements
and leases, other than those that are Governmental Permits, to
which Seller is a party and pertain to the ownership, operation
or maintenance of the Assets or the Business, including those
described on Schedule 1.8.
"Seller Financial Statements" shall have the meaning set forth
in Section 5.11.
"Service Area" shall mean any area within a Franchise
Area where businesses, residences, multi-family dwellings,
hotels, motels, trailers and other users are capable of being
serviced with terrestrial cable television services without
further line construction as of the Closing Date excluding those
areas where TCI is providing terrestrial cable television
services by means of cable, microwave, fiber optics, satellite
receivers or broadcasts as of the Closing Date.
"System" shall mean a cable television reception and
distribution system operated in the conduct of the Business,
consisting of one or more headends, subscriber drops and
associated electronic and other equipment, and which is, or is
capable of being without modification, operated as an independent
system without interconnections to other systems, as
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set forth on Schedule 1.9.
"Taking" shall have the meaning set forth in Section 7.7(b).
"Tax Return" shall mean any return, report, information
return or other document (including any related or supporting
information) filed or required to be filed with any taxing
authority in connection with the determination, assessment,
collection, administration or imposition of any Taxes.
"Taxes" shall mean all taxes, charges, fees, liens,
imposts, duties or other assessments including, but not limited
to, income, withholding, excise, employment, property, sales,
franchise, use and gross receipt taxes, imposed by the United
States or any state, county, local or foreign government or any
subdivision thereof. Such term shall also include any interest,
penalties or additions attributable to such assessments.
"TCI" shall mean TCI Communications, Inc., a Delaware
corporation.
"Telecom Act" shall have the meaning set forth in Section 5.8(e).
"Termination Date" shall mean July 22, 1997; provided
however, Seller shall have the right upon five days notice to
Buyer, to extend the Termination Date to a date designated in
such notice, which date shall in no event be later than September
22, 1997; provided further, Seller shall have the right, upon
five days notice to Buyer to further extend the Termination Date
to a date designated in such notice, which date shall in no event
be later than December 19, 1997.
"Xxxxxxx Properties Consent" shall mean the consent of
Pot-Nets, Inc. (or any successor thereto) to permit the transfer
to Buyer of the Agreement Granting a Cable Television Franchise,
dated as of November 20, 1973, by and between CATV Sussex Company
and Pot-Nets, Inc., as assigned to Seller.
"Units" shall mean the number of Equivalent Basic
Subscribers attributable to the units of Sea Colony determined in
accordance with the definition of "Equivalent Basic Subscribers".
"WARN Act" shall mean the Worker Adjustment and
Retraining Notification Act.
ARTICLE II
2. Purchase and Sale of Assets.
2.1 Purchase and Sale of Assets. Subject to the satisfaction of
the conditions
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to each party's obligations set forth in Articles VIII and IX (or, with
respect to any condition not satisfied, the waiver thereof by the party or
parties for whose benefit the condition exists), Seller shall sell, assign,
transfer and deliver to Buyer all of Seller's right, title and
interest in, and Buyer shall purchase, acquire, accept and pay
for, the Assets.
2.2 Time and Place of Closing. Subject to the terms
and conditions of this Agreement, the Closing shall take place at
10:00 a.m. New York City time on a date specified by notice from
Seller or Buyer to the other (but shall not in any event be prior
to the satisfaction or waiver of the conditions to Closing as set
forth in Articles VIII and IX or no later than ten Business Days
after satisfaction or waiver of all conditions to Closing as set
forth in Articles VIII and IX), in New York, New York at the
offices of Xxxx, Scholer, Fierman, Xxxx & Handler, LLP, or at
such other time or place as the parties may agree; provided,
however, the date specified in such notice shall not be less than
10 nor more than 30 days after the date of such notice (unless
the Termination Date would occur within such 10-day period, in
which event Seller or Buyer shall have the right to designate any
date prior to the Termination Date as the date of Closing);
provided, further, that if Seller gives Buyer notice designating
a date for Closing prior to June 23, 1997 and Buyer has not yet
obtained the Commitment, Buyer shall have the right to designate
the date for Closing, which shall be on or prior to June 23,
1997.
ARTICLE III
3. Consideration.
3.1 Consideration for the Assets. The aggregate
consideration for the Assets shall consist of (i) an amount equal
to $43,100,000, subject to proration as set forth in Section 3.2
and adjustment as set forth in Section 3.3 (the "Purchase Price")
and (ii) the assumption by Buyer of the Assumed Liabilities. The Purchase
Price shall be payable as follows: (a) $1,077,500 (the "Deposit"), payable
concurrently with the execution and delivery of this Agreement in
cash by means of wire or interbank transfer in immediately
available funds to the account of The Chase Manhattan Bank (the
"Escrow Agent"), to be held, administered and distributed for the
respective benefits of the parties hereto in accordance with the
terms of this Agreement and the Escrow Agreement among Seller,
Buyer and the Escrow Agent dated the date of this Agreement (the
"Escrow Agreement") in the form set forth as Exhibit B attached
hereto, and (b) $42,022,500, as adjusted by the prorations and
adjustments set forth in the Preliminary Adjustments Report but
subject to Sections 3.3(c), (d) and (e) and to the last sentence
of Section 3.4(a), payable by Buyer to Seller, or Seller's
designee, at Closing in cash by means of wire or interbank
transfer in immediately available funds. At Closing, Seller and
Buyer shall direct the Escrow Agent to release any interest,
earnings and gains then accrued on the Deposit to Buyer, or
Buyer's designee, in accordance with the terms of the Escrow
Agreement and Escrow Agent shall retain the Deposit, in
accordance with the terms of the Escrow Agreement, for the
satisfaction of indemnification claims by Buyer against Seller,
if any, pursuant to Article XII.
3.2 Purchase Price Prorations. (1) All revenues
(other than Accounts
10
Receivable being purchased by Buyer hereunder) and all expenses arising
from the operations of the Business up until 12:01 a.m. on the Closing Date
(the "Adjustment Time"), including, but not limited to, pole rental fees,
rental or other charges payable in respect of the Seller Contracts,
sales and use taxes payable with respect to cable television
service and equipment (which shall not include sales or use taxes
arising out of the consummation of the transaction contemplated
hereunder), power and utility charges, real and personal property
taxes and assessments levied against the Assets, applicable
franchise, copyright or other fees, sales and service charges,
wages, payroll taxes and payroll expenses (including accrued
vacation pay except to the extent a Purchase Price adjustment in
Buyer's favor is made under Section 3.3) of employees of Employer
who primarily perform services in connection with the operation
of the Business who are employed by Buyer as of the Closing, and
other prepaid and deferred items shall be prorated between Buyer
and Seller as of the Adjustment Time in accordance with GAAP and
the principle that Seller shall receive all revenues (other than
Accounts Receivable being purchased by Buyer hereunder) and shall
be responsible for all expenses, costs and liabilities allocable
to the period prior to the Adjustment Time and Buyer shall
receive all revenues and shall be responsible for all expenses,
costs and liabilities allocable to the period after the
Adjustment Time.
(2) The amount of each item of revenue prorated
under subsection (a) above, to a party which has not received,
and under the terms of this Agreement will not receive, such
revenue shall be deemed a charge against the other party. The
amount of any item of cost or expense prorated under subsection
(a) above to a party which has not paid, and under the terms of
this Agreement will not pay, such cost or expense shall be deemed
a charge against such party. If the aggregate charges allocated
to Seller as set forth in this Section 3.2(b) exceed the
aggregate charges allocated to Buyer as set forth in this Sec
tion 3.2(b), the Purchase Price shall be decreased by an amount
equal to the difference between the aggregate charges allocated
to Seller and the aggregate charges allocated to Buyer. If the
aggregate charges allocated to Buyer as set forth in this Sec
tion 3.2(b) exceed the aggregate charges allocated to Seller as
set forth in this Section 3.2(b), the Purchase Price shall be
increased by an amount equal to the difference between the
aggregate charges allocated to Buyer and the aggregate charges
allocated to Seller.
3.3 Purchase Price Adjustments. (1) The Purchase
Price shall be increased by an amount equal to the aggregate of
the following:
(1) (a) 100% of the face amount of all
Accounts Receivable which, as of the Closing Date, are
outstanding for a period of not more than 30 days after their
respective invoice dates and (b) 85% of the face amount of all
Accounts Receivable which, as of the Closing Date, are
outstanding for a period of more than 30 days but not more than
60 days after their respective invoice dates; and
(2) to the extent not included in the
prorations to the Purchase Price as set forth in Section 3.2, the
dollar amount of all advance payments to, or deposits with, third
parties relating to the Business which, as of the Closing Date,
are for the account of Seller or are security for Seller's
performance of its obligations under any agreement relating to the
11
Business or any Assets, including, but not limited to,deposits made with
lessors and deposits for utilities.
(2) The Purchase Price shall be decreased by an
amount equal to the sum of (i) the dollar amount of the remaining
balance, as of the Closing Date, of all advance payments to, or
monies of third parties on deposit with, Seller relating to the
Business, including advance payments and deposits by customers
served by the Business for converters, encoders, decoders, cable
service and related sales, (ii) the dollar amount of accrued
vacation pay of employees of Employer identified on Schedule
5.13(d) who are employed by Buyer as of the Closing and (iii) if
the average of the aggregate number of Equivalent Basic
Subscribers served by the System (excluding the Units) as of the
Closing Date and as of the first day of the month for the eleven
months prior to the month during which the Closing occurs (the
"Subscriber Average") is less than 27,582, an amount equal to
(x) the difference between 27,582 and the Subscriber Average
times (y) $1,507.
(c)(i) If as of the Closing Date Seller has
obtained the Sea Colony Consent, then no adjustment shall be made
to the Purchase Price other than as provided for in Sections 3.2
and 3.3(a) and (b); provided, however, that if the weighted
average rate charged under such agreement for the provision of
Basic Services (the "Closing Rate") is less than $13.09 per unit
of Sea Colony per month, the Purchase Price shall be decreased by
an amount equal to (x) $1,534,126 (the "Sea Colony Adjustment")
minus (y) the Units calculated using the Closing Rate times
$1,507.
(ii) If as of the Closing Date, (x) Seller has not
obtained the Sea Colony Consent and (y) Seller has received
written notice from Xxxx X. Xxxxxxx Associates, Inc. (or any
successor thereto) that Buyer will not be permitted to provide
Basic Services to the Units after the Closing Date (a "Sea Colony
Notice"), then the Purchase Price shall be decreased by an amount
equal to the Sea Colony Adjustment.
(iii) If as of the Closing Date Seller (x) has
not obtained the Sea Colony Consent, (y) has not received a Sea
Colony Notice and (z) is not providing Basic Services to the
Units, then the Purchase Price shall be decreased by an amount
equal to the Sea Colony Adjustment and at Closing Buyer shall
place into escrow an amount equal to the Sea Colony Adjustment.
(iv) If as of the Closing Date Seller (x) has not
obtained the Sea Colony Consent, (y) has not received a Sea
Colony Notice and (z) is providing Basic Services to the Units,
then at Closing Seller shall place into escrow a portion of the
Purchase Price equal in amount to the Sea Colony Adjustment.
(v) Any funds placed into escrow pursuant to
paragraph (iii) or (iv) of this Section 3.3(c) shall be released
(together with any interest earned thereon) as follows:
12
(x) if Buyer does not provide, or ceases to provide, Basic
Services to the Units prior to the first anniversary of the
Closing Date and does not commence or recommence providing such
services for a continuous period of 180 days, then on the 181st day:
(i) to Seller, an amount equal to 50% of any revenue
attributable to the provision of cable services to the Units for
the period from the Closing Date to the date Buyer ceases
providing such services; and
(ii) the balance to Buyer;
provided, that if within 180 days after the first date on which
Buyer does not provide, or ceases to provide, Basic Services to
the Units, Buyer commences or recommences providing such services
to the Units, then on the fifth Business Day after Buyer
commences or recommences providing such services:
(A) to Buyer, an amount equal to 50% of any loss in
revenue to Buyer attributable to cable services to the Units for
the period from the date Buyer does not provide or ceases to
provide Basic Services to the Units to the date of commencement
of such services based on an amount per month equal to the
average monthly revenue received or accrued (in accordance with
GAAP) by Seller for the Units for the twelve months prior to
Closing (the "Units Revenue"); and
(B) the balance to Seller;
provided, further, that if the rate charged by Buyer for the
provision of Basic Services (the "New Rate") is less than $13.09
per unit of Sea Colony per month, then on the fifth Business Day
after such agreement:
(1) to Buyer, an amount equal to 50% of any loss in
revenue attributable to cable services to the Units for the
period from the date Buyer does not provide or ceases to provide
Basic Services to the Units to the date of commencement of such
services based on an amount per month equal to the Unit Revenue
plus an amount equal to (a) the Sea Colony Adjustment minus (b)
the Units calculated using the New Rate times $1,507; and
(2) the balance to Seller;
(y) if Buyer enters into a written agreement to provide
Basic Services to the Units, then on the fifth Business Day after
such agreement:
(i) to Buyer, an amount equal to 50% of any loss in
revenue to Buyer attributable to cable services to the Units for
the period from the date Buyer does not provide or ceases to
provide Basic Services to the Units to the date of commencement
of such services based on an amount per month equal to the Units
Revenue; and
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(ii) the balance to Seller;
provided, however, that if the New Rate charged under Buyer's
agreement for the provision of Basic Services is less than $13.09
per unit of Sea Colony per month, then on the fifth Business Day
after such agreement:
(A) to Buyer, an amount equal to 50% of any loss in
revenue attributable to cable services to the Units for the
period from the date Buyer does not provide or ceases to provide
Basic Services to the Units to the date of commencement of such
services based on an amount per month equal to the Units Revenue
plus an amount equal to (a) the Sea Colony Adjustment minus (b)
the Units calculated using the New Rate times $1,507; and
(B) the balance to Seller; or
(z) if Buyer commences or recommences providing Basic
Services to the Units without having entered into an agreement
therefor and, on the first anniversary of the Closing Date, is
regularly so providing such services, then, on the first
anniversary of the Closing Date:
(i) to Buyer, an amount equal to 50% of any loss in
revenue to Buyer attributable to cable services to the Units for
the period from the date Buyer does not provide or ceases to
provide Basic Services to the Units to the date of commencement
or recommencement of such services based on an amount per month
equal to the Units Revenue; and
(ii) the balance to Seller;
provided, however, that if the New Rate actually charged by Buyer
for the provision of Basic Services is less than $13.09 per Unit
of Sea Colony per month, then
(A) to Buyer, 50% of any loss in revenue to Buyer
attributable to cable services to the Units for the period from
the date Buyer does not provide or ceases to provide Basic
Services to the Units to the date of commencement or
recommencement of such services based on an amount per month
equal to the Units Revenue, plus an amount equal to (a) the Sea
Colony Adjustment minus (b) the Units calculated using the New
Rate times $1,507; and
(B) the balance to Seller.
(vi) If the Subscriber Average calculated as of
the earlier of the Closing Date and April 30, 1997 is greater
than 27,582, then any adjustment to the Purchase Price and any
amount to be placed into escrow by Seller or Buyer pursuant to
paragraphs (iii) and (iv) of this Section 3.3(c) shall be
decreased by an amount equal to the difference between 27,582 and
the Subscriber Average calculated as of the earlier of the
Closing Date and April 30, 1997, times $1,507.
14
(vii) If (A) the Purchase Price is adjusted
pursuant to paragraph (ii) of this Section 3.3(c) or any portion
of the escrow funds are released to Buyer pursuant to Section
3.3(c)(v)(x)(ii) and (B)(i) on or prior to the first anniversary
of the Closing Date Buyer enters into a written agreement to
commence or recommence providing Basic Services to the Units or
(ii) on the first anniversary of the Closing Date Buyer is in
fact regularly providing such services (whether or not pursuant
to an agreement), then Buyer shall pay to Seller an amount equal
to (i)(a) the amount of the Sea Colony Adjustment or (b) if the
New Rate is less than $13.09 per unit of Sea Colony per month, an
amount equal to the Units calculated using the New Rate times
$1,507 minus (ii) 50% of any loss in revenue to Buyer
attributable to cable services to the Units for the period from
the date Buyer does not provide or ceases to provide Basic
Services to the Units to the date of commencement of such
services based on an amount per month equal to the Units Revenue;
such payment shall be made to Seller in cash (by means of
interbank transfer in immediately available funds) within 10
Business Days of commencement of such services but in no event
later than the first anniversary of the Closing Date.
(d) If as of the Closing Date Seller has not
obtained the Xxxxxxx Properties Consent, then at Closing Seller
shall place into escrow a portion of the Purchase Price equal to
(a) the average number of Equivalent Basic Subscribers that are
the subject of the Xxxxxxx Properties Consent included in the
Subscriber Average times (b) $1,507 (the "Xxxxxxx Properties
Adjustment"). The Xxxxxxx Properties Adjustment shall be
released from escrow (together with any interest earned thereon)
as follows:
(x) if Buyer does not provide, or ceases to provide, Basic
Services to the Xxxxxxx Properties Subscribers and does not
commence or recommence providing such services for a continuous
period of 45 days, then on the 46th day:
(i) to Seller, an amount equal to 50% of any revenue
attributable to the provision of cable services to the
subscribers that are the subject of the Xxxxxxx Properties
Consent (the "Xxxxxxx Properties Subscribers") from the Closing
Date to the date Buyer ceases providing such services; and
(ii) the balance to Buyer;
(y) if Seller obtains the Xxxxxxx Properties Consent or
Buyer enters into a written agreement to provide Basic Services
to the Xxxxxxx Properties Subscribers, then on the fifth Business
Day after the date of such agreement:
(i) to Buyer, an amount equal to 50% of any loss in
revenue attributable to cable services to the Xxxxxxx Properties
Subscribers for the period from the date Buyer does not provide
or ceases to provide Basic Services to the Xxxxxxx Properties
Subscribers to the date of commencement of such services based on
an amount per month equal to the average monthly revenue received
or accrued (in accordance with GAAP) by Seller for the Xxxxxxx
Properties Subscribers for the twelve months prior to Closing
(the "Xxxxxxx Revenue") and
15
(ii) the balance to Seller; or
(z) if not theretofor released, then on the date which is
the first anniversary of the Closing, to Seller.
If (A) any portion of the Xxxxxxx Properties Adjustment is
released from escrow to Buyer pursuant to Section 3.3(d)(x)(ii)
and (B)(i) on or prior to the first anniversary of the Closing
Buyer enters into a written agreement to commence providing Basic
Services to the Xxxxxxx Properties Subscribers or (ii) on the
first anniversary of the Closing Date Buyer is in fact regularly
providing such services (whether or not pursuant to an
agreement), then Buyer shall pay to Seller an amount equal to (i)
the Xxxxxxx Properties Adjustment minus (ii) 50% of any loss of
revenue attributable to cable services to the Xxxxxxx Properties
Subscribers for the period from the date Buyer does not provide
or ceases to provide such services to the date of commencement or
recommencement of such services based on an amount per month
equal to the Xxxxxxx Revenue.
(e) If as of the Closing Date Seller has not
obtained the Angola Consent, then at Closing Seller shall place
into escrow a portion of the Purchase Price equal to (a) the
average number of Equivalent Basic Subscribers that are the
subject of the Angola Consent included in the Subscriber Average
times (b) $1,507 (the "Angola Adjustment"). The Angola
Adjustment shall be released from escrow (together with any
interest earned thereon) as follows:
(x) if Buyer does not provide, or ceases to provide, Basic
Services to the Angola Subscribers and does not commence or
recommence providing such services for a continuous period of 45
days, then on the 46th day:
(i) to Seller, an amount equal to 50% of any revenue
attributable to the provision of cable services to the
subscribers that are the subject of the Angola Consent (the
"Angola Subscribers") from the Closing Date to the date Buyer
does ceases providing such services; and
(ii) the balance to Buyer;
(y) if Seller obtains the Angola Consent or Buyer enters
into a written agreement to provide Basic Services to the Angola
Subscribers, then on the fifth Business Day after the date of
such agreement:
(i) to Buyer, an amount equal to 50% of any loss in
revenue attributable to cable services to the Angola Subscribers
for the period from the date Buyer does not provide or ceases to
provide Basic Services to the Angola Subscribers to the date of
commencement of such services based on an amount per month equal
to the average monthly revenue received or accrued (in accordance
with GAAP) by Seller for the Angola Subscribers for the twelve months
16
prior to Closing (the "Angola Revenue"); and
(ii) the balance to Seller; or
(z) if not theretofor released, then on the date which is
the first anniversary of the Closing, to Seller.
If (A) any portion of the Angola Adjustment is released from
escrow to Buyer pursuant to Section 3.3(e)(x)(ii) and (B)(i) on
or prior to the first anniversary of the Closing Buyer enters
into a written agreement to commence providing Basic Services to
the Angola Subscribers or (ii) on or prior to the first
anniversary of the Closing Date Buyer is in fact regularly
providing such services (whether or not pursuant to an
agreement), then Buyer shall pay to Seller an amount equal to (i)
the Angola Adjustment minus (ii) 50% of any loss of revenue
attributable to cable services to the Angola Subscribers for the
period from the date Buyer does not provide or ceases to provide
such services to the date of commencement or recommencement of
such services based on an amount per month equal to the Angola
Revenue.
3.4 Preliminary and Final Settlements. Preliminary
and final adjustments to the Purchase Price will be determined as
follows:
(1) At least ten Business Days prior to the
Closing Date, Seller will deliver to Buyer a report (the
"Preliminary Adjustments Report"), prepared in good faith and on
a reasonable basis, setting forth in reasonable detail Seller's
estimate as of the Closing Date of the prorations set forth in
Section 3.2 and the adjustments set forth in Section 3.3. The
Preliminary Adjustments Report shall be certified by an
authorized officer of the general partner of the General Partner
to have been prepared in good faith and on a reasonable basis.
Seller shall provide Buyer with such information as Buyer may
reasonably request to verify the proposed prorations and
adjustments. If Buyer gives notice to Seller that it reasonably
believes that any of the proposed prorations or adjustments are
materially incorrect and the parties are unable to resolve the
dispute prior to Closing, the disputed amount shall be deposited
with the Escrow Agent, to be administered and distributed in
accordance with the terms of this Agreement and the Escrow
Agreement, pending final resolution of the adjustments pursuant
to Section 3.4(b).
(2) Within 60 days after the Closing Date, Seller
will deliver to Buyer a report (the "Final Adjustments Report"),
prepared in good faith and on a reasonable basis, setting forth
in reasonable detail the final determination of the prorations
set forth in Section 3.2 and the adjustments set forth in Sec
tion 3.3. The Final Adjustments Report shall make such changes
to the Preliminary Adjustments Report as are necessary to cover
those prorations or adjustments which (i) were estimated or were
not calculated as of the Closing Date in the Preliminary
Adjustments Report and (ii) were adjusted in the Preliminary
Adjustments Report and which require subsequent adjustment. The
Final Adjustments Report shall be certified by an authorized
officer of the general partner of the General Partner to be true,
complete and correct as of the date it is delivered.
17
Buyer shall provide Seller with reasonable access to
all records which Buyer has in its possession and which are
necessary for Seller to prepare the Final Adjustments Report.
Seller shall provide Buyer with reasonable access to all records
which Seller has in its possession which are necessary for Buyer
to review and verify the Final Adjustments Report.
(3) Within 30 days after receipt of the Final
Adjustments Report, Buyer shall review the Final Adjustments
Report and notify Seller whether or not Buyer accepts all or any
of the prorations and adjustments set forth on the Final
Adjustments Report. If Buyer accepts the Final Adjustments
Report with respect to all prorations and adjustments contained
therein, Buyer or Seller, as appropriate, shall, within ten
Business Days of such acceptance, make the following payments:
(i) if the Purchase Price calculated based on the Final
Adjustments Report is greater than the Purchase Price calculated
based on the Preliminary Adjustments Report, Buyer shall pay such
difference to Seller in cash by wire or interbank transfer in
immediately available funds, or (ii) if the Purchase Price
calculated based on the Final Adjustments Report is less than the
Purchase Price calculated based on the Preliminary Adjustments
Report, Seller shall pay such difference to Buyer in cash by wire
or interbank transfer in immediately available funds. In the
event any payment required by this Section 3.4(c) is not made
when due, Seller or Buyer, as appropriate, shall make the payment
required by this Section 3.4(c) with interest accruing from the
date such payment was due at the Prime Rate plus 5%.
(4) If Buyer in good faith objects to any
prorations and/or adjustments set forth on the Final Adjustments
Report, Buyer shall give notice thereof to Seller within 30 days
after receipt of the Final Adjustments Report, specifying in
reasonable detail the nature and extent of such disagreement and
Buyer and Seller shall have a period of 30 days from Seller's
receipt of such notice in which to resolve such disagreement. If
such notice of objection is not received by Seller within 30 days
after receipt of the Final Adjustments Report, it shall be deemed
that Buyer has accepted the Final Adjustments Report with respect
to all items set forth therein and within ten Business Days after
the expiration of such 30-day period Buyer or Seller, as
appropriate, shall make the payments described in Section 3.4(c).
Any disputed amounts which cannot be agreed to by the parties
within 30 days from Seller's receipt of Buyer's notice of
objection to any of the adjustments set forth in the Final
Adjustments Report shall be determined by a nationally recognized
accounting firm selected by Buyer and Seller which has not been
employed by Buyer or Seller for two years prior to the date
hereof (the "Accountants") in accordance with the engagement
letter set forth on Exhibit C attached hereto with such changes
as may be requested by the Accountants and approved by Seller and
Buyer. The engagement of and the determination by the
Accountants shall be binding on and shall be nonappealable by
Seller and Buyer. In the event that (a) the Purchase Price
calculated based on the determination of the Accountants is less
than the Purchase Price calculated based on the Final Adjustments
Report, the fees and expenses payable to the Accountants shall be
paid by Seller or (b) the Purchase Price calculated based on the
determination of the Accountants is greater than or equal to the
Purchase Price calculated based on the Final Adjustments Report,
the fees and expenses
18
payable to the Accountants shall be paid by Buyer. Within ten Business Days
after the determination by the Accountants of all disputed prorations and/or
adjustments, Buyer or Seller, as appropriate, shall make the payments described
in Section 3.4(c) as if the determinations of the Accountants were
included in the Final Adjustments Report. In the event any
payment required by this Section 3.4(d) is not made when due,
Seller or Buyer, as appropriate, shall make the payment required
by this Section 3.4(d) with interest accruing from the date such
payment was due at the Prime Rate plus 5%.
3.5 Disputed Liabilities. If a proration or
adjustment to the Purchase Price is made in Buyer's favor for any
liability assumed by Buyer but is in good faith being contested
by Seller as of the Closing Date, and if Buyer is relieved of
this liability, Buyer shall pay to Seller or its designee in cash
(by means of wire or interbank transfer in immediately available
funds) an amount equal to the unpaid portion of this liability
within five Business Days after the date Buyer receives written
notice and such additional documentation as Buyer may reasonably
request, all in form and substance reasonably acceptable to
Buyer, that it is relieved of this liability. In the event any
payment required by this Section 3.5 is not made by Buyer when
due, Buyer shall make the payment required by this Section 3.5
with interest accruing from the date such payment was due at the
Prime Rate plus 5%.
3.6 Allocation of Purchase Price. The Purchase Price
shall be allocated among the classes of assets set forth in Sec
tion 1060 of the Code and the regulations thereunder in the
manner agreed to by the parties prior to the Closing. After the
Closing, Seller shall cooperate with Buyer in the preparation,
execution and filing with the IRS of all information returns and
supplements thereto required to be filed by the parties under Sec
tion 1060 of the Code relating to the allocation of such
consideration, and Seller and Buyer agree to file Form 8594 (or
any substitute therefor) when required by applicable law.
ARTICLE IV
4. Assumed Liabilities and Excluded Assets.
4.1 Assignment and Assumption. (1) Seller will
assign, and Buyer will assume and perform, all liabilities and
obligations of Seller arising out of the conduct of the Business,
but excluding the Excluded Liabilities (collectively, the
"Assumed Liabilities"). Without limiting the generality of the
foregoing, the Assumed Liabilities shall include the following
liabilities and obligations of Seller: (A) Seller's obligations
to subscribers of the Business for (i) refunds of subscriber
deposits held by Seller as of the Closing Date in respect of
which a Purchase Price adjustment is made in Buyer's favor under
Section 3.3(b), (ii) refunds of subscriber advance payments held
by Seller as of the Closing Date for services to be rendered by
the System after the Closing Date, in respect of which a Purchase
Price adjustment is made in Buyer's favor under Section 3.3(b)
and (iii) the delivery of cable television service to customers
of the System after the Closing Date in a manner consistent with
past practice; (B) obligations
19
and liabilities in respect of which a Purchase Price adjustment in Buyer's
favor is made under Section 3.3 including, but not limited to, accrued but
unpaid real and personal property taxes related to the Assets which
correspond to a period of time prior to the Adjustment Time,
expenses accrued under Governmental Permits and Seller Contracts
which correspond to a period of time prior to the Adjustment Time
and certain accrued vacation pay; (C) obligations accruing and
relating to periods on or after the Adjustment Time under
Governmental Permits and Seller Contracts; and (D) any taxes
accrued from or after the Adjustment Time in connection with the
ownership of the Assets and the ownership of the Assets and the
operation of the Business.
(2) Buyer will not assume or have any
responsibility for any liabilities or obligations of Seller which
arise out of, result from, or relate to, (i) the Excluded Assets
or (ii) the conduct of the Business prior to the Adjustment Time
(except to the extent a Purchase Price adjustment in Buyer's
favor was made under Section 3.3(b)) (collectively, the "Excluded
Liabilities").
4.2 Excluded Assets. Excluded from the assets which
will be transferred from Seller to Buyer pursuant to this
Agreement (collectively, the "Excluded Assets") are all assets
not specifically identified in this Agreement as being
transferred from Seller to Buyer. Without limiting the foregoing,
"Excluded Assets" shall include all Seller's right, title and
interest in, to and under the following: (a) all programming
agreements relating to the Business; (b) all insurance policies
and rights and claims thereunder (except as otherwise provided in
Section 7.9(a)); (c) all bonds, letters of credit, surety
instruments and other similar items and any cash surrender value
thereunder; (d) all cash, cash equivalents and securities; (e)
all trademarks, trade names, service marks, service names, logos
and similar proprietary rights used in the Business, provided
that Buyer shall have the right to use such proprietary rights
for the period commencing on the Closing Date and expiring
120 days after the Closing Date; (f) any contracts, licenses,
authorizations, agreements or commitments which are not assumed
by Buyer pursuant to this Agreement; (g) the Management
Agreement; (h) any asset or properties owned or leased by Seller
that are not used in the Business; (i) all subscriber deposits
and advance payments held by Seller as of the Closing Date in
connection with the operation of the Business for which a
Purchase Price adjustment is made in Buyer's favor under Section
3.3(b); (j) all claims, rights and interests in and to any refund
for federal, state or local franchise, income or other taxes or
fees (including, but not limited to, copyright fees) of any
nature relating to the operation of the Business prior to the
Closing Date; (k) the account books of original entry, general
ledgers and financial records used in connection with the
Business, provided that for a period of three years after the
Closing Date, Buyer shall have access to and the right to copy,
at its expense, during usual business hours upon reasonable prior
notice to Seller, portions of such books and records that are
relevant to Buyer's ownership and operation of the System; (l)
the retransmission consent agreements relating to the carriage of
WMAR, WBAL, WTTG and WJZ; and (m) those properties, rights and
interests set forth on Schedule 4.2.
ARTICLE V
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5. Representations and Warranties of Seller.
Except with respect to Sections 5.1(b), 5.2(b) and
5.3(c), as to which TCI and the General Partner, severally as to
itself only, and not Seller, represent and warrant to Buyer,
Seller represents and warrants to Buyer as follows:
5.1 Organization and Qualification. (a) Seller is a
limited partnership duly organized, validly existing and in good
standing under the laws of the state of Colorado and has all
requisite partnership power and authority to own, lease and use
the Assets as they are currently owned, leased and used and to
conduct the Business as it is currently conducted. Seller is
duly qualified or licensed to do business and is in good standing
under the laws of each jurisdiction where the Assets are located
and the Business is conducted, except any such jurisdiction where
the failure to be so qualified or licensed and in good standing
would not have a material adverse effect on the validity, binding
effect or enforceability of this Agreement, or on the ability of
Seller to perform its obligations under this Agreement.
(b) Each of TCI and the General Partner is a
corporation or limited partnership, as the case may be, duly
organized, validly existing and in good standing under the laws
of its state of incorporation or formation.
5.2 Authority and Validity. (a) Seller has full
partnership power and authority to execute and deliver this
Agreement and to consummate the transactions contemplated hereby.
The execution and delivery of this Agreement and the consummation
of the transactions contemplated hereby by Seller have been duly
and validly authorized by all necessary action on the part of
Seller (other than, with respect to the sale of the Assets, the
approval of such transaction contemplated by this Agreement by
the Limited Partners). The General Partner has taken all
necessary action so that it may recommend that the Limited
Partners approve the transactions contemplated by this Agreement.
This Agreement has been duly and validly executed and delivered
by Seller and constitutes a valid and binding obligation of
Seller enforceable in accordance with its terms. Except for the
approval by the Limited Partners, no further partnership action
on the part of Seller is required in connection with the
consummation of the transactions contemplated by this Agreement.
(b) Each of TCI and the General Partner has all
requisite corporate or partnership, as the case may be, power and
authority to execute, deliver and perform its obligations under
this Agreement. The execution and delivery by each of TCI and
the General Partner of, and the performance by each of TCI and
the General Partner of its respective obligations under, this
Agreement have been duly authorized by all requisite corporate or
partnership action, as the case may be, of TCI and the General
Partner, as the case may be, and no other corporate or
partnership proceedings, as the case may be, on the part of TCI
or the General Partner, as the case may be, are necessary to
authorize the execution and delivery of this Agreement or the
performance of TCI's or the General Partner's respective
obligations hereunder. This Agreement has been duly and validly
executed and delivered by each of TCI and the General Partner and
constitutes a valid and binding agreement of each of TCI and the
21
General Partner, enforceable in accordance with its terms.
5.3 Consents and Approvals; No Violation. (1) Except
for (i) the Consents, (ii) filings, consents or other actions
which, if not made or obtained, would not have a material adverse
effect on any of the Assets material to the Business, the System,
the Business, Seller's ability to perform its obligations under
this Agreement or Buyer's ability to conduct the Business after
the Closing in substantially the same manner in which it is
currently conducted by Seller, (iii) the consent of the Limited
Partners with respect to the transactions contemplated by this
Agreement and (iv) the Regulatory Requirements, no consent,
waiver, action, approval or authorization of, or filing,
registration or qualification with, any Person or Governmental
Authority is required to be made or obtained by Seller in
connection with the execution, delivery and performance of this
Agreement by Seller.
(2) Except as set forth on Schedule 5.3(b), the
execution, delivery and performance of this Agreement by Seller
do not and will not: (a) violate or conflict with any provision
of its Certificate of Limited Partnership or the Partnership
Agreement; (b) violate any Legal Requirement; or (c) (i) violate,
conflict with or constitute a breach of or default under (without
regard to requirements of notice, passage of time or elections of
any Person), (ii) permit or result in the termination, suspension
or modification of, (iii) result in the acceleration of (or give
any Person the right to accelerate) the performance of Seller
under, or (iv) result in the creation or imposition of any
Encumbrance under, any Seller Contract or any other instrument
evidencing any of the Assets or any instrument or other agreement
to which Seller is a party or by which Seller or any of its
assets is bound or affected, except such violations, conflicts,
breaches, defaults, terminations, suspensions, modifications, and
accelerations which would not, individually or in the aggregate,
have a material adverse effect on the Assets, taken as a whole,
the System, the Business, or Seller's ability to perform its
obligations under this Agreement or Buyer's ability to conduct
the Business after the Closing in substantially the same manner
in which it is currently conducted by Seller.
(c) The execution, delivery and performance of
this Agreement by each of TCI and the General Partner do not and
will not violate or conflict with any provision of TCI's or the
General Partner's respective Certificate of Incorporation or By-
Laws or Certificate of Limited Partnership or partnership
agreement, as the case may be.
5.4 Complete Systems. Except as set forth on Schedule
5.4, the Assets represent all assets, properties, franchises,
licenses, permits, consents, certificates, authorities, operating
rights, leases, contracts (with the exception of programming
contracts and retransmission consents included in the Excluded
Assets which Buyer acknowledges may need to be replaced in order
for Buyer to continue to operate the Business), agreements,
commitments and arrangements owned or used by Seller in the
Business and reasonably necessary for the conduct of the Business
in the ordinary course in the same manner as that in which the
Business is currently conducted by Seller.
22
5.5 Title. Except as set forth on Schedule 5.5 and
for the Permitted Encumbrances, Seller has, and on the Closing
Date will have and will transfer to Buyer, good and marketable
title to the Assets. The Assets on the Closing Date will be free
and clear of all Encumbrances of any kind or nature, other than
Permitted Encumbrances.
5.6 Real Property. (1) All the Assets consisting of
interests in Real Property that are material to the conduct of
the Business are described on Schedule 1.7. Seller has valid
leasehold interests in Real Property leased by Seller under
written leases or subleases, correct and complete copies of which
have been made available to Buyer.
(2) All easements, rights-of-way and other rights
which are necessary in any material respect for Seller's current
use of any Real Property are valid and in full force and effect,
and, since July 1, 1992 and, to the Best of Seller's Knowledge
with respect to all periods prior thereto, Seller has not
received any written notice with respect to the termination or
breach of any of those rights.
(3) Seller has not given or received any written
notice of the termination of any lease for Real Property. All
leases and subleases pursuant to which any of the Real Property
is occupied or used are valid, subsisting, binding and
enforceable in accordance with their respective terms and there
are no existing defaults thereunder or events that with notice or
lapse of time or both would constitute defaults thereunder. To
the Best of Seller's Knowledge, subject to the receipt of any
necessary Consents, the consummation of the transactions
contemplated by this Agreement will not result in any termination
of any lease for Real Property.
(4) There is no condemnation, eminent domain,
expropriation or similar proceedings pending or, to the Best of
Seller's Knowledge, threatened against any of the Real Property
which, if adversely determined, would have a material adverse
effect on the Assets, the Business or the System.
(5) There are not pending or, to the Best of
Seller's Knowledge, threatened, any special assessments or any
pending proceedings for changes in the zoning with respect to the
Real Property or any part thereof and Seller has not received any
notice of the desire of any public authority or other entity to
take or use any Real Property or any part thereof. All
structures on the Real Property are structurally sound and in
good operating condition and repair (reasonable wear and tear
excepted). Each parcel of Real Property has access (either
direct or by an easement included among the Assets) to all public
roads, utilities, and other services necessary for the operation
of the System with respect to such parcel. Seller has complied
with all notices or orders to correct violations of Legal
Requirements issued by any Governmental Authority having
jurisdiction against or affecting any of the Real Property.
5.7 Environmental Matters. (1) Except as set forth
on Schedule 5.7 and except for any adverse environmental
condition(s) which may be identified in any environmental report
prepared and delivered pursuant to Section 7.5, to the Best of
Seller's Knowledge, Seller's
23
use of the Real Property complies in all material respects with all
Environmental Laws. Seller has not received written notice or, to the Best of
Seller's Knowledge, oral notice of any claim or investigation based on
Environmental Laws which relates to any Real Property or any
operations conducted by Seller on such Real Property.
(2) Seller has provided Buyer with complete and
correct copies of (i) all studies, reports, samplings, test
results, surveys, submissions, correspondence or other materials
in the possession of Seller, TCI or any of TCI's direct or
indirect wholly-owned subsidiaries relating to the presence or
alleged presence of Hazardous Substances at, on or affecting the
Real Property, (ii) all notices or other materials in the
possession of Seller, or TCI or any of TCI's direct or indirect
wholly-owned subsidiaries that were received from any
Governmental Authority having the power to administer or enforce
any Environmental Laws relating to current or past ownership, use
or operation of the Real Property or activities at the Real
Property and (iii) all materials in the possession of Seller, TCI
or any of TCI's direct or indirect wholly-owned subsidiaries
relating to any claim, allegation or action by any private third
party under any Environmental Law.
(3) Except for any adverse environmental
condition(s) which may be identified in any Phase I environmental
report prepared and delivered pursuant to Section 7.5, Seller
does not know or have any reason to know of: (i) the presence,
release or threatened release of any Hazardous Substances in, on,
to, from or under the Real Property; (ii) the use, treatment,
storage, disposal or transportation of Hazardous Substance in,
on, to, from or under the Real Property; (iii) any judicial or
administrative proceedings regarding Hazardous Substances or
Environmental Laws in connection with the Real Property or, to
the Best of Seller's Knowledge, any threat thereof; or (iv) any
other matter relating to Hazardous Substances or threats to
public health or the environment in connection with the Real
Property.
5.8 Compliance with Law; Governmental Permits.
(1) Except as set forth on Schedule 5.8, the ownership, leasing
and use of the Assets as they are currently owned, leased and
used by Seller and the conduct of the Business as it is currently
conducted by Seller, do not violate any Legal Requirement, which
violation(s), individually or in the aggregate, reasonably could
be expected to have a material adverse effect on the Assets,
taken as a whole, the System or the Business. Seller has not
received any notice claiming a material violation by Seller or
the Business of any Legal Requirement applicable to Seller or the
Business as it is currently conducted and, to the Best of
Seller's Knowledge, no basis exists for any person to claim that
such a violation exists.
(2) Schedule 1.5 lists all Governmental Permits
that are material to the conduct of the Business as it
is currently conducted by Seller. Complete and correct copies of
all such Governmental Permits as currently in effect have been,
or prior to Closing will be, made available to Buyer. All such
Governmental Permits are currently in full force and effect.
There is no action, proceeding or investigation pending or, to
the Best of Seller's Knowledge, threatened, relating to the
termination, suspension or modification of any such Governmental
24
Permit and Seller is in compliance in all material respects with
the terms and conditions of all Governmental Permits and no other
Governmental Permits are required in connection with the
operation of the Business in the manner in which it is currently
conducted by Seller.
(3) The operation of the System has been, and is,
in compliance in all material respects with the Communications
Act of 1934, as amended (as so amended, the "Communications
Act"), and the rules and regulations of the Federal Communi
cations Commission (the "FCC"), except that, as to any rate
regulation thereunder (other than with respect to the operation
of the System in Unincorporated Sussex County, Delaware) the
foregoing is limited to the Best of Seller's Knowledge. Seller
has delivered, or prior to Closing will deliver, to Buyer
complete and correct copies of all reports and filings for the
past three years made or filed pursuant to the Communications
Act or FCC rules and regulations with respect to the Business.
(4) To the Best of Seller's Knowledge, the
operation of the System has been, and is, in compliance in all
material respects with the Cable Television Consumer Protection
and Competition Act of 1992 (the "Cable Act"), and the rules and
regulations of the FCC promulgated thereunder.
(5) To the Best of Seller's Knowledge, the
operation of the System has been, and is, in compliance in all
material respects with the Telecommunications Act of 1996 (the
"Telecom Act"), and the rules and regulations of the FCC
promulgated thereunder.
(6) With the exception of Delaware Public Service
Commission, as of the date of this Agreement no Governmental
Authority has notified Seller of its application to be certified
to regulate rates or its attempt to regulate rates with respect
to the System.
(7) The rates charged by the System as of the
date of this Agreement are in compliance in all material respects
with current FCC rate regulations.
5.9 Seller Contracts. Schedule 1.8 lists each Seller
Contract, as of the date of this Agreement, that is (i) material
to the conduct of the Business as it is now conducted,
(ii) involves annual payments in excess of $10,000 or (iii) is
not terminable without material penalty on 90 days' notice or
less. Complete and correct copies of the Seller Contracts as
currently in effect have been made available to Buyer. Neither
Seller nor, to the Best of Seller's Knowledge, any other party to
any Seller Contract is in any material respect in breach of the
performance of its obligations under any Seller Contract. Except
as set forth on Schedule 5.9, Seller has not received any written
notice with respect to termination of any Seller Contract that is
material to the conduct of the Business as it is now conducted.
5.10 Copyright Compliance. Seller has deposited with
the United States Copyright Office all statements of account and
other documents and instruments, and paid all royalties,
supplemental royalties, fees and other sums to the United States
Copyright Office, required under the Copyright Act with respect
to the Business and operations of the System as
25
are required to obtain, hold and maintain the compulsory copyright license for
cable television systems prescribed in Section 111 of the Copyright Act and
the rules and regulations of the United States Copyright Office promulgated
thereunder. Seller and the System are in material compliance with the
Copyright Act. Seller and the System are entitled to hold and do now hold
the compulsory copyright license described in Section 111 of the Copyright Act,
which compulsory copyright license is in full force and effect
and has not been revoked, canceled, encumbered or materially
adversely affected in any manner. Seller has made available to
Buyer complete and correct copies of all reports and filings, and
all reports and filings for the past three years, made or filed
pursuant to the Copyright Act with respect to the Business.
Seller has not received any notice to the effect that the conduct
of the Business as currently conducted infringes on the rights of
any Person in any copyright or other intellectual property right,
except as to potential copyright liability arising from the
performance, exhibition or carriage of any music on the System
relating to claims made by music licensing organizations (such as
ASCAP, BMI and SESAC) that operators of cable television systems
are responsible for payment of music performing rights license
fees for certain music cablecast on such systems.
5.11 Financial Statements. (1) Seller has delivered
to Buyer correct and complete copies of certain financial
information for the System for the years ended December 31, 1995
and December 31, 1994 and the nine-month period ended
September 30, 1996 (collectively, the "Seller Financial
Statements"). Except for the absence of footnote disclosures,
cash flow statements and statements of equity and except for
estimated, annualized or projected financial information, the
Seller Financial Statements fairly present, in all material
respects, the results of operations of the System for the
respective periods ended on such dates, all in conformity with
GAAP consistently applied with full allocations of all costs,
expenses and overhead associated with operating the System, and
with respect to the Seller Financial Statements for the nine-
month period ended September 30, 1996, subject to normal year-end
adjustments (none of which are expected to be material in
amount). Seller has delivered correct and complete copies of
balance sheets and capital expenditure reports for the System as
of December 31, 1994, December 31, 1995 and September 30, 1996,
each prepared in the ordinary course of business.
(2) Since the latest date of the Seller Financial
Statements (i) the Business has been operated only in the
ordinary course and (ii) there has been no material adverse
change in, and no event has occurred which, so far as reasonably
can be foreseen, is likely, individually or in the aggregate, to
result in any material adverse change in the results of
operations of the Business, other than any change arising out of
matters of a general economic nature or matters (including, but
not limited to, competition caused by or arising from direct
broadcast satellite, the Multichannel Multipoint Distribution
Service, legislation, rule making and regulation) affecting the
cable television industry (national or regional) in general.
5.12 Legal Proceedings. Except as set forth on
Schedule 5.12, and except for any judgments, orders, actions,
suits, proceedings or investigations as may affect the cable
television industry (national or regional) generally, there is no
judgment or order outstanding, or any action, suit, proceeding or
investigation by or before any Governmental Authority or any
26
arbitrator pending or, to the Best of Seller's Knowledge,
threatened, involving or affecting any of the Assets or the
Business which, if adversely determined, would have a material
adverse effect on the Assets or the Business or would materially
impair the ability of Seller to perform its obligations under
this Agreement.
5.13 Employment Matters. (1) Seller does not employ
any individuals in connection with the operation of the Business
and does not, and is not obligated to, maintain or contribute to
any employee benefit plan, as defined in Section 3(3) of ERISA.
All individuals managing the operations of the Business are
employees of TCI or its Affiliates (other than Seller) (the
"Employer"). The Employer is reimbursed for employee-related
expenses relating to the operations of the Business by Seller
under the Management Agreement or the Partnership Agreement.
(2) To the Best of Seller's Knowledge, Employer
has complied in all material respects with all Legal Requirements
relating to the employment of labor and those relating to wages,
hours, collective bargaining, unemployment compensation, worker's
compensation, equal employment opportunity, age and disability
discrimination, immigration control and the payment and withhold
ing of taxes with respect to employees of Employer who primarily
perform services in connection with the operation of the
Business.
(3) Employer is not a party to any contract with
any labor organization, and Employer has not recognized or agreed
to recognize any union or other collective bargaining unit with
respect to employees of Employer who primarily perform services
in connection with the operation of the Business. To the Best of
Seller's Knowledge after reasonable inquiry of Employer, and
except as set forth on Schedule 5.13(c), no union or other
collective bargaining unit has been certified as representing any
of the employees engaged in the operation of the Business, and,
to the Best of Seller's Knowledge after reasonable inquiry of
Employer, Employer has not received any request from any party
for recognition as a representative of employees engaged in the
operation of the Business for collective bargaining purposes.
Neither Seller nor Employer is party to any agreement, oral or
written, express or implied, that would require Buyer to employ
any individual after the Closing Date.
(4) Schedule 5.13(d) sets forth a true and
complete list of all individuals employed by Employer who
primarily perform services with respect to the operation of the
Business together with their position and salary as of the date
of this Agreement and their date of hire by Employer. Neither
Seller nor Employer is a party to any written employment
contract, agreement, commitment or arrangement with any
individual identified on Schedule 5.13(d).
(5) Except for those plans described on Schedule 5.13(e) and
in the TCI Employee Handbook dated February, 1995 (the "Employer Plans"),
which are sponsored by the Employer, or to which the Employer contributes
or is obligated to contribute, the employees of Employer who primarily perform
services with respect to the operation of the Business do not
27
receive benefits under any bonus, deferred compensation, pension,
profit-sharing, retirement, severance pay, insurance, stock purchase, stock
option, or other fringe benefit plan, arrangement or practice, or
any other employee benefit plan, as defined in Section 3(3) of ERISA.
(6) Seller has not incurred or taken any action,
and to the Best of Seller's Knowledge, no action or event has
occurred, that could cause Seller to incur any material liability
(i) under Section 412 of the Code or Title IV of ERISA with
respect to any Employer Plan that is a single-employer plan,
within the meaning of Section 4001(a)(15) of ERISA, (ii) on
account of a partial or complete withdrawal from any Employer
Plan that is a multiemployer plan, within the meaning of Sec
tion 3(37) of ERISA, or on account of any unpaid contributions to
any such multiemployer plan, or (iii) for any tax or penalty
under Section 4975 of the Code or Section 502(i) of ERISA on
account of any prohibited transaction, within the meaning of Sec
tion 4975 of the Code or Section 406 of ERISA, with respect to
any Employer Plan.
5.14 System Information. The number of Equivalent
Basic Subscribers served by the System, the number of subscribers
served by the System taking Expanded Basic Services and the
bandwidth of the System, the approximate number of Homes Passed
by the System and the approximate number of miles of plant
included in the Assets, each as of June 30, 1996, are as set
forth on Schedule 5.14. Approximately twenty-eight percent of
miles of plant included in the System are built to at least 450
MHz. As of the date of this Agreement, there are no pending
complaints by subscribers or other users of the System.
5.15 Finders and Brokers. Except for its engagement of
Xxxxxxx & Associates, L.P. to assist Seller in the solicitation
of offers to purchase the Assets and except for a disposition fee
payable by Seller to an Affiliate pursuant to its Partnership
Agreement, Seller has not employed any financial advisor, broker
or finder or incurred any liability for any financial advisory,
brokerage, finder's or similar fee or commission in connection
with the transactions contemplated by this Agreement.
5.16 Tax Matters. Except as set forth on Schedule
5.16, (a) all Tax Returns required to be filed by Seller before
the Closing with respect to the Business or the Assets have been
or will be filed on or before the Closing and (b) all Taxes shown
as due or payable before the Closing on such Tax Returns have
been or will be paid when required by law. To the Best of
Seller's Knowledge, there are no outstanding deficiencies or
assessments of tax, interest or penalties which could be imposed
on Buyer or could reasonably be expected to constitute or result
in a lien on the Assets in Buyer's hands.
5.17 Inventory. The inventory of the System has been
maintained at adequate levels for the operation of the Business
(for an ordinary cycle of thirty days) consistent with the past
practices of Seller.
5.18 Insurance. Seller has maintained insurance
policies in the ordinary course of business which when taken
together provide insurance coverage for the Assets and the
operations of the Business as is customary for similar businesses
similarly situated.
28
5.19 Accounts Receivable. The Accounts Receivable
arose from bona fide transactions in the ordinary course of
business and reflect credit terms consistent with the past
practices of Seller.
5.20 Restoration. No property of any Person has been
damaged, destroyed, disturbed or removed in the process of
construction or maintenance of the System, which has not been, or
will not be, prior to the Closing, repaired, restored or replaced
and as to which an adequate reserve has not been established by
Seller.
5.21 Equipment. The Equipment is and will be at
Closing in adequate condition and repair to operate the business
as currently conducted (reasonable wear and tear excepted).
5.22 Microwave Replacement. As of the date of this
Agreement, Seller has completed the replacement of all AML
microwave transmissions with fiber plant.
ARTICLE VI
6. Buyer's Representations and Warranties.
Buyer represents and warrants to Seller as follows:
6.1 Organization and Qualification. Buyer is a
limited liability company, duly organized, validly existing and
in good standing under the laws of its state of formation and has
all requisite limited liability company power and authority to
carry on its business as currently conducted and to own, lease,
use and operate its assets. Buyer is duly qualified or licensed
to do business and is in good standing under the laws of each
jurisdiction in which the character of the properties owned,
leased or operated by it or the nature of the activities
conducted by it makes such qualification necessary, except where
the failure to be so qualified or licensed and in good standing
would not have a material adverse effect on the validity, binding
effect or enforceability of this Agreement or the ability of
Buyer to perform its respective obligations under this Agreement.
6.2 Authority and Validity. Buyer has all requisite
limited liability company power and authority to execute, deliver
and perform its obligations under this Agreement. The execution
and delivery by Buyer of, the performance by Buyer of its
obligations under, and the consummation by Buyer of the
transactions contemplated by, this Agreement have been duly
authorized by all requisite limited liability company action of
Buyer and no other limited liability company proceedings on the
part of Buyer are necessary to authorize the execution and
delivery of this Agreement or the performance of Buyer's
obligations hereunder. This Agreement has been duly and validly
executed and delivered by Buyer and constitutes a valid and binding
29
agreement of Buyer enforceable in accordance with its terms.
6.3 No Breach or Violation. (1) Except for (i) any
consents that will be obtained by Buyer or waived on or prior to
the Closing Date and are identified on Schedule 6.3(a),
(ii) filings and consents which, if not made or obtained, would
not have a material adverse effect on Buyer's ability to perform
its obligations under this Agreement and (iii) the Regulatory
Requirements, no consent, waiver, approval or authorization of,
or filing, registration or qualification with, any Governmental
Authority is required to be made or obtained by Buyer in
connection with the execution, delivery and performance of this
Agreement by Buyer.
(2) The execution, delivery and performance of
this Agreement by Buyer do not and will not: (a) violate or
conflict with any provision of Buyer's Articles of Organization
or operating agreement, (b) violate any Legal Requirement; or
(c) (i) violate, conflict with or constitute a breach of or
default under (without regard to requirements of notice, passage
of time or elections of any Person), (ii) permit or result in the
termination, suspension or modification of, (iii) result in the
acceleration of (or give any Person the right to accelerate) the
performance of Buyer under, or (iv) result in the creation or
imposition of any Encumbrance under, any material contract,
agreement, arrangement, commitment or plan to which Buyer is a
party or by which Buyer or any of its assets is bound or
affected, except such violations, conflicts, breaches, defaults,
terminations, suspensions, modifications and accelerations as
would not, individually or in the aggregate, have a material
adverse effect on Buyer's ability to perform its obligations
under this Agreement.
6.4 Litigation. (1) There are no claims, actions,
suits, proceedings or investigations pending or, to the best of
Buyer's knowledge, threatened, in any court or before any
governmental agency or instrumentality, or before any arbitrator,
by or against or affecting or relating to Buyer or any of its
Affiliates which, if adversely determined, would restrain or
enjoin the consummation of the transactions contemplated by this
Agreement or declare unlawful the transactions or events
contemplated by this Agreement or cause any of such transactions
to be rescinded.
(2) There are no judgments, injunctions, orders
or other judicial or administrative mandates outstanding against
or affecting Buyer or any of its Affiliates which would
materially hinder or delay the consummation of the transactions
contemplated by this Agreement.
6.5 Financial Statements. Buyer has delivered to
Seller copies of its unaudited financial statements for the
period March 12, 1996 through June 30, 1996 ("Buyer Financial
Statement"). The Buyer Financial Statement fairly present, in
conformity with GAAP consistently applied except as may be noted
therein, the assets, liabilities and financial condition of Buyer
as of the date thereof and the results of operations and cash
flows or changes in financial position, as applicable, of Buyer
for the period ended on such date, subject to normal
30
year-end adjustments (none of which are expected to be material in
amount), other adjustments noted therein and the absence of footnotes.
6.6 Adequate Financing. Although as of the date of
this Agreement Buyer does not have a Commitment, Buyer has no
reason to believe that on or prior to June 23, 1997 it will not
have received binding commitments pursuant to which one or more
lenders or investors will have agreed to loan or contribute to
Buyer, all funds necessary to satisfy all its obligations under
this Agreement and with respect to the transactions contemplated
by this Agreement, including its obligations to purchase the
Assets and to pay the Purchase Price to Seller.
6.7 Finders and Brokers. Buyer has not employed any
financial advisor, broker or finder or incurred any liability for
any financial advisory, brokerage, finder's or similar fee or
commission in connection with the transactions contemplated by
this Agreement for which Seller will in any way have any
liability.
6.8 Qualification of Buyer. Buyer knows of no reason
why it cannot be the transferee of the assignable licenses and
permits from Seller necessary for it to own and operate the
Business in the manner in which it is currently conducted by
Seller.
ARTICLE VII
7. Additional Covenants.
7.1 Access to Premises and Records. Between the date
of execution and delivery of this Agreement and the Closing Date,
Seller will give Buyer and its representatives (including its
auditors, accountants, lenders and potential investors), during
normal business hours and with reasonable prior notice, access to
the books and records of the Business, the Assets, the manager of
the System and the employees of Employer listed on Schedule
5.13(d) and will furnish to Buyer and its representatives such
information regarding the Business and the Assets as Buyer may
from time to time reasonably request; provided, that Buyer shall
have access to the employees of Employer listed on Schedule
5.13(d), other than the manager of the System, solely for
purposes of determining which employees Buyer intends to offer
employment as of the Closing Date.
7.2 Continuity and Maintenance of Operations;
Financial Statements. Except as to actions which Buyer has been
advised and to which it has consented in writing and except as
specifically permitted or required by this Agreement or required
by any Legal Requirement, Seller shall:
(1) Operate the Business in the ordinary course
consistent with past practices and will use commercially
reasonable efforts to cause Employer to keep available the
services of the employees of the Employer who are primarily
involved in the operation of the
31
Business and to preserve any beneficial business relationships with customers,
suppliers and others having business dealings with Seller relating to the
Business;
(2) Maintain the Assets in adequate condition to
operate the Business as currently conducted, subject to normal
wear and tear, consistent with past practice;
(3) Maintain adequate inventories of spare
Equipment consistent with past practice;
(4) Maintain all bonds and insurance as in effect
on the date of this Agreement;
(5) Keep all of its business books, records and
files in the ordinary course of business in accordance with past
practices;
(6) Continue to implement its procedures for
disconnection and discontinuance of service to subscribers whose
accounts are delinquent in accordance with those in effect on the
date of this Agreement;
(7) Not sell, transfer or assign any Assets other
than in the ordinary course of business;
(8) Use commercially reasonable efforts not to
permit any material amendment to, or cancellation of, any of the
Governmental Permits or Seller Contracts;
(9) Not enter into any contract or commitment for
the acquisition of goods or services relating to the System or
the Business involving an expenditure (i) less than or equal to
$40,000 other than in the ordinary course of business consistent
with past practice or (ii) in excess of $40,000 without Buyer's
written consent which may not be unreasonably withheld; provided,
that Buyer shall be deemed to have consented thereto if Buyer has
not given Seller written notice of its refusal to give consent,
setting forth the reason for such refusal, within five Business
Days of Buyer's receipt of Seller's written request for consent;
(10) Not take or omit to take any action that
would cause Seller to be in breach of any of its representations
or warranties in this Agreement in any material respect,
provided, however, that the foregoing shall not preclude Seller
from engaging a financial advisor to render an opinion as to the
fairness, from a financial point of view, of the transactions
contemplated by this Agreement;
(11) Pay, consistent with past practice, all
accounts payable and other debts, liabilities and obligations of
the System and the Business;
(12) Report and write off Accounts Receivable in
accordance with past practices;
32
(13) Not create, assume or permit to exist any
Encumbrance (other than Permitted Encumbrances);
(14) Comply in all material respects with all
applicable Legal Requirements;
(15) Maintain service quality of the Business at a
level at least consistent with past practices.
(16) Use commercially reasonable efforts to cause
Employer not to increase the compensation or change any benefits
available to employees who work in the Business except as
required pursuant to existing written agreements or except in the
ordinary course of business consistent with past practice;
(17) Use commercially reasonable efforts to cause
Employer to withhold and pay when due all Taxes relating to the
employees of the Business and shall withhold and pay when due all
Taxes relating to the Assets, the Business and/or the System;
(18) File with the FCC all reports required to be
filed under applicable FCC rules and regulations, and otherwise
comply with all Legal Requirements with respect to the System;
and
(19) Not implement any new marketing program,
policy or practices, or implement any rate change, retiering or
repackaging, except in the ordinary course of business consistent
with past practices.
Seller shall deliver to Buyer, promptly after such
statements and reports become available to Seller, correct and
complete copies of unaudited monthly and quarterly income
statements and operating reports for the Business that are
prepared by or for Seller at any time between the date of this
Agreement and the Closing; provided, that Seller shall not be
required to make and shall not be deemed to make any
representation or warranty concerning the accuracy of the
contents of any such information delivered to Buyer.
Seller shall deliver to Buyer, promptly after execution
thereof, correct and complete copies of each Seller Contract
entered into by Seller after the date of this Agreement; upon
such delivery each such agreement which has been entered into by
Seller in compliance with the provisions of Section 7.2(i) shall
be deemed to be included on Schedule 1.8 for all purposes of this
Agreement; provided, however, that any contract or commitment for
which Buyer's consent is required pursuant to Section 7.2(i)
shall not be deemed to be included on Schedule 1.8 if Buyer has
reasonably withheld its consent thereto.
Buyer shall deliver to Seller promptly after such
statements and reports become available to Buyer, correct and
complete copies of Buyer's audited financial statements for the
33
fiscal year ended December 31, 1996, which statements and the
notes thereto shall fairly present the assets, liabilities and
financial condition of Buyer as of the date thereof and the
results of operations and cash flows or changes in financial
position, as applicable, of Buyer for the period ended on such
date, all in conformity with GAAP consistently applied, except as
may be noted therein. Unless the Closing occurs on or before
June 30, 1997, Buyer shall deliver to Seller promptly when
available correct and complete copies of Buyer's unaudited
financial statements for the three-months ended March 30, 1997
and each fiscal quarter thereafter which are available prior to
Closing, which statements and the notes thereto shall fairly
present the assets, liabilities and financial condition of Buyer
as of the date thereof and the results of operations and cash
flows or changes in financial position, as applicable, of Buyer
for the period ended on such date, all in conformity with GAAP
consistently applied, except as may be noted therein.
7.3 Employee Matters. (1) Buyer may offer employment
upon such terms and conditions of employment as Buyer may
establish, to certain of the employees of Employer who primarily
perform services with respect to the operation of the Business as
of the Closing Date; provided, that if, prior to the date which
is 180 days after the Closing Date, Buyer terminates the
employment of any employee listed on Schedule 5.13(d) employed by
Buyer as of the Closing Date other than "for cause" as described
in the Summary Plan Description of Telecommunications Inc.
Severance Pay Plan effective July 1, 1996 (the "Severance Plan"),
Buyer shall pay to such terminated employee the severance benefit
payments which such employee would have been entitled to receive
had it been terminated by Employer as of the Closing Date in an
amount and upon such terms as set forth in the Severance Plan
(but in no event more than six months' severance benefits for any
employee); provided, further, Buyer shall not be required to make
any such severance payments with respect to any employee who is
hired by TCI or any of its direct or indirect wholly-owned
subsidiaries (including Employer) within 45 Business Days of his
termination of employment by Buyer. Not later than March 24,
1997, Buyer shall deliver to Seller a notice containing the names
of employees of the Business to whom Buyer intends to offer
employment on the Closing Date (the "Employee List"); provided,
that (i) if the Closing has not occurred, Buyer may deliver to
Seller a notice updating the Employee List on the date which is
150 days after the date of this Agreement and (ii) if the
Termination Date is extended by Seller, Buyer may deliver to
Seller a notice no later than 60 Business Days prior to the
extended Termination Date updating the Employee List; provided,
however, that any notice delivered by Buyer updating the Employee
List shall not be deemed effective if the Closing occurs fewer
than 60 Business Days after delivery to Seller of such updated
Employee List. TCI shall cause Employer to terminate the
employment of all such employees hired by Buyer as of the
Adjustment Time. Seller shall undertake to provide to all
affected employees and any other necessary persons any notice
that may be required under the WARN Act. Except as provided
herein, Employer shall retain all liabilities arising prior to
the Adjustment Time relating to employees, including severance
obligations.
(2) For the period commencing on the date of this
Agreement and expiring on the date which is 180 days after the
Closing Date, TCI shall not, and shall cause its direct and
indirect wholly-owned subsidiaries including Employer not to,
solicit, or offer
34
employment to, any employee of Employer set forth on Schedule 5.13(d) who
primarily performs services with respect to the operation of the Business as
of the date of this Agreement; provided, however, that after the Closing Date,
each of TCI and its direct and indirect wholly-owned subsidiaries
including Employer may hire any such employee that Buyer does not
employ as of the Closing Date or whose employment Buyer terminates after the
Closing Date.
(3) Nothing in this Section 7.3 or elsewhere in
this Agreement is intended to confer upon any employee of
Employer or his or her legal representative or heirs any rights
as a third party beneficiary or otherwise or any remedies of any
nature or kind whatsoever under or by reason of this Agreement,
or the transactions contemplated hereby, including, but not
limited to, any rights of employment or continued employment.
All rights and obligations created by this Agreement are solely
between the parties hereto.
7.4 Franchise Extensions. Seller covenants and agrees
that, as soon as practicable following the execution of this
Agreement, it will apply to the applicable Governmental Authority
for an extension (the "Extensions") of each franchise described
on Schedule 1.5 with an expiration date prior to June 30, 2000.
Each such Extension shall have an expiration date no earlier than
June 30, 2000 and shall otherwise be on substantially the terms
and conditions of the current franchises, subject to
modifications customarily imposed by Governmental Authorities,
but which shall not impose any conditions or obligations which
are materially more burdensome than contained in the current
franchise.
7.5 Environmental Report. (a) Buyer may cause to
be prepared and delivered at its expense within 60 days after the
date of this Agreement, a Phase I environmental report for the
Real Property. Seller shall cooperate with Buyer and permit
access to such Real Property during normal business hours in
order for Buyer or its representatives to inspect such property
and the related environmental records in the possession of
Seller, as necessary for the preparation of the Phase I
environmental report. Buyer shall deliver to Seller a copy of
any such environmental report within five Business Days of
receipt of such report by Buyer. If such environmental report
discloses one or more adverse environmental conditions which
require remediation under applicable Environmental Law, Seller
shall assume full responsibility for remediation of each such
environmental condition(s) to the extent required by applicable
Environmental Law (the "Remediation") and shall bear all
expenses incurred in connection therewith; provided, that Seller
shall not be obligated to spend more than $200,000 in connection
with the Remediation. Buyer shall give Seller notice confirming
that Buyer has delivered to Seller all environmental reports to
be prepared pursuant to this Section 7.5, and Seller shall notify
Buyer within twenty Business Days after its receipt of such
notice if Seller concludes, in its reasonable judgment, that it
is or will be unable to complete the Remediation for $200,000 or
less (the "Remediation Notice"). If Seller gives a Remediation
Notice, then Buyer may terminate this Agreement pursuant to
Section 10.1(c)(vii) by notice to Seller given within five
Business Days of the Remediation Notice; provided, that if within
five Business Days after receipt by Seller of Buyer's notice of
termination pursuant to Section 10.1(c)(vii), Seller gives notice
to Buyer that Seller agrees to bear all costs of Remediation in
excess of $200,000, such
35
termination shall be void ab initio and this Agreement shall be deemed not to
have been terminated. If Buyer does not terminate this Agreement pursuant to
Section 10.1(c)(vii) within such five Business Day period, (i) Buyer
shall be deemed to have assumed all liabilities and obligations
in connection with the Remediation as of the Closing Date, (ii)
Buyer shall receive a credit at the Closing in the amount of
$200,000 less the aggregate of all amounts paid by Seller to
third parties in connection with the Remediation and (iii) after
the Closing Date Seller shall have no obligation or liability
with respect to the Remediation or otherwise in connection with
any condition referred to in any report prepared and/or delivered
pursuant to this Section 7.5.
(b) If Seller concludes, in its reasonable judgment,
that the cost of the Remediation will not exceed $200,000 or
Seller agrees to bear any costs of Remediation in excess of
$200,000, then Seller shall have the sole right to direct the
Remediation; provided, that if Buyer agrees to bear any costs of
Remediation in excess of $200,000, then from and after the
Closing Buyer may assume responsibility for overseeing the
Remediation.
(c) In the event that Seller assumes full
responsibility for the Remediation and such Remediation has not
been completed prior to the Closing, then from and after the
Closing and until Seller and Buyer shall have agreed that
Remediation has been completed, Buyer shall cooperate with Seller
and permit access to the Real Property to Seller and its
representatives during normal business hours in order for the
Remediation to be completed.
7.6 Consents. Seller will use commercially reasonable
efforts to obtain, as soon as practicable and at its expense, all
the Consents and the Extensions, in form and substance reasonably
satisfactory to Buyer; provided, that "commercially reasonable
efforts" for purposes of this Section 7.6 shall not require
Seller or Buyer to undertake extraordinary or unreasonable
measures to obtain such approvals and consents, including, but
not limited to, the initiation or prosecution of legal
proceedings or the payment of fees in excess of normal and usual
filing and processing fees. Concurrently with the execution and
delivery of this Agreement, Buyer is delivering to Seller "highly
confident" letters of Chase Manhattan Bank, N.A. with respect to
Buyer's equity and its debt financing and after the date hereof
shall deliver to Seller such other materials requested by Seller
appropriate for Seller to use in connection with seeking the
Consents and the Extensions. Buyer will use commercially
reasonable efforts to assist Seller in its efforts to obtain all
the Consents and the Extensions, and in connection therewith will
consent to such modifications to any agreement that is the
subject of the Ocean Pines Consent, Xxxxxxx Properties Consent,
Sea Colony Consent or Angola Consent or any Governmental Permit
that Ocean Pines Association, Inc. (or its successor), Pot Nets,
Inc. (or its successor), Xxxx X. Xxxxxxx Associates Inc., as
successor to Sea Colony, Inc. (or its successor), Angola-by-the-
Bay Property Owners Association Inc. (or its successor) or a
Governmental Authority, as the case may be, may request as a
condition to (i) the transfer of such agreement or Governmental
Permit to Buyer and/or (ii) obtaining extension of the term of
such Governmental Permit, provided, however, that Buyer will not
be required to agree to any modifications to a Governmental
Permit unless they are customarily imposed by Governmental
Authorities issuing cable television franchises as a condition to
obtaining the consent to the transfer of such franchises and do not
36
impose upon Buyer any conditions or obligations which are
materially more burdensome than are presently contained in any
such Governmental Permit; and provided, further, that Buyer will
not be required to agree to any modifications to any agreement
that is the subject of the Ocean Pines Consent, Xxxxxxx
Properties Consent, Sea Colony Consent or Angola Consent that
will impose upon Buyer any conditions or obligations which are
materially more burdensome than presently contained in any such
agreement, provided, that any change in rates charged for Basic
Services contained in the Sea Colony Consent which is reflected
in a purchase price adjustment pursuant to Section 3.3 shall not
be deemed to be a condition or obligation which is materially
more burdensome.
7.7 HSR Notification. As soon as practicable after
the execution of this Agreement and if required by applicable
Legal Requirements, Seller and Buyer will each complete and file,
or cause to be completed and filed, any notification and report
required to be filed under the Xxxx-Xxxxx-Xxxxxx Antitrust
Improvements Act of 1976, as amended (the "HSR Act"). Each of
the parties will take any additional action that may be
necessary, proper or advisable, will cooperate to prevent
inconsistencies between their respective filings and will furnish
to each other such necessary information and reasonable
assistance as the other may reasonably request in connection with
its preparation of necessary filings or submissions under the HSR
Act. Buyer and Seller shall use commercially reasonable efforts
(including the filing of a request for early termination) to
obtain the early termination of the waiting period under the HSR
Act.
7.8 Notification of Certain Matters. Each party will
promptly notify the other of any fact, event, circumstance or
action the existence or occurrence of which would cause any of
such party's representations or warranties under this Agreement
not to be true in any material respect.
7.9 Risk of Loss; Condemnation. (1) Seller will bear
the risk of any loss or damage to the Assets resulting from fire,
theft or other casualty (except reasonable wear and tear) at all
times prior to the Closing. If any such loss or damage is so
substantial as to prevent normal operation of any material
portion of the System, Seller shall promptly notify Buyer of that
fact and Buyer, at any time within 10 days after receipt of such
notice, may elect by written notice to Seller either (i) to waive
such defect and proceed toward consummation of the acquisition of
the Assets in accordance with this Agreement or (ii) to terminate
this Agreement pursuant to Section 10.1(c)(v). If Buyer elects
to consummate the acquisition of the Assets notwithstanding such
loss or damage and does so, there will be no adjustment in the
Purchase Price on account of such loss or damage but all
insurance proceeds payable as a result of the occurrence of the
event resulting in such loss or damage (to the extent not
previously applied by Seller with respect to such loss or damage)
will be delivered by Seller to Buyer or the rights to such
proceeds will be assigned by Seller to Buyer if not yet paid over
to Seller.
(2) If, prior to the Closing, any part of a
material Asset or an interest in a material Asset 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
Seller or Buyer that it
37
intends to condemn all or any part of a material Asset (such event being
referred to, in either case, as a "Taking"), then Buyer may terminate this
Agreement pursuant to Section 10.1(c)(vi). If Buyer does not elect to
terminate this Agreement then (a) if the Closing occurs, Buyer shall have the
sole right, in the name of Seller, if Buyer so elects, to
negotiate for, claim, contest and receive all damages with
respect to the Taking, (b) Seller shall be relieved of its
obligation to convey to Buyer the Asset or interests that are the
subject of the Taking and (c) at the Closing Seller shall assign
to Buyer all of Seller's rights (including the right to receive
payment of damage) with respect to such Taking and shall pay to
Buyer all damages previously paid to Seller with respect to the
Taking.
7.10 Adverse Changes. Seller shall promptly notify
Buyer in writing of any materially adverse developments affecting
the Assets, the System or the Business which become known to
Seller, including, but not limited to, (i) any damage,
destruction or loss (whether or not covered by insurance)
materially and adversely affecting any of the Assets, the System
or the Business, (ii) any notice of violation, forfeiture or
complaint under any material Governmental Permits or (iii)
anything which, if not corrected prior to the Closing Date, will
prevent Seller from fulfilling any condition to Closing described
in Article VIII.
7.11 Action by Limited Partners. (1) If required by
applicable Legal Requirements and the Partnership Agreement to
consummate the transactions contemplated by this Agreement, or if
the Seller otherwise elects to do so, the Seller, acting through
the General Partner, shall in accordance with the applicable
Legal Requirements and the Partnership Agreement: (i) within a
reasonable period of time (as determined by the General Partner)
after the execution and delivery of this Agreement, duly call,
give notice of, convene and hold a special meeting (the "Special
Meeting") of the Limited Partners for the purpose of approving
the transactions contemplated by this Agreement; and (ii) subject
to its fiduciary duties (as determined by the General Partner
after consultation with independent counsel), include in any
proxy statement the determination and recommendation of the
General Partner to the effect that the General Partner, having
determined that this Agreement and the transactions contemplated
hereby are in the best interests of Seller and the Limited
Partners, has approved this Agreement and such transactions and
recommends that the Limited Partners vote in favor of the sale of
the Assets to Buyer pursuant to this Agreement.
(2) As soon as practicable after the execution
and delivery of this Agreement, Seller shall file with the SEC
under the Exchange Act, and shall use commercially reasonable
efforts to clear with the SEC and mail to the Limited Partners no
later than February 15, 1997, a proxy statement with respect to
the Special Meeting (the "Proxy Statement"). Buyer shall furnish
to Seller the information relating to Buyer as reasonably
requested by Seller required by the Exchange Act to be set forth
in the Proxy Statement. Seller agrees that the Proxy Statement
shall comply in all material respects with the Exchange Act and
the rules and regulations thereunder; provided, however, that no
agreement is made by Seller with respect to information supplied
by Buyer expressly for inclusion in the Proxy Statement. Buyer
and its counsel shall be given a reasonable opportunity to review
the Proxy Statement
38
prior to the filing of the definitive Proxy Statement with the SEC.
7.12 No Solicitation. (1) Each of Seller and the
General Partner shall not, and shall cause its respective
employees, agents and representatives (including, but not limited
to, any investment banker, attorney or accountant retained by
Seller) not to, initiate, solicit or encourage, directly or
indirectly, any inquiries or the making of any proposal with
respect to any Alternative Transaction, engage in any
negotiations concerning, or provide to any other Person any
information or data relating to, the Business, the System, the
Assets or Seller for the purposes of, or have any discussions
with any Person relating to, or otherwise cooperate in any way
with or assist or participate in, facilitate or encourage, any
inquiries or the making of any proposal which constitutes, or may
reasonably be expected to lead to, any effort or attempt by any
other Person to seek or to effect an Alternative Transaction, or
agree to or endorse any Alternative Transaction; provided,
however, that nothing contained in this Section 7.12 shall
prohibit Seller or the General Partner from making any disclosure
to the Limited Partners that, in the judgment of the General
Partner based upon the advice of independent counsel, is required
under applicable Legal Requirements; and provided, further, that
(i) Seller or the General Partner may, upon the unsolicited
request of a third party, furnish information or data (including,
but not limited to, confidential information or data) relating to
the Business, the System, the Assets or Seller for the purposes
of facilitating an Alternative Transaction and participate in
negotiations with a Person making (or who may reasonably be
expected to make) an unsolicited proposal regarding an
Alternative Transaction and (ii) following receipt of a proposal
for an Alternative Transaction, Seller or the General Partner may
terminate this Agreement pursuant to Section 10.1(b)(ii).
(2) TCI shall not, and shall cause its Affiliates
which it controls not to, make a proposal to Seller regarding an
Alternative Transaction. The restriction set forth in this Sec
tion 7.12(b) shall terminate on the earlier of (i) the Closing or
(ii) termination of this Agreement.
7.13 Sales and Transfer Taxes and Fees. Buyer and
Seller shall each pay 50 percent of any state or local sales,
use, transfer, excise, documentary or license taxes or fees or
any other charge (including filing fees) imposed by any
Governmental Authority as a consequence of the transfer of any
Assets pursuant to this Agreement. Seller shall timely file any
sales tax returns required to be filed with any Governmental
Authority as a consequence of the transfer of any Assets pursuant
to this Agreement. Buyer shall cooperate as reasonably requested
in the preparation and filing of any submission or application
necessary to obtain any clearance relating to, or, if available,
exemption from, any Taxes or fees described in this Section 7.13.
7.14 Commercially Reasonable Efforts. (1) Seller
shall use commercially reasonable efforts to take all steps
within its power, and will cooperate with Buyer, to cause to be
fulfilled those of the conditions to Buyer's obligations to
consummate the transactions contemplated by this Agreement that
are dependent upon its actions, and to execute and deliver such
instruments and take such other reasonable actions as may be
necessary or appropriate in order to carry out the intent of this
Agreement and consummate the transactions contemplated
39
hereby.
(2) Buyer shall use commercially reasonable
efforts to take all steps within its power, and will cooperate
with Seller, to cause to be fulfilled those of the conditions to
Seller's obligations to consummate the transactions contemplated
by this Agreement that are dependent upon its actions and to
execute and deliver such instruments and take such other
reasonable actions as may be necessary or appropriate in order to
carry out the intent of this Agreement and consummate the
transactions contemplated hereby.
7.15 Title Insurance. Seller shall cooperate with
Buyer if Buyer elects to obtain title insurance policies on any
Real Property owned in fee or leased. Buyer shall have the sole
responsibility for obtaining and paying for such policies. The
parties agree that the obtaining of title insurance on any Real
Property shall not be a condition to the obligation of Buyer to
consummate the transactions contemplated hereby.
7.16 Non-Competition. For the period commencing on the
Closing Date and expiring on the fifth anniversary thereof, each
of Seller, the General Partner and TCI hereby covenants and
agrees that it shall not, and TCI hereby covenants and agrees
that it shall cause its direct and indirect wholly-owned
subsidiaries not to, directly or indirectly, compete with Buyer
in the provision of terrestrial cable television video services
by means of cable, microwave, fiber optics, satellite receivers
or broadcasts all of which being directed to the delivery of
terrestrial cable television video services to businesses,
residences, multi-family dwellings, hotels, motels, trailers and
other users, in any Service Area in which the Business operates
on the Closing Date. For the period commencing on the Closing
Date and expiring on the fifth anniversary thereof, each of
Seller, the General Partner and TCI further covenants that it
shall not, and TCI further covenants that it shall cause its
direct and indirect wholly-owned subsidiaries not to, directly or
indirectly, manage, operate, join, control, participate, or
become interested in, or be connected with (as a consultant,
partner, stockholder or investor) any such terrestrial cable
television video service that would compete with Buyer in the
provision of cable television service within any portion of the
geographical area described above, except as a passive investor
or stockholder holding less than five percent of the outstanding
voting stock or equity interest in any corporation or other
entity.
7.17 Financing Commitment. No later than June 23,
1997, Buyer shall have obtained, and delivered to Seller a true
and correct copy of, a commitment (in form and substance
satisfactory to Seller in its reasonable judgment) of a reputable
financial institution to provide to Buyer the funds necessary (at
any time to and including December 19, 1997) which together with
Buyer's then existing resources enable it to satisfy all of
Buyer's obligations under this Agreement and with respect to the
transactions contemplated by this Agreement, including its
obligation to purchase the Assets and to pay the Purchase Price,
with funding subject only to (a) the satisfaction of the
conditions to Closing set forth in Article VIII, (b) there having
occurred no Material Adverse Change in the Financial Markets
after the date of such commitment and (c) there having occurred
no material adverse change in the financial condition of Buyer after the
40
date of such commitment (the "Commitment"). Without
limiting the foregoing, the Commitment shall not be subject to
any condition with respect to equity funding (except a condition,
if any, which such financial institution has confirmed, in
writing to Seller, has been satisfied prior to the Initial
Termination Date).
7.18 Forms 394. Unless Seller and Buyer agree to waive
filing of Forms 394 with respect to a Governmental Authority,
(i) within 15 Business Days after the date of this Agreement,
Seller shall deliver to Buyer all information available to Seller
necessary for Buyer to prepare Forms 394 and (ii) within 15
Business Days after the necessary information has been supplied
by Seller, Buyer shall prepare, in form and substance reasonably
satisfactory to Seller, and Seller shall file, Forms 394 with the
applicable Governmental Authorities.
7.19 UCC Lien and Judgment Searches. Seller shall
deliver to Buyer a copy of all UCC lien and judgment searches
which Seller has obtained and any bringdowns thereto which Seller
may obtain prior to Closing in connection with the transactions
contemplated by this Agreement.
7.20 Seller Financial Statements. Seller agrees that
from and after the date of this Agreement it shall, at Buyer's
cost and expense (i) use its commercially reasonable efforts to
make promptly available to Buyer, upon Buyer's request, such
financial statements, financial statement schedules and other
financial information relating to the System and the Business, in
form and substance reasonably satisfactory to Seller and Buyer,
which Buyer may be required to include in any registration
statement, report or other document which Buyer may file with the
SEC or any applicable state securities commission, and shall
direct KPMG Peat Marwick to cooperate in connection therewith and
(ii) use its commercially reasonable efforts to obtain promptly
for Buyer, upon Buyer's request, any consent, report, opinion or
letter of KPMG Peat Marwick, in form and substance reasonably
satisfactory to Seller and Buyer, required to be filed by Buyer
under applicable regulations of the SEC or any applicable state
securities commission in connection therewith.
7.21 Ad Insertion Agreement. No later than 90 days
after the date of this Agreement, Buyer shall give Seller written
notice of whether it intends to assume the Letter Agreement,
dated February 1, 0000, xxxxxxx XXX Xxxxxxxxxxx xx Xxxxxxx Xxxxx
and American Cable Television of Lower Delaware (the "Ad Insertion Agreement").
ARTICLE VIII
8. Conditions Precedent to Obligations of Buyer.
The obligations of Buyer under this Agreement are
subject to the satisfaction at or prior to the Closing of each of
the following conditions, any one or more of which may be waived
by Buyer, in its sole discretion.
41
8.1 HSR Act. If required under applicable Legal
Requirements, all filings required under the HSR Act shall have
been made and the applicable waiting period shall have expired or
been earlier terminated without the receipt of any objection or
the commencement or threat of any litigation by a Governmental
Authority of competent jurisdiction to restrain the consummation
of the transactions contemplated by this Agreement.
8.2 Governmental or Legal Action. No action, suit or
proceeding shall be pending or threatened by any Governmental
Authority and no Legal Requirement shall have been enacted,
promulgated or issued or deemed applicable to any of the
transactions contemplated by this Agreement by any Governmental
Authority that would (a) prohibit Buyer's ownership or operation
of all or a material portion of the System, the Business or the
Assets or (b) prevent or make illegal the consummation of the
transactions contemplated by this Agreement.
8.3 Accuracy of Representations and Warranties. The
representations and warranties of Seller contained in this
Agreement shall be true and correct in all material respects as
of the date of this Agreement and as of the Closing Date, with
the same effect as though made on and as of the Closing Date,
except for such changes permitted or contemplated by the terms of
this Agreement and except insofar as any of such representations
and warranties relate solely to a particular date or period, in
which case they shall be true and correct in all material
respects on such Closing Date with respect to such date and
period.
8.4 Performance of Agreements. Seller shall have
performed in all material respects all obligations and agreements
and complied, or caused to be complied with, all covenants and
conditions required by this Agreement to be performed or complied
with by Seller at or prior to the Closing Date.
8.5 No Material Adverse Change. During the period
from the date of this Agreement through and including the Closing
Date, there shall not have occurred any material adverse change
in the business, financial condition or operations of the Assets,
taken as a whole, the System or the Business, other than any
change arising out of matters of a general economic nature or
matters (including, but not limited to, competition caused by or
arising from the Multichannel Multipoint Distribution Service,
direct broadcast satellite, legislation, rule making and
regulation) affecting the cable television industry (national or
regional) generally, and Seller shall not have sustained any
material loss or damage to the Assets or the System, whether or
not insured, that materially affects the ability of Seller to
conduct the Business in a manner consistent with past practice.
8.6 Consents and Extensions. Seller shall have
delivered to Buyer evidence, in form and substance reasonably
satisfactory to Buyer, that all the Required Consents and
Extensions have been obtained or given.
42
8.7 Transfer Documents. Seller shall have delivered
to Buyer customary bills of sale, deeds, assignments and other
instruments of transfer sufficient to convey good and marketable
title to the Assets in accordance with the terms of this
Agreement, in form and substance reasonably satisfactory to
Buyer.
8.8 Opinions of Seller's Counsel. Buyer shall have
received the opinion or opinions of Xxxx, Scholer, Fierman, Xxxx
& Handler, LLP, counsel for Seller, dated the Closing Date,
substantially in the form of Exhibit D.
8.9 Discharge of Liens. Seller shall have secured the
termination or removal of all Encumbrances of any nature on the
Assets, other than Permitted Encumbrances.
8.10 Extension of Ad Insertion Agreement. In the event
that Buyer gives notice to Seller in accordance with Section 7.21
of its intention to assume the Ad Insertion Agreement, such
agreement shall have been extended on terms similar to those
contained in the existing agreement for a period of one year from
the Closing Date.
8.11 Opinion of Seller's FCC Counsel. Buyer shall have
received the opinion of Xxxx, Raywid & Xxxxxxxxx, FCC counsel for
Seller, dated the Closing Date, substantially in the form of
Exhibit F.
8.12 Additional Documents and Acts. Seller shall have
delivered or caused to be delivered to Buyer all other documents
required to be delivered pursuant to this Agreement and done or
caused to be done all other acts or things reasonably requested
by Buyer to evidence compliance with the conditions set forth in
this Article VIII.
8.13 Certificates. Seller shall have furnished Buyer
with such other certificates of Seller and others, dated as of
the Closing Date, to evidence compliance with the conditions set
forth in this Article VIII, as may be reasonably requested by
Buyer.
ARTICLE IX
9. Conditions Precedent to Obligations of Seller.
The obligations of Seller under the Agreement are
subject to the satisfaction, at or prior to the Closing Date, of
each of the following conditions, any one or more of which may be
waived by Seller in its sole discretion.
9.1 HSR Act. If required under applicable Legal
Requirements, all filings required under the HSR Act shall have
been made and the applicable waiting period shall have expired or
been earlier terminated without the receipt of any objection or
the commencement or threat of any litigation by a Governmental
Authority of competent jurisdiction to restrain the
43
consummation of the transactions contemplated by this Agreement.
9.2 Governmental or Legal Actions. No action, suit or
proceeding shall be pending or threatened by any Governmental
Authority and no Legal Requirement shall have been enacted,
promulgated or issued or deemed applicable to any of the
transactions contemplated by this Agreement by any Governmental
Authority that would (a) prohibit Buyer's ownership or operation
of all or any material portion of the System, the Business or the
Assets or (b) prevent or make illegal the consummation of the
transactions contemplated by this Agreement.
9.3 Accuracy of Representations and Warranties. The
representations and warranties of Buyer contained in this
Agreement shall be true and correct in all material respects as
of the date of this Agreement and as of the Closing Date, with
the same effect as though made on and as of the Closing Date,
except for such changes permitted or contemplated by the terms of
this Agreement and except insofar as any of such representations
and warranties relate solely to a particular date or period, in
which case they shall be true and correct in all material
respects on such Closing Date with respect to such date and
period.
9.4 Performance of Agreements. Buyer shall have
performed in all material respects all obligations and agreements
and complied, or caused to be complied with, all covenants and
conditions required by this Agreement to be performed or complied
with by Buyer at or prior to the Closing Date.
9.5 Consents. All Required Consents shall have been
obtained or given.
9.6 Opinions of Buyer's Counsel. Seller shall have
received the opinion or opinions of Xxxxxxxxx Xxxxxx Xxxxxxxx
Xxxxxx & Xxxxxx, P.C., outside counsel for Buyer, dated the
Closing Date, substantially in the form of Exhibit E.
9.7 Limited Partner Approval. The transactions
contemplated by this Agreement shall have been approved by the
affirmative vote of or consent by the Limited Partners to the
extent required by the Partnership Agreement or if Seller
otherwise elects as permitted by Section 7.11.
9.8 Payment of Purchase Price. Buyer shall have paid
to Seller the Purchase Price as set forth in Section 3.1.
9.9 Assumption of Liabilities. Buyer shall have
delivered to Seller a customary assumption of liabilities
agreement in form and substance reasonably acceptable to Buyer
and Seller which is sufficient to cover Buyer's obligations as
set forth in Section 4.1.
9.10 Closing of Another System. In the event that,
subsequent to the date of this Agreement but prior to the Closing
Date, Seller and Buyer enter into an agreement for the
44
sale by Seller of any cable television system to Buyer other than the
System, the closing of the sale of such other system shall have
occurred or shall occur contemporaneously with the Closing
hereunder.
9.11 Additional Documents and Acts. Buyer shall have
delivered or caused to be delivered to Seller all other documents
required to be delivered pursuant to this Agreement and done all
other acts or things reasonably requested by Seller to evidence
compliance with the conditions set forth in this Article IX.
9.12 Certificates. Buyer shall have furnished Seller
with such other certificates of Buyer and others, dated as of the
Closing Date, to evidence compliance with the conditions set
forth in this Article IX, as may be reasonably requested by
Seller.
9.13 Fairness Opinion. Seller shall have received an
opinion, in form and substance reasonably satisfactory to Seller,
from its financial advisors as to the fairness, from a financial
point of view, of the transactions contemplated by this
Agreement.
ARTICLE X
10. Termination.
10.1 Events of Termination. This Agreement and the
transactions contemplated by this Agreement may be terminated at
any time prior to the Closing:
(1) by the mutual written consent of Buyer and
Seller;
(2) by Seller:
(1) if the consummation of the transactions
contemplated by this Agreement by Seller would violate any
nonappealable final order, decree or judgment of any Governmental
Authority having competent jurisdiction;
(2) following receipt by Seller or the General
Partner of an unsolicited proposal for an Alternative Transaction
to the extent that the General Partner determines in good faith
on the basis of advice of independent counsel that such action is
necessary or appropriate in order for the General Partner to act
in a manner that is consistent with its fiduciary obligations
under applicable law;
(3) if any representation or warranty of Buyer
made herein is untrue in any material respect (other than a
change permitted or contemplated by this Agreement) and such
breach is not cured within 10 days of Buyer's receipt of a notice
from Seller that such breach exists or has occurred;
45
(4) if Buyer shall have defaulted in any material
respect in the performance of any material obligation under this
Agreement and such breach is not cured within 30 days of Buyer's
receipt of a notice from Seller that such default exists or has
occurred;
(5) if the conditions to Seller's obligations to
consummate the Closing as set forth in Article IX cannot
reasonably be satisfied on or before the Termination Date;
(vi) on any date from June 23, 1997 to and
including the Initial Termination Date, if Buyer has not obtained
the Commitment required by Section 7.17, and at any time
thereafter if the Commitment is terminated; or
(vii) within five Business Days of the date which
is 60 days from the date of this Agreement, if Seller has not
obtained the Ocean Pines Consent, or within five Business Days
the date which is 90 days from the date of this Agreement, if
Seller has not obtained the Ocean Pines Consent.
(3) by Buyer:
(1) if the consummation of the transactions
contemplated by this Agreement by Buyer would violate any
nonappealable final order, decree or judgment of any Governmental
Authority having competent jurisdiction;
(2) if any representation or warranty of Seller
made herein is untrue in any material respect (other than due to
a change permitted or contemplated by this Agreement) and such
breach is not cured within 10 days of Seller's receipt of a
notice from Buyer that such breach exists or has occurred;
(3) if Seller shall have defaulted in any
material respect in the performance of any material obligation
under this Agreement and such breach is not cured within 30 days
of Seller's receipt of a notice from Buyer that such default
exists or has occurred;
(4) if the conditions to Buyer's obligations to
consummate the Closing as set forth in Article VIII cannot
reasonably be satisfied on or before the Termination Date;
(5) within 10 days after receipt by Buyer of a
notice from Seller that the loss or damage to the Assets
resulting from fire, theft or other casualty is so substantial as
to prevent normal operation of any material portion of the
System, as contemplated by Section 7.9(a);
(6) following a Taking, as contemplated by the
first sentence of Section 7.9(b);
(vii) if Seller notifies Buyer that, in its
reasonable judgment, the cost of the Remediation will exceed
$200,000, as contemplated by Section 7.5(a); provided, that Seller
46
has not agreed to bear all costs of the Remediation in excess of $200,000; or
(viii) within five Business Days of the date which
is 90 days from the date of this Agreement, if Seller has not
obtained the Ocean Pines Consent.
(4) Unless the Closing shall have theretofore
taken place, by either party after the Termination Date, provided
that the terminating party is not otherwise materially in default
or breach of this Agreement.
10.2 Manner of Exercise. In the event of the
termination of this Agreement by either Buyer or Seller, pursuant
to Section 10.1, notice thereof shall forthwith be given to the
other party and this Agreement shall terminate and the
transactions contemplated hereunder shall be abandoned without
further action by Buyer or Seller.
10.3 Effect of Termination. (1) Subject to
paragraphs (b), (c), (d) and (e) of this Section 10.3, in the
event of the termination of this Agreement pursuant to Sec
tion 10.1 and prior to the Closing, all obligations of the
parties hereunder shall terminate, except for the respective
obligations of the parties under Section 13.12; provided,
however, that no termination of this Agreement shall (i) except
as set forth in paragraphs (b), (c), (d) and (e) of this
Section 10.3 and Section 10.4, relieve a defaulting or breaching
party from any liability to the other party or parties hereto for
or in respect of such default or (ii) result in the rescission of
any transaction theretofore consummated hereunder. For purposes
of this Section 10.3 and Section 10.4, the failure to obtain the
Commitment on or prior to June 23, 1997 or the termination of the
Commitment at any time thereafter shall be deemed to be a breach
or default by Buyer of its obligations under this Agreement.
(2) If this Agreement is terminated by Seller
pursuant to Section 10.1(b)(ii), (i) Buyer shall be entitled to
an immediate return of the Deposit and (ii) Seller shall
simultaneously with such notice of termination (which notice of
termination shall not be effective unless and until such payment
is made and action is taken) take all action required under the
Escrow Agreement to cause the Deposit (together with all interest
earned thereon) to be released to Buyer and pay to Buyer a
termination fee of $1,077,500; provided, that if Seller
terminates this Agreement pursuant to 10.1(b)(ii) with respect to
an unsolicited proposal for an Alternative Transaction proposed
by a person who submitted a written proposal prior to the date of
this Agreement to purchase the System pursuant to the competitive
auction conducted by Xxxxxxx & Associates, L.P., then the amount
of such termination fee shall be $2,155,000. Any such
termination fee shall be liquidated damages and not a penalty,
and upon receipt thereof and the Deposit Buyer shall be precluded
from exercising any other right or remedy available under this
Agreement or applicable law.
(3) If this Agreement is terminated for any
reason other than pursuant to Section 10.1(b)(ii),
Section 10.1(b)(iii), Section 10.1(b)(iv) or Section 10.1(b)(vi)
and Buyer is not otherwise in default or breach of this
Agreement, Buyer shall be entitled to the immediate
47
return of the Deposit (together with all interest earned thereon), and Seller
shall promptly (but in no event more than two Business Days after
the date of termination of this Agreement) take all action
required under the Escrow Agreement to cause the Deposit
(together with all interest earned thereon) to be released to
Buyer.
(4) If this Agreement is terminated by Seller
pursuant to Section 10.1(b)(vi) on or prior to the Initial
Termination Date, and if prior to such termination, (i) there has
occurred a Material Adverse Change in the Financial Markets since
the date of this Agreement and (ii) Seller has received written
notice from Buyer that its failure to have the Commitment was due
solely to such Material Adverse Change in the Financial Markets
(which notice shall state with particularity the events which
constitute such change), then Seller's damages for the
termination of this Agreement shall be limited to $3,026,700. In
any action or proceeding to determine damages for termination of
this Agreement, Buyer shall have the burden to prove that the
provisions of this paragraph (d) are applicable to such
termination.
(5) If (i) this Agreement is extended by Seller
beyond the Initial Termination Date and is subsequently
terminated by Seller pursuant to Section 10.1(b)(vi) and (ii) at
any time after the Initial Termination Date but prior to the
Closing the Commitment is terminated solely because there has
been a Material Adverse Change in the Financial Markets following
the Initial Termination Date, Seller's damages shall be limited
to $3,026,700; provided, that if prior to such termination (x)
all conditions to Closing set forth in Articles VIII and IX,
other than Section 9.10, have been satisfied and (y) Buyer has
given written notice to Seller stating that Buyer is prepared to
consummate the transactions contemplated by this Agreement and
requesting that Seller waive the condition to Closing set forth
in Section 9.10 (the "Waiver Notice"), then Seller shall be
deemed to have waived all damages hereunder for termination of
this Agreement if thereafter the conditions to Closing set forth
in Article VIII have been satisfied and Buyer is unable to
consummate the transactions contemplated by this Agreement solely
because the Commitment was terminated by the issuing financial
institution after the date of the Waiver Notice and the
Commitment was so terminated solely because a "material adverse
change," as defined (on commercially reasonable terms, but
specifically excluding any material adverse change of or relating
to the Buyer or its business or financial condition) in the
Commitment, occurred after the date of the Waiver Notice. In any
action or proceeding to determine damages for termination of this
Agreement, Buyer shall have the burden to prove that the
provisions of this paragraph (e) are applicable to such
termination.
(6) Subject to Section 10.4, if this Agreement is
terminated (i) pursuant to Section 10.1(b)(vi) or (ii) for any
reason other than pursuant to Section 10.1(b)(vi) or pursuant to
Section 10.1(b)(ii), and Buyer is in default or breach of this
Agreement, then in either such case the Deposit shall continue to
be held by Escrow Agent in accordance with the terms of the
Escrow Agreement pending final resolution of any claims for
damages arising from Buyer's default or breach of this Agreement
or as otherwise directed by Seller and Buyer.
10.4 Liquidated Damages. Provided that Seller is not
in material default of
48
this Agreement, in the event of (i) the breach or default by Buyer of its
obligations under this Agreement and (ii) the termination of this Agreement
prior to the Closing pursuant to Section 10.1(b)(iii), (iv) or (vi) (but
subject to Section 10.3(e)), Seller shall have the option, upon
notice from Seller to Buyer given as provided in the Escrow
Agreement, to receive as liquidated damages, and not as a
penalty, the Deposit. In the event Seller elects to receive the
Deposit (together with all interest earned thereon) as liquidated
damages as set forth in this Section 10.4, Buyer shall promptly
(but in no event more than five Business Days after receipt of
such notice of termination) take all action required under the
Escrow Agreement to cause the Deposit (together with all interest
earned thereon) to be released to Seller. If Seller elects to
receive the Deposit as liquidated damages as set forth in this
Section 10.4, Seller shall, upon receipt of the Deposit (together
with all interest earned thereon), be precluded from exercising
any other right or remedy available under this Agreement or
applicable law.
ARTICLE XI
11. Nature and Survival of Representations,
Warranties and Agreements.
11.1 Nature of Representations, Warranties and
Agreements. Neither party will be deemed to have made any
representation, warranty, covenant or agreement except as set
forth in this Agreement. Without limiting the generality of the
foregoing, neither party will be liable or bound in any manner by
any express or implied representation, warranty, covenant or
agreement that is made by any employee, agent or other Person
representing or purporting to represent such party.
11.2 Survival of Representations and Warranties. The
representations and warranties of Seller and Buyer in this
Agreement and in the documents and instruments to be delivered by
Seller and Buyer pursuant to this Agreement shall survive the
Closing only as and to the extent set forth in this Article XI.
11.3 Time Limitations. If the Closing occurs, except
as set forth below, Seller shall have no liability to Buyer with
respect to any representation or warranty or any covenant,
agreement or obligation to the extent required to be performed or
complied with prior to the Closing Date, unless on or before the
first anniversary of the Closing Date Seller is given written
notice by Buyer asserting a claim with respect thereto and
specifying the factual basis of that claim in reasonable detail
to the extent then known by Buyer. If the Closing occurs, Buyer
shall have no liability to Seller with respect to any
representation or warranty or any covenant, agreement or
obligation to the extent required to be performed or complied
with prior to the Closing Date, unless on or before the first
anniversary of the Closing Date Buyer is given written notice by
Seller of a claim with respect thereto and specifying the factual
basis of that claim in reasonable detail to the extent then known
by Seller. A claim with respect to any covenants to be performed
or complied with by Buyer or Seller after the Closing Date may be
asserted at any
49
time. Notwithstanding the foregoing, indemnification claims for the breach
of the representations in Sections 5.5 and 5.16 and indemnification claims
arising from any third party claim asserted against Buyer arising from the
Excluded Liabilities may be made by Buyer at any time.
11.4 Limitations as to Amount. (1) If the Closing
occurs, Seller shall have no liability (for indemnification or
otherwise) with respect to any failure or breach of any
representation or warranty or any covenant, agreement or
obligation to the extent required to be performed on or prior to
the Closing Date until the total of all damages with respect to
all such failures or breaches exceeds in the aggregate $50,000,
and then only for damages in excess of $50,000.
(2) If the Closing occurs, Buyer shall have no
liability (for indemnification or otherwise) with respect to any
failure or breach of any representation or warranty or any
covenant, agreement, or obligation to the extent required to be
performed on or before the Closing Date until the total of all
damages with respect to all such failures or breaches exceeds in
the aggregate $50,000, and then only for damages in excess of
$50,000.
(3) If the Closing occurs, Seller's aggregate
liability (for indemnification or otherwise) with respect to any
failure or breach of any representation or warranty or any
covenant, agreement or obligation to the extent required to be
performed on or prior to the Closing Date shall be limited to
Buyer's right to make an indemnification claim against Seller
under Article XII and shall be further limited as set forth in
Section 12.3.
ARTICLE XII
12. Indemnification.
12.1 Rights to Indemnification. Subject to the
limitations set forth in Sections 11.3 and 11.4, Seller agrees to
indemnify and hold harmless Buyer against any loss, liability,
claim, damage or expense (including, but not limited to,
reasonable attorneys' fees, accountants' fees and disbursements)
arising from (a) any claim for brokerage or agent's or finder's
commissions or compensation in respect of the transactions
contemplated by this Agreement by any Person purporting to act on
behalf of Seller, (b) any claim that Buyer is liable for the
Excluded Liabilities and (c) Seller's failure or breach of any
representation, warranty, covenant, agreement or obligation made
or required to be performed by Seller under this Agreement (and
specifically excluding any representation, warranty, covenant,
agreement or obligation of TCI or the General Partner, as to
which Seller shall have no obligations to Buyer). Subject to the
limitations set forth in Sections 11.3 and 11.4, Buyer agrees to
indemnify and hold harmless Seller against any loss, liability,
claim, damage or expense (including, but not limited to,
reasonable attorneys' fees, accountants' fees and disbursements)
arising from (a) any claim for brokerage or agent's or finder's
commissions or compensation in respect of the transactions
50
contemplated by this Agreement by any Person purporting to act on
behalf of Buyer, (b) the failure to perform the obligations of
the Assumed Liabilities, (c) Buyer's failure or breach of any
representation, warranty, covenant, agreement or obligation made
or required to be performed by Buyer under this Agreement and (d)
if Buyer has the right to terminate this Agreement pursuant to
Section 7.5(a) and does not give notice to terminate this
Agreement pursuant to Section 10.1(c)(vii), then after the
Closing any claim with respect to any environmental condition
disclosed or any report prepared and delivered pursuant to
Section 7.5.
12.2 Procedure for Indemnification. Promptly after
receipt by an indemnified party under Section 12.1 of notice of
the commencement of any action, such indemnified party shall, if
a claim in respect thereof is to be made against an indemnifying
party under such section, give notice to the indemnifying party
of the commencement thereof, but the failure so to notify the
indemnifying party shall not relieve it of any liability that it
may have to any indemnified party except to the extent the
indemnifying party demonstrates that the defense of such action
is prejudiced thereby. In case any such action shall be brought
against an indemnified party and it shall promptly give notice to
the indemnifying party of the commencement thereof, the
indemnifying party shall be entitled to participate therein and,
to the extent that it shall wish, within ten Business Days of
receipt of such notice, to assume the defense thereof with
counsel of its choice and reasonably satisfactory to such
indemnified party and, after notice from the indemnifying party
to such indemnified party of its election so to assume the
defense thereof, the indemnifying party shall not be liable to
such indemnified party under such section for any fees of other
counsel or any other expenses, in each case subsequently incurred
by such indemnified party in connection with the defense thereof,
other than reasonable costs of investigation. If an indemnifying
party assumes the defense of such action, (a) no compromise or
settlement thereof may be effected by the indemnifying party
without the indemnified party's consent unless (i) there is no
finding or admission of any violation of law or any violation of
the rights of the indemnified party and no effect on any other
claims that may be made against the indemnified party and (ii)
the sole relief provided is monetary damages that are paid in
full by the indemnifying party and (b) the indemnifying party
shall have no liability with respect to any compromise or
settlement thereof effected without its consent (which shall not
be unreasonably withheld). If notice is given to an indemnifying
party of the commencement of any action and it does not, within
ten Business Days after the indemnified party's notice is given,
give notice to the indemnified party of its election to assume
the defense thereof, the indemnifying party shall be bound by any
determination made in such action or any compromise or settlement
thereof effected by the indemnified party. Notwithstanding the
foregoing, if an indemnified party determines in good faith that
there is a reasonable probability that an action may adversely
affect it or its Affiliates other than as a result of monetary
damages, such indemnified party may, by notice to the
indemnifying party, assume the exclusive right to defend,
compromise or settle such action, but the indemnifying party
shall not be bound by any determination of an action so defended
or any compromise or settlement thereof effected without its
consent (which shall not be unreasonably withheld).
12.3 Deposit. Buyer acknowledges and agrees that
recourse against the
51
Deposit up to an aggregate amount of $1,077,500 is its sole and exclusive
remedy in the event of a claim against Seller with respect to any
representation or warranty or any covenant, agreement or obligation,
whether for indemnification pursuant to Article XI or this Article XII or
otherwise; provided, however, that this limitation shall not
apply to claims by Buyer for (i) breaches of covenants,
agreements or obligations to be performed or complied with by
Seller after the Closing Date, (ii) breaches of representations
or warranties set forth in Sections 5.5 and 5.16 and (iii) third
party claims asserted against Buyer arising from the Excluded
Liabilities for which Buyer acknowledges and agrees that its
first recourse shall be against the Deposit, to the extent there
are funds available.
ARTICLE XIII
13. Miscellaneous.
13.1 Parties Obligated and Benefitted. (1) Subject to
the limitations set forth in clauses (b) and (c) below, this
Agreement will be binding upon the parties and their respective
assigns and successors in interest and will inure solely to the
benefit of the parties and their respective assigns and
successors in interest, and no other Person will be entitled to
any of the benefits conferred by this Agreement.
(2) Without the prior written consent of the
other parties, no party will assign any of its rights under this
Agreement or delegate any of its duties under this Agreement;
provided, that Buyer may assign this Agreement to any Affiliate
or subsidiary of Buyer without Seller's consent; provided,
however, that notwithstanding such assignment Buyer shall remain
obligated to Seller pursuant to the terms and conditions of this
Agreement.
13.2 Press Releases and Confidentiality. Except as
required by applicable law based on the advice of counsel,
neither party shall make any public announcement, press release
or Form 8-K filing under the Exchange Act with the SEC or any
other filing with any other regulatory agency with respect to the
transactions contemplated by this Agreement, without the prior
written approval of the other party. Prior to the Closing Date
(or at any time if the Closing does not occur), Buyer shall, and
shall cause its members, officers, directors, employees, lenders,
potential investors, auditors, accountants and representatives
to, keep confidential and not disclose to any Person (other than
its members, officers, directors, employees, lenders, potential
investors, auditors, accountants and representatives) or use any
information relating to Seller, the General Partner, Tele-
Communications, Inc., TCI or any of TCI's direct or indirect
wholly-owned subsidiaries and (except in connection with the
transactions contemplated hereby, including, but not limited to,
efforts to obtain from Governmental Authorities and third parties
Extensions and Required Consents to the transactions contemplated
hereby and the operation of the Business) all non-public
information obtained by Buyer pursuant to this Agreement. Prior
to and following the Closing, Seller shall, and shall cause its
officers, employees and representatives to, keep confidential and
not disclose to any Person or use any information
52
relating to Buyer and (except in connection with preparing Tax returns,
conducting proceedings relating to Taxes or the Excluded
Liabilities and, prior to the Closing Date, as required in the
conduct of the Business or as permitted by Section 7.12) any non-
public information relating to the Business. Buyer agrees to the
inclusion of a description of the transactions contemplated by
this Agreement in a letter to the Limited Partners. This
Section 13.2 shall not be violated by disclosure pursuant to
court order or as otherwise required by law, on condition that
notice of the requirement for such disclosure is given to the
other party hereto prior to making any disclosure and the party
subject to such requirement cooperates as the other may
reasonably request in resisting it.
13.3 Notices. All notices, consents, approvals,
demands, requests and other communications required or desired to
be given hereunder must be given in writing, shall refer to this
Agreement, and shall be sent by registered or certified mail,
return receipt requested, by hand delivery, by facsimile or by
overnight courier service, addressed to the parties hereto at
their addresses set forth below, or such other addresses as they
may designate by like notice:
To Seller:
American Cable TV Investors 5, Ltd.
0000 XXX Xxxxxxx
Xxxxxxxxx, Xxxxxxxx 00000
Attention: Xxxxxx Xxxxx
Facsimile No.: (000) 000-0000
With copies to:
Xxxx, Scholer, Fierman,
Xxxx & Handler, LLP
000 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxx Xxxx Xxxxxx, Esq.
Facsimile No.: (000) 000-0000
To Buyer at:
Mediacom LLC
00 Xxxxxxx Xxx Xxxx, Xxxxx 000-X
Xxxxxxxxxx, XX 00000
Attention: Xxxxx Xxxxxxxx
Facsimile No.: (000) 000-0000
With a copy to:
Xxxxxxxxx Xxxxxx Xxxxxxxx Xxxxxx & Xxxxxx, P.C.
53
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxx Xxxxxxxx
Facsimile No.: (000) 000-0000
Any notice from a party hereto may be given by such
party's respective attorneys. Any notice or other communications
made hereunder shall be deemed to have been given (i) if
delivered personally, by overnight courier service or by
facsimile, on the date received, or (ii) if by registered or
certified mail, return receipt requested, five business days
after mailing.
13.4 Waiver. This Agreement or any of its provisions
may not be waived except in writing. The failure of any party to
enforce any right arising under this Agreement on one or more
occasions will not operate as a waiver of that or any other right
on that or any other occasion.
13.5 Captions. The article and section captions of
this Agreement are for convenience only and do not constitute a
part of this Agreement.
13.6 CHOICE OF LAW. THIS AGREEMENT AND THE LEGAL
RELATIONS BETWEEN THE PARTIES HERETO SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK
APPLICABLE TO CONTRACTS MADE AND TO BE PERFORMED IN THAT STATE,
WITHOUT REGARD TO CONFLICT OF LAWS PRINCIPLES.
13.7 Nonrecourse. Notwithstanding anything in this
Agreement to the contrary, in any action brought by reason of
this Agreement or the transactions contemplated hereby, no
judgment shall be sought or obtained against any of the general
or limited partners of Seller or enforced against any of such
partners or any of their assets.
13.8 Terms. Terms used with initial capital letters
will have the meanings specified, applicable to both singular and
plural forms, for all purposes of this Agreement. The word
"include" and derivatives of that word are used in this Agreement
in an illustrative sense rather than a limiting sense.
13.9 Rights Cumulative. Except as set forth in Sec
tion 10.4, all rights and remedies of each of the parties under
this Agreement will be cumulative, and the exercise of one or
more rights or remedies will not preclude the exercise of any
other right or remedy available under this Agreement or
applicable law.
13.10 Further Actions. Seller and Buyer will
execute and deliver to the other, from time to time at or after
the Closing, for no additional consideration and at no additional
cost to the requesting party, such further assignments,
certificates, instruments, records, or other documents,
assurances or things as may be reasonably necessary to give full
effect to this
54
Agreement and to allow each party fully to enjoy
and exercise the rights accorded and acquired by it under this
Agreement.
13.11 Time. If the last day permitted for the
giving of any notice or the performance of any act required or
permitted under this Agreement falls on a day which is not a
Business Day, the time for the giving of such notice or the
performance of such act will be extended to the next succeeding
Business Day.
13.12 Expenses. Except as otherwise expressly
provided in this Agreement, each party will pay all of its
expenses, including attorneys' and accountants' fees, in
connection with the negotiation of this Agreement, the
performance of its obligations and the consummation of the
transactions contemplated by this Agreement.
13.13 Specific Performance. Seller and Buyer agree
that irreparable damages would occur if any of the provisions of
this Agreement were not performed in accordance with their
specific terms or were otherwise breached. It is accordingly
agreed that Seller and Buyer shall be entitled to an injunction
or injunctions to prevent breaches of this Agreement and to
enforce specifically the terms and provisions hereof in any court
of the United States or any state having jurisdiction, in
addition to any other remedy to which they are entitled at law or
in equity; provided, however, that Seller shall not be entitled
to enforce specifically the terms and provisions hereof if Buyer
would be required, as a result of such enforcement, to accept
financing on terms which are not commercially reasonable in order
to fund the Purchase Price. Buyer acknowledges and agrees that
financing terms similar to those existing under its senior debt
facility agented by The Chase Manhattan Bank are deemed to be
commercially reasonable.
13.14 Additional Remedies. Buyer, TCI and the
General Partner agree that irreparable harm would occur if any of
the obligations of TCI or the General Partner set forth in
Sections 7.3 and 7.16 were not performed in accordance with their
specific terms or were otherwise breached. It is accordingly
agreed that Buyer shall be entitled to an injunction or
injunctions to prevent breaches of Sections 7.3 and 7.16 and to
enforce specifically the terms and provisions of Sections 7.3 and
7.16 in any court of the United States or any state having
jurisdiction, in addition to any other remedy to which they are
entitled at law or in equity. Buyer shall be entitled to any
remedy available at law or in equity with respect to a breach by
TCI or the General Partner of its respective representations,
warranties or covenants in this Agreement.
13.15 Waiver of Remedies. Each of Seller and
Buyer hereby waives any claim for damages and any right to bring
any action, cause of action, suit, demand or damage in law or
equity which it may have against the other arising from
termination of this Agreement pursuant to Section 10.(b)(vii) or
10.1(c)(viii); provided, however, that neither Seller nor Buyer
shall be precluded from bringing any action or suit arising from
any default or breach of this Agreement.
13.16 Schedules. Any disclosure made on a Schedule
to this Agreement will be deemed included on any other Schedule
to which such disclosure may be pertinent.
55
13.17 Counterparts. This Agreement may be executed
in one or more counterparts, each of which will be deemed an
original.
13.18 Entire Agreement. This Agreement (including
the Schedules and Exhibits referred to in this Agreement, which
are incorporated in and constitute a part of this Agreement)
contains the entire agreement of the parties and supersedes all
prior oral or written agreements and understandings with respect
to the subject matter. This Agreement may not be amended or
modified except by a writing signed by the parties.
13.19 Severability. Any term or provision of this
Agreement which is invalid or unenforceable will be ineffective
to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining rights of the
Person intended to be benefitted by such provision or any other
provisions of this Agreement.
56
IN WITNESS WHEREOF the parties hereto have executed
this Agreement as of the day and year first above written.
SELLER: AMERICAN CABLE TV INVESTORS 5, LTD.
By: IR-TCI Partners V, L.P.,
its general partner
By: TCI Ventures Five, Inc.,
its general partner
By:
Name:
Title:
BUYER: MEDIACOM LLC
By:
Name:
Title:
With respect to Sections 5.1(b), 5.2(b), 5.3(c),
7.3, 7.12(b), 7.16 and 13.14 only:
TCI COMMUNICATIONS, INC.
By:
Name:
Title:
With respect to Sections 5.1(b), 5.2(b), 5.3(c),
7.12(a), 7.16 and 13.14 only:
IR-TCI PARTNERS V, L.P.
By: TCI Ventures Five, Inc., its
general partner
57
By:
Name:
Title:
