EXHIBIT 99.1
EXECUTION COPY
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ASSET PURCHASE AGREEMENT
between
ADELPHIA COMMUNICATIONS CORPORATION
and
TIME WARNER NY CABLE LLC
Dated as of April 20, 2005
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TABLE OF CONTENTS
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ARTICLE I DEFINITIONS AND TERMS...................................................................... 3
Section 1.1 Certain Definitions....................................................... 3
Section 1.2 Other Interpretive Provisions............................................. 41
ARTICLE II PURCHASE AND SALE OF THE SPECIFIED BUSINESSES............................................. 43
Section 2.1 Purchase and Sale of Assets............................................... 43
Section 2.2 Excluded Assets........................................................... 45
Section 2.3 Assumption of Liabilities................................................. 46
Section 2.4 Excluded Liabilities...................................................... 47
Section 2.5 Purchase Price............................................................ 47
Section 2.6 Closing Adjustment Amount................................................. 48
Section 2.7 MCE Systems............................................................... 50
Section 2.8 Closing................................................................... 53
Section 2.9 Deliveries by Buyer....................................................... 53
Section 2.10 Deliveries by Seller...................................................... 55
Section 2.11 Non-Assignability of Assets............................................... 57
ARTICLE III REPRESENTATIONS AND WARRANTIES OF SELLER................................................. 58
Section 3.1 Organization and Qualification............................................ 58
Section 3.2 Subsidiaries and Transferred Investments.................................. 58
Section 3.3 Corporate Authorization................................................... 60
Section 3.4 Consents and Approvals.................................................... 61
Section 3.5 Non-Contravention......................................................... 61
Section 3.6 Binding Effect............................................................ 62
Section 3.7 Financial Statements...................................................... 62
Section 3.8 Litigation and Claims..................................................... 64
Section 3.9 Taxes..................................................................... 65
Section 3.10 Employee Benefits......................................................... 65
Section 3.11 Compliance with Laws...................................................... 67
Section 3.12 Environmental Matters..................................................... 68
Section 3.13 Intellectual Property..................................................... 69
Section 3.14 Labor..................................................................... 70
Section 3.15 Contracts................................................................. 70
Section 3.16 Cable System and Subscriber Information................................... 72
Section 3.17 Franchises................................................................ 72
Section 3.18 Network Architecture...................................................... 73
Section 3.19 Absence of Changes........................................................ 74
Section 3.20 Assets.................................................................... 74
Section 3.21 Real Property............................................................. 75
Section 3.22 Absence of Liabilities.................................................... 76
Section 3.23 Insurance................................................................. 76
Section 3.24 Friendco Purchase Agreement............................................... 76
Section 3.25 Transactions with Affiliates.............................................. 76
Section 3.26 Finders' Fees............................................................. 77
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Section 3.27 No Other Representations or Warranties.................................... 77
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF BUYER................................................... 77
Section 4.1 Organization and Qualification............................................ 77
Section 4.2 Subsidiaries.............................................................. 77
Section 4.3 Corporate Authorization................................................... 78
Section 4.4 Buyer Interests and Parent Capital Stock.................................. 79
Section 4.5 Purchase Shares........................................................... 80
Section 4.6 Consents and Approvals.................................................... 80
Section 4.7 Non-Contravention......................................................... 80
Section 4.8 Binding Effect............................................................ 81
Section 4.9 Financial Statements...................................................... 81
Section 4.10 Litigation and Claims..................................................... 81
Section 4.11 Taxes..................................................................... 82
Section 4.12 Employee Benefits......................................................... 82
Section 4.13 Compliance with Laws...................................................... 83
Section 4.14 Environmental Matters..................................................... 83
Section 4.15 Intellectual Property..................................................... 83
Section 4.16 Labor..................................................................... 84
Section 4.17 Contracts................................................................. 84
Section 4.18 Parent Cable Systems and Subscriber Information........................... 85
Section 4.19 Parent Franchises......................................................... 85
Section 4.20 Network Architecture...................................................... 86
Section 4.21 Absence of Changes........................................................ 86
Section 4.22 Assets.................................................................... 86
Section 4.23 Absence of Liabilities.................................................... 87
Section 4.24 Friendco Agreements....................................................... 87
Section 4.25 No On-Sale Agreements..................................................... 87
Section 4.26 Finders' Fees............................................................. 87
Section 4.27 Opinion of Financial Advisors............................................. 87
Section 4.28 No Other Representations or Warranties.................................... 88
ARTICLE V COVENANTS.................................................................................. 88
Section 5.1 Access and Information.................................................... 88
Section 5.2 Conduct of Business....................................................... 91
Section 5.3 Conduct of Parent Business................................................ 96
Section 5.4 Amended and Restated Charter and Amended and Restated By-laws............. 98
Section 5.5 Listing of Purchase Shares................................................ 98
Section 5.6 Commercially Reasonable Efforts........................................... 98
Section 5.7 Tax Matters............................................................... 102
Section 5.8 Post-Closing Obligations of each Specified Business to Certain
Employees................................................................. 105
Section 5.9 Ancillary Agreements...................................................... 110
Section 5.10 Acquisition Proposals..................................................... 111
Section 5.11 Additional Financial Information.......................................... 113
Section 5.12 Post-Closing Consents..................................................... 115
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Section 5.13 Bankruptcy Proceedings.................................................... 115
Section 5.14 Equipment Leases.......................................................... 121
Section 5.15 Expanded Transaction...................................................... 121
Section 5.16 Environmental Matters..................................................... 122
Section 5.17 SOA Compliance............................................................ 123
Section 5.18 Franchise Expirations..................................................... 123
Section 5.19 Exchange Act Filings...................................................... 123
Section 5.20 Cooperation upon Inquiries as to Rates.................................... 124
Section 5.21 Third Party Confidentiality Agreements.................................... 124
Section 5.22 Enforcement............................................................... 124
Section 5.23 Subscriber Reports........................................................ 125
Section 5.24 Transitional Services..................................................... 125
ARTICLE VI CONDITIONS TO CLOSING..................................................................... 125
Section 6.1 Conditions to the Obligations of Buyer and Seller......................... 125
Section 6.2 Conditions to the Obligation of Buyer..................................... 126
Section 6.3 Conditions to the Obligation of Seller.................................... 128
ARTICLE VII SURVIVAL; INDEMNIFICATION; CERTAIN REMEDIES.............................................. 130
Section 7.1 Survival.................................................................. 130
Section 7.2 Indemnification by Seller................................................. 130
Section 7.3 Indemnification by Buyer.................................................. 131
Section 7.4 Third Party Claim Indemnification Procedures.............................. 131
Section 7.5 Consequential Damages; Materiality; Interest.............................. 133
Section 7.6 Payments.................................................................. 133
Section 7.7 Characterization of Indemnification Payments.............................. 134
Section 7.8 Remedies.................................................................. 134
ARTICLE VIII TERMINATION............................................................................. 134
Section 8.1 Termination by Mutual Consent............................................. 134
Section 8.2 Termination by Either Buyer or Seller..................................... 135
Section 8.3 Termination by Seller..................................................... 135
Section 8.4 Termination by Buyer...................................................... 136
Section 8.5 Effect of Termination..................................................... 137
ARTICLE IX MISCELLANEOUS............................................................................. 138
Section 9.1 Notices................................................................... 138
Section 9.2 Amendment; Waiver......................................................... 140
Section 9.3 No Assignment or Benefit to Third Parties................................. 140
Section 9.4 Entire Agreement.......................................................... 140
Section 9.5 Debtor Obligations Joint and Several; Fulfillment of Obligations.......... 141
Section 9.6 Public Disclosure......................................................... 141
Section 9.7 Expenses.................................................................. 141
Section 9.8 Schedules................................................................. 141
Section 9.9 Bulk Sales................................................................ 142
Section 9.10 Governing Law; Submission to Jurisdiction; Selection of Forum; Waiver
of Trial by Jury.......................................................... 142
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Section 9.11 Counterparts.............................................................. 143
Section 9.12 Headings.................................................................. 143
Section 9.13 Severability.............................................................. 143
Section 9.14 Specific Enforcement...................................................... 143
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EXHIBITS AND ANNEXES
EXHIBITS
Exhibit 1.1(a) - Form of Amended and Restated By-laws
Exhibit 1.1(b) - Form of Amended and Restated Charter
Exhibit 5.15(a)(i) - Form of Expanded Agreement
ANNEXES
Annex A - Seller Disclosure Schedule
Annex B - Buyer Disclosure Schedule
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ASSET PURCHASE AGREEMENT, dated as of April 20, 2005, between Adelphia
Communications Corporation, a Delaware corporation ("Seller"), and Time Warner
NY Cable LLC, a Delaware limited liability company that has elected to be
classified as a corporation for United States federal income tax purposes
("Buyer"). Capitalized terms used but not otherwise defined herein shall have
the respective meanings ascribed to such terms in Article I.
WITNESSETH:
WHEREAS, Seller and certain of its Affiliates are debtors and debtors in
possession (the "Debtors") under chapter 11 of title 11 of the United States
Code, 11 U.S.C. Sections 101 et seq. (the "Bankruptcy Code"), having each
commenced voluntary cases (jointly administered as No. 02-41729 (REG)) (the
"Reorganization Case") on or after June 10, 2002 (the "Petition Date") in the
Bankruptcy Court;
WHEREAS, Seller and its Affiliates are engaged in the business of
operating Systems providing customers with analog and digital video services,
high-speed Internet access and other services, including telephony services, in
the geographical areas listed on Schedule A of the Seller Disclosure Schedule
and on Schedule A of the Seller Disclosure Schedule (as defined in the Friendco
Purchase Agreement) to the Friendco Purchase Agreement, and are engaged in the
other businesses and have such other holdings as are set forth on Schedule B of
the Seller Disclosure Schedule (together, the "Business");
WHEREAS, Time Warner Cable Inc., a Delaware corporation ("Parent"), and
its Subsidiaries, including Buyer, are engaged in the business of operating
Systems providing customers with analog and digital video services, high-speed
Internet access and other services, including telephony services, in the
geographical areas listed on Schedule C of the Buyer Disclosure Schedule (the
"Parent Business");
WHEREAS, Seller desires to sell and assign, and to cause certain of its
Affiliates to sell and assign, to Buyer and Buyer desires to purchase and assume
from Seller and such Affiliates certain Assets and Liabilities of the Business,
as more particularly set forth herein, including the Systems servicing the
geographical areas listed in Part 1 of Schedule A of the Seller Disclosure
Schedule (the "Group 1 Systems"), Part 2A of Schedule A of the Seller Disclosure
Schedule (the "Group 2 Systems") and Part 2B of Schedule A of the Seller
Disclosure Schedule (the "MCE Systems" and, together with the Group 1 Systems
and Group 2 Systems, the "Acquired Systems");
WHEREAS, the parties intend that the Transaction shall constitute a
taxable transaction for all income Tax purposes and, for the avoidance of doubt,
the Transaction shall not be governed by Sections 351 or 368(a) of the Code (or
similar provisions of state, local or foreign Tax Law, as applicable);
WHEREAS, simultaneously with the execution hereof, Seller and Comcast
Corporation, a Pennsylvania corporation ("Friendco"), are entering into an Asset
Purchase Agreement (together with the schedules and exhibits thereto, all as
amended from time to time with the approval of Buyer and disregarding the
effectiveness of any waiver by Friendco not approved by Buyer and any waiver by
Seller not approved by Buyer to the extent it adversely affects Buyer, the
"Friendco Purchase Agreement") pursuant to which Seller has agreed to sell and
assign, and to cause certain of its Affiliates to sell and assign, to Friendco
and Friendco has agreed to purchase and assume from Seller and such Affiliates
on the terms set forth therein, certain Assets and Liabilities of the Business,
as more particularly set forth therein (the "Friendco Business");
WHEREAS, simultaneously with the execution hereof, Parent, Friendco and
certain of their Affiliates are entering into the Exchange Agreement, pursuant
to which Buyer and/or certain of its Affiliates will convey to Friendco and/or
certain of its Affiliates and Friendco and/or certain of its Affiliates will
assume from Buyer and/or certain of its Affiliates the Business Related to the
Group 1 Systems and the Group 1 Shared Assets and Liabilities (the "Group 1
Business"), together with additional Systems owned and managed by certain of
Parent's Subsidiaries, in exchange for a portion of the Friendco Business,
together with additional Systems owned and managed by Friendco or its
Affiliates, all as more specifically set forth in the Exchange Agreement (the
"Exchange");
WHEREAS, upon consummation of the Transaction and the Exchange, the
portion of the Business retained by Buyer will be (a) that portion of the
Business Related to the Group 2 Systems, (b) that portion of the Business
Related to the MCE Systems and (c) the Group 2 Shared Assets and Liabilities
(collectively, the "Group 2 Business" and together with the Group 1 Business,
the "Acquired Business"); provided, however, that the Acquired Business shall
exclude the Assets and Liabilities identified on Schedule D of the Seller
Disclosure Schedule;
WHEREAS, as an inducement to Seller to enter into this Agreement,
simultaneously with the execution hereof, Parent, Buyer and Seller are entering
into a Parent Agreement pursuant to which Parent is guaranteeing the performance
of Buyer hereunder (the "Parent Agreement");
WHEREAS, prior to or at the Closing, Seller, Buyer and an escrow agent to
be mutually selected by Buyer and Seller (the "Escrow Agent") will enter into an
escrow agreement in form and substance reasonably acceptable to Buyer and Seller
(the "Escrow Agreement");
WHEREAS, in connection with the Transaction, Seller and/or its Affiliates,
on the one hand, and Buyer, Parent and/or certain of Parent's Controlled
Affiliates, on the other hand, shall enter into the other Ancillary Agreements;
and
WHEREAS, the Debtors have agreed to file the Plan with the Bankruptcy
Court to implement the Transaction upon the terms and subject to the conditions
set forth herein.
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NOW, THEREFORE, in consideration of the premises and the mutual
representations, warranties, covenants and undertakings contained herein, and
for other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties hereto, intending to be legally bound,
agree as follows:
ARTICLE I
DEFINITIONS AND TERMS
Section 1.1 Certain Definitions. As used in this Agreement, the following
terms have the meanings set forth below:
"Accounts Receivable" means, with respect to each Specified Business, all
Subscriber, trade and other accounts and notes receivable, and other
miscellaneous receivables of such Specified Business arising out of the sale or
other disposition of goods or services of such Specified Business.
"Acquire" means to directly or indirectly acquire, receive in exchange or
redemption, subscribe for, purchase (by merger, consolidation, combination,
recapitalization or other reorganization) or otherwise obtain an interest in, by
operation of Law or otherwise.
"Acquired Business" has the meaning set forth in the Recitals.
"Acquired Systems" has the meaning set forth in the Recitals.
"Acquisition" has the meaning set forth in Section 5.10.
"Acquisition Proposal" has the meaning set forth in Section 5.10.
"Additional Discharge" means, with respect to any Person, except as
otherwise provided in the Plan and the Confirmation Order (or, to the extent
approved by Buyer (such approval not to be unreasonably withheld), such other
plan that includes such Person as a debtor and the confirmation order of the
Bankruptcy Court approving such plan and effecting the Additional Discharge),
the discharge and/or equivalent effect granted pursuant to such confirmation
order and sections 363, 1123 and 1141 of the Bankruptcy Code, and in each case
prior to or at the Closing, (i) of such Person, as a debtor in possession, from
all Liabilities, (ii) of interests of, and rights, interests and Claims of the
holders of Claims against and interests in, such Person and (iii) of
Encumbrances on, or interests of other Persons (other than Seller and its
Affiliates) in, the Transferred Assets that are related to such Person; it being
understood that an Additional Discharge may occur pursuant to the Plan.
"Additional Financial Statements" has the meaning set forth in Section
5.11(b).
"Additional Reorganization Case" has the meaning set forth in Section
5.13(h).
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"Affiliate" means, with respect to any Person, any other Person directly
or indirectly controlling, controlled by, or under common control with, such
Person as of the date on which, or at any time during the period for which, the
determination of affiliation is being made. For purposes of this definition, the
term "control" (including the correlative meanings of the terms "controlled by"
and "under common control with"), as used with respect to any Person, means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management policies of such Person, whether through the
ownership of voting securities or by contract or otherwise. For purposes of this
Agreement, (i) none of Seller or any of its Affiliates shall be deemed to be an
Affiliate of any of Buyer, Parent, TWX, Friendco or any of their respective
Affiliates, (ii) none of Buyer, Parent, TWX or any of their Affiliates shall be
deemed to be an Affiliate of any of Seller, Friendco or any of their respective
Affiliates, (iii) none of Friendco or any of its Affiliates shall be deemed to
be an Affiliate of any of Seller, Buyer, Parent, TWX or any of their respective
Affiliates, (iv) each Managed Cable Entity shall be deemed to be an Affiliate of
Seller, (v) no member of the family of Xxxx Xxxxx shall be deemed to control
Seller or any of its Affiliates and (vi) each of the Tele-Media Entities shall
be deemed to be an Affiliate of Seller.
"Aggregate Consideration" means the Purchase Price plus the Assumed
Liabilities, as adjusted pursuant to this Agreement.
"Aggregate Purchase Price Value" means $14,114,000,000.
"Aggregate Value of the Purchase Shares" means $4,960,000,000.
"Agreement" means this Asset Purchase Agreement.
"Alternate Plan" has the meaning set forth in Section 5.10(b).
"Amended and Restated By-laws" means the Amended and Restated By-laws of
Parent, in the form of Exhibit 1.1(a), as the same may be amended, supplemented
or modified from time to time (provided, that any such amendment, supplement or
modification shall not (i) amend, modify or supplement Article VI or XII of such
Amended and Restated By-laws or (ii) to the extent relating to any other matter,
(A) affect Seller or its stakeholders in a manner that is adverse relative to
the manner in which it affects TWX as a stockholder of Parent or (B) adversely
affect Seller or its stakeholders in any material respect).
"Amended and Restated Charter" means the Amended and Restated Certificate
of Incorporation of Parent, in the form of Exhibit 1.1(b), as the same may be
amended, supplemented or modified from time to time (provided, that any such
amendment, supplement or modification shall not (i) amend, modify or supplement
Article VI or IX of such Amended and Restated Charter or (ii) to the extent
relating to any other matter, (A) affect Seller or its stakeholders in a manner
that is adverse relative to the manner in which it affects TWX as a stockholder
of Parent or (B) adversely affect Seller or its stakeholders in any material
respect).
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"Ancillary Agreements" means the Parent Agreement, the Escrow Agreement
and each MCE Management Agreement, and the instruments and other agreements
required to be delivered pursuant to Sections 2.9 and 2.10, including any Xxxx
of Sale.
"Applicable Employees" has the meaning set forth in Section 5.8(e).
"Applicable Monthly Rate" has the meaning set forth in the definition of
"Permitted Promotion."
"Asset Transferring Subsidiary" means those Subsidiaries of Seller that
have any right, title or other interest in, to or under any Transferred Assets.
"Assets" means any asset, property or right, wherever located (including
in the possession of vendors or other third parties or elsewhere), whether real,
personal or mixed, tangible, intangible or contingent, in each case whether or
not recorded or reflected or required to be recorded or reflected on the books
and records or financial statements of any Person, and all right, title,
interest and claims therein.
"Assigned Contracts" has the meaning set forth in Section 5.13(b).
"Assignment and Assumption Agreement" means an agreement in form and
substance reasonably acceptable to Seller and Buyer, providing for the effective
assignment of any Assigned Contracts or other Transferred Assets Related to such
Specified Business and the assumption of the Assumed Liabilities Related to such
Specified Business other than, in each case, the Transferred Real Property
Leases.
"Assumed Cure Costs" means the amounts designated as Assumed Cure Costs
pursuant to Section 5.13(d) and the Cure Costs related to the Franchises for
each of the localities listed on Schedule A of the Seller Disclosure Schedule.
"Assumed Liabilities" means, with respect to each Specified Business, only
the following Liabilities of Seller or any of its Affiliates that are Debtors
(or which become subject to an MCE Discharge or an Additional Discharge) that
are Related to such Specified Business, in each case to the extent allocated to
such Specified Business as required by Section 2.3: (i) Liabilities attributable
to actions, omissions, circumstances or conditions to the extent occurring
following the Closing to the extent so allocated to such Specified Business or
any of the Transferred Assets allocated to such Specified Business pursuant to
the Designated Allocation, including under the Assigned Contracts and
Authorizations, (ii) Liabilities of such Specified Business arising in the
Ordinary Course of Business since the Petition Date but only to the extent of
the amount reflected in the Closing Net Liabilities Amount used in calculating
the Final Adjustment Amount for such Specified Business, (iii) the following
Liabilities: (A) Liabilities to provide severance pay and benefits pursuant to
Section 5.8(d), (B) Liabilities for all expenses and benefits with respect to
claims incurred by Transferred Employees or their covered dependents on or after
the Closing Date pursuant to Section 5.8(f) and (C) Liabilities to provide
accrued but unused vacation and with respect to sale bonuses due under the
Adelphia Communications Corporation Sale Bonus Program (the "Sale
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Bonus Program") to Transferred Employees pursuant to Section 5.8(k) but only to
the extent of the amount reflected in the Closing Net Liabilities Amount used in
calculating the Final Adjustment Amount for such Specified Business, (iv) the
Assumed Cure Costs, (v) the Liabilities Related to such Specified Business
described in the proviso to the second sentence of Section 5.13(d), (vi) all
Liabilities of such Specified Business set forth on Schedule 1.1(a) of the
Seller Disclosure Schedule, (vii) Assumed Taxes, (viii) Liabilities in respect
of Environmental Self-Audit Deficiencies or Environmental Transfer Act
Liabilities, in each case (with respect to this clause (viii)), to the extent
and only to the extent such Liabilities consist solely of monetary obligations
(but only to the extent of the amount reflected in the Closing Net Liabilities
Amount used in calculating the Final Adjustment Amount for such Specified
Business) or non-monetary obligations agreed to by Buyer pursuant to Section
5.16 and (ix) Liabilities of such Specified Business under purchase orders
outstanding as of the Closing but only to the extent of the amount reflected in
the Closing Net Liabilities Amount used in calculating the Final Adjustment
Amount for such Specified Business.
"Assumed Taxes" means, with respect to each Specified Business, any Taxes
imposed with respect to such Specified Business or any Transferred Assets
Related thereto or any income or gain derived with respect thereto for the
taxable periods, or portions thereof, beginning after the Closing.
"Audited Financial Statements" has the meaning set forth in Section
3.7(a).
"Authorization" means any Governmental Authorization or Non-Governmental
Authorization.
"Background Check" has the meaning set forth in Section 5.8(a).
"Bankruptcy Code" has the meaning set forth in the Recitals.
"Bankruptcy Court" means the United States Bankruptcy Court for the
Southern District of New York or, with respect to a Managed Cable Entity or
Non-Debtor Subsidiary, the United States Bankruptcy Court in which any chapter
11 case that includes such Managed Cable Entity or Non-Debtor Subsidiary is
pending.
"Bankruptcy Rules" means the Federal Rules of Bankruptcy Procedure as
promulgated by the United States Supreme Court under section 2075 of title 28 of
the United States Code applicable to the Reorganization Case, and any Local
Rules of the Bankruptcy Court.
"Base Net Liabilities Amount" means, with respect to each Specified
Business, $0.00.
"Base Subscriber Number" means, with respect to each Specified Business,
the number of Basic Subscribers of such Specified Business corresponding to the
month prior to the month in which the Closing occurs, as set forth on Schedule
1.1(b) of the Seller Disclosure Schedule; provided, however, that, except for
purposes of
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calculating the Initial Disputed MCE System Adjustment Amount pursuant to
Section 2.7(a), in the event any Disputed MCE Systems exist as of the Closing,
then the Base Subscriber Number for the Group 2 Business shall be reduced by the
aggregate of the MCE Base Subscriber Numbers for all such Disputed MCE Systems.
"Basic Subscriber" means a "Basic Video Customer" as determined pursuant
to the Seller Subscriber Accounting Policy.
"Benefit Plans" has the meaning set forth in Section 3.10(a).
"Xxxx of Sale" means, with respect to each Specified Business, an
agreement in form and substance reasonably acceptable to Seller and Buyer,
transferring the tangible personal property included in the Transferred Assets
Related to such Specified Business.
"Board" has the meaning set forth in Section 5.10.
"Books and Records" means, with respect to each Specified Business, all
books, ledgers, files, reports, records, manuals, maps and engineering data,
tests, drawings, blueprints, schematics, lists, plans and processes and all
files of correspondence and records concerning Subscribers and prospective
Subscribers of any Cable System of such Specified Business or concerning signal
or program carriage and all correspondence with Government Entities, including
all reports filed by or on behalf of Seller or any of its Affiliates with the
FCC and statements of account filed by or on behalf of Seller or any of its
Affiliates with the United States Copyright Office, all Tax Returns of Seller or
any of its Affiliates (including workpapers) and tax software to the extent
directly related thereto and other materials (in any form or medium) of, or
maintained for, such Specified Business, but excluding any such items to the
extent (i) they are included in or primarily related to any Excluded Assets or
Excluded Liabilities or (ii) with respect to any such items related to
Employees, any Law prohibits their transfer; provided, however, that Books and
Records shall include copies of any items excluded pursuant to the foregoing
clause (i).
"Broadband Industry" means the industries in which any Specified Business
and the Parent Business operate as of the date hereof and as such industries
develop from time to time.
"Budget" has the meaning set forth in Section 5.2(s).
"Business" has the meaning set forth in the Recitals.
"Business Day" means any day other than a Saturday, a Sunday or a day on
which banks in New York City are authorized or obligated by Law or executive
order to close.
"Buyer" has the meaning set forth in the Preamble.
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"Buyer Adverse Tax Event" means any change in Tax Law or Proposed Change
in Tax Law that has a reasonable possibility (or, in the case of any Proposed
Change in Tax Law (i) by a Specified HWMC Member or a Specified SFC Member, or
(ii) that is a Non-Referred Proposal, a reasonable probability) of being enacted
or adopted and such change in Tax Law or Proposed Change in Tax Law (assuming in
the case of a Proposed Change in Tax Law, such Proposed Change in Tax Law were
enacted pursuant to its terms) would cause Buyer, based upon Buyer's
consultation with Xxxx, Weiss, Rifkind, Xxxxxxx & Xxxxxxxx LLP or other tax
counsel reasonably selected by Buyer, not to conclude both (A) that Buyer should
have an aggregate tax basis in the Transferred Assets that includes the fair
market value of the Aggregate Consideration, and (B) that there should be no
special limitations on Buyer's ability to depreciate or amortize the Transferred
Assets, in each case, because of (1) the method by which Buyer will acquire the
Transferred Assets in the Transaction or (2) the fact that Seller or any of its
Affiliates is a party to the Reorganization Case or any other special
circumstances of the Seller or any of its Affiliates; provided, however, that
the net effects of such change in Tax Law or of such Proposed Change in Tax Law
insofar as it relates to Buyer's aggregate tax basis in the Transferred Assets
and Buyer's ability to depreciate or amortize the Transferred Assets are adverse
to Buyer other than in a de minimis manner; provided, further, that the adverse
effects of such change in Tax Law or Proposed Change in Tax Law cannot be
avoided by accelerating or deferring the Closing Date of the Transaction or by
restructuring the Transaction, in each case in a manner reasonably satisfactory
to Buyer and Seller (and that such acceleration, deferral or restructuring is in
fact implemented). Buyer agrees that assuming the Closing Date was the date
hereof, Buyer would conclude that Buyer's basis should include the fair market
value of the Aggregate Consideration and there should be no such special
limitations on Buyer's ability to depreciate or amortize the Transferred Assets.
"Buyer Class 1 Representations and Warranties" has the meaning set forth
in Section 6.3(a).
"Buyer Class 2 Representations and Warranties" has the meaning set forth
in Section 6.3(a).
"Buyer Discharge Amount" has the meaning ascribed to such term in the
Friendco Purchase Agreement.
"Buyer Disclosure Schedule" means the Buyer Disclosure Schedule attached
hereto as Annex B.
"Buyer Indemnification Deadline" has the meaning set forth in Section 7.1.
"Buyer Indemnified Parties" has the meaning set forth in Section 7.2(a).
"Buyer JV Partner" has the meaning ascribed to such term in the Friendco
Purchase Agreement.
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"Buyer Managed MCE System" has the meaning set forth in Section 2.7(c).
"Buyer Plan" has the meaning set forth in Section 5.8(h).
"Buyer Required Approvals" means all consents, approvals, waivers,
authorizations, notices and filings from or with a Government Entity that are
listed on Schedule 1.1(a) of the Buyer Disclosure Schedule other than the LFA
Approvals.
"Buyer's 401(k) Plan" has the meaning set forth in Section 5.8(j).
"Buyer's Statement" has the meaning set forth in Section 2.6(b).
"Cable Act" means Title VI of the Communications Act, 47 U.S.C. Sections
521 et seq.
"Cable System" means, with respect to each Specified Business, each System
that is Related to such Specified Business.
"Cap Amount" means the Group 1 Cap Amount or the Group 2 Cap Amount, as
the case may be.
"Capital Expenditure Adjustment Amount" means, with respect to each
Specified Business, an amount equal to the Target Capital Expenditure Amount
minus the Closing Capital Expenditure Amount for such Specified Business. Except
to the extent (and only to the extent) the consent of Buyer is obtained as
contemplated in the proviso to the definition of "Closing Capital Expenditure
Amount," in no event will the Capital Expenditure Adjustment Amount be a
negative number.
"Capital Lease" means any lease that is required to be classified and
accounted for as a capital lease under GAAP.
"Cash Consideration" has the meaning set forth in Section 2.5(b).
"CERCLA" means the Comprehensive Environmental Response, Compensation and
Liability Act of 1980.
"Chapter 11 Expenses" means (a) any and all costs incurred and expenses
paid or payable by Seller or any of its Affiliates in connection with the Sale
Process, the Transaction or the transactions contemplated by the Friendco
Purchase Agreement, other than costs that Buyer has expressly agreed to pay
pursuant to this Agreement and (b) the following costs and expenses related to
the administration of the Reorganization Case or the reorganization case of any
Managed Cable Entity or Non-Debtor Subsidiary: (i) obligations to pay any
professionals' fees and expenses in connection with the Reorganization Case
incurred by Seller, its Affiliates, the Committees, and any other compensation
or expenses payable in connection with the Reorganization Case (including fees
of attorneys, accountants, investment bankers, financial advisors, auditors and
consultants), other than fees and expenses Buyer has expressly agreed to pay
pursuant to
9
this Agreement, (ii) fees and expenses payable to the US Trustee under section
1930 of title 28, United States Code, (iii) fees and expenses of the members of
the Committees, (iv) fees and expenses of the trustees of existing indentures of
Seller and (v) fees and expenses related to the DIP Facility.
"Chosen Courts" has the meaning set forth in Section 9.10.
"Claim" means a claim (as defined in section 101(5) of the Bankruptcy
Code) against a Debtor.
"Claim Notice" has the meaning set forth in Section 7.4(a).
"Class 1 Representations and Warranties" has the meaning set forth in
Section 6.2(a).
"Class 2 Representations and Warranties" has the meaning set forth in
Section 6.2(a).
"Closing" means the closing of the Transaction.
"Closing Adjustment Amount" means, with respect to each Specified
Business, the sum (expressed as a positive, if positive, or as a negative, if
negative) of (i) the Net Liabilities Adjustment Amount for such Specified
Business, minus (ii) the Subscriber Adjustment Amount for such Specified
Business, minus (iii) the Capital Expenditure Adjustment Amount for such
Specified Business.
"Closing Capital Expenditure Amount" means, as to each Specified Business,
the sum of all capital expenditures incurred by Seller and its Affiliates in
respect of such Specified Business consistent with the Budget and in the
Ordinary Course of Business (and excluding any amounts incurred or paid in
connection with any casualty or damage), subsequent to December 31, 2004 and up
to and including the end of the month immediately preceding the Closing Date or,
if the Closing occurs on a month-end, up to and including such month; provided,
however, that any capital expenditures incurred or paid for in excess of the
aggregate amount set forth in the Budget for such Specified Business shall be
included in the determination of Closing Capital Expenditure Amount only to the
extent that Buyer shall have consented to such expenditures prior to the
incurrence thereof.
"Closing Date" has the meaning set forth in Section 2.8.
"Closing Net Liabilities Amount" means, with respect to each Specified
Business, the Current Assets of such Specified Business minus the Total
Liabilities of such Specified Business.
"Closing Subscriber Number" means, with respect to each Specified
Business, as of the Closing, the number of Eligible Basic Subscribers of such
Specified Business.
10
"Code" means the Internal Revenue Code of 1986.
"Collective Bargaining Agreements" means, with respect to each Specified
Business, the collective bargaining agreements covering Employees listed on
Schedule 1.1(c) of the Seller Disclosure Schedule and identified as Related to
such Specified Business.
"Committees" means (i) the committee appointed by the US Trustee to
represent the interests of the unsecured creditors of the Debtors, (ii) the
committee appointed by the US Trustee to represent the interests of equity
holders of the Debtors, (iii) any other committee appointed by the US Trustee in
connection with the Reorganization Case and (iv) any committee appointed by the
US Trustee in the reorganization case of any Managed Cable Entity or Non-Debtor
Subsidiary.
"Communications Act" means the Communications Act of 1934.
"Condemnation Proceeds" means, with respect to any Specified Business, all
amounts payable or paid to Seller or any of its Affiliates as proceeds of (i) a
condemnation or other taking of any Asset Related to such Specified Business by
any Government Entity following December 31, 2004 or (ii) the exercise of any
Purchase Right Related to such Specified Business following December 31, 2004.
"Confidential Information" has the meaning set forth in Section 5.1(e).
"Confirmation Hearing" means the hearing held by the Bankruptcy Court to
consider confirmation of the Plan.
"Confirmation Order" means an order or judgment of the Bankruptcy Court
confirming the Plan pursuant to section 1129 of the Bankruptcy Code, satisfying
the requirements of Section 5.13.
"Contract" means any agreement, contract, lease or sublease, license or
sublicense, purchase order, arrangement, commitment, indenture, note, security,
instrument, consensual obligation, promise, covenant or undertaking, including
all franchises, rights-of-way, bulk service, commercial service or multiple
dwelling unit agreements, access agreements, programming agreements, signal
supply agreements, agreements with community groups, commercial leased access
agreements, capacity license agreements, partnership, joint venture or other
similar agreements or arrangements, and advertising interconnect agreements, or
any other agreement, in each case, whether written or oral, and all rights
associated therewith.
"Contract Categories Expected to be Assumed" means the following
categories of Contracts, in each case to the extent Related to a Specified
Business:
(i) construction and installation Contracts;
(ii) individual Subscriber service Contracts;
11
(iii) bulk service, commercial service or multiple dwelling unit
Subscriber Contracts;
(iv) Contracts (including open purchase orders) relating to Fixtures
and Equipment and any other tangible personal property (excluding motor
vehicles), in each case only if Related exclusively to a specific Cable System;
(v) local Cable System leased access agreements required by Law;
(vi) Rights-of-Way;
(vii) Real Property Leases (excluding leases that would be Excluded
Assets pursuant to Section 2.2(h)(i)) and Transferred Real Property Subleases;
(viii) Franchises and Authorizations (other than state certificates
of public convenience and necessity and similar state telecommunications
Authorizations);
(ix) advertising interconnect and local advertising sale Contracts
(other than advertising representation Contracts, except as set forth on
Schedule 1.1(e) of the Seller Disclosure Schedule); and
(x) software licenses and related maintenance agreements, in each
case only if Related exclusively to a specific Cable System.
"Controlled Affiliate" means, with respect to any Person, any Affiliate of
such Person that is controlled directly or indirectly by such Person.
"Cost Center" means a so called cost center as used by Seller for internal
management and bookkeeping purposes.
"CPA Firm" means KPMG LLP or such other firm of independent certified
public accountants as to which Seller and Buyer shall mutually agree.
"Cure Costs" means, with respect to any Contract, the costs and expenses
payable under section 365 of the Bankruptcy Code in connection with the
assumption and/or assignment of such Contract.
"Current Assets" means, with respect to each Specified Business, the
current assets of such Specified Business included in the Transferred Assets as
of the Closing (after giving effect to the Transaction), as would be reflected
on the face of a balance sheet for such Specified Business (excluding any
footnotes thereto) prepared in accordance with GAAP, consistently applied (to
the extent GAAP was previously applied) for such Specified Business; provided,
however, that in no event shall Current Assets include (A) inventory, (B) any
Assets with respect to Taxes (including duty and tax refunds and prepayments)
and net operating losses of Seller or any of its Affiliates, (C) investments in
Subsidiaries, (D) Assets held for sale (other than in connection with
12
the Exchange), (E) Condemnation Proceeds, (F) Insurance Claims (except to the
extent (and only to the extent) relating to an Assumed Liability), (G) Accounts
Receivable related to Programming Agreements, (H) pre-paid insurance premiums
and maintenance expenses (to the extent paid under Contracts other than Assigned
Contracts) or (I) prepaid expenses except to the extent the Specified Business
will receive the benefit thereof within one year of the Closing; provided,
further, that Current Assets to be acquired under purchase orders outstanding as
of the Closing will, for purposes hereof, be treated as being owned by the
relevant Specified Business as of the Closing regardless of whether they would
otherwise be treated as such under GAAP but subject in any event to the
remainder of this definition. For purposes of determining Current Assets in
respect of any Disputed MCE System, all references above to the Closing shall be
deemed to mean, with respect to any Disputed MCE System, the MCE Closing.
"Debtors" has the meaning set forth in the Recitals.
"Delayed Transfer Asset" has the meaning set forth in Section 2.11.
"Derivative 2003 Financial Statements" has the meaning set forth in
Section 3.7(a).
"Derivative 2004 Financial Statements" has the meaning set forth in
Section 3.7(a).
"Derivative Audited Financial Statements" has the meaning set forth in
Section 5.11(b).
"Derivative Unallocated 2004 Financial Statements" has the meaning set
forth in Section 3.7(a).
"Designated Allocation" has the meaning set forth in Section 2.1.
"Designated Litigation" means the litigation set forth on Schedule 1.1(f)
of the Seller Disclosure Schedule.
"Digital Subscriber" means a "Digital Customer" as determined pursuant to
the Seller Subscriber Accounting Policy.
"DIP Facility" means the Third Amended and Restated Credit and Guaranty
Agreement, dated as of February 25, 2005, among Seller, the Subsidiaries of
Seller identified therein and the financial institutions identified therein, and
any related documents, agreements and instruments.
"Discharge" means, except as otherwise provided in the Plan and the
Confirmation Order, the discharge or equivalent granted pursuant to the
Confirmation Order, and sections 363, 1123 and 1141 of the Bankruptcy Code, (i)
of Seller and its Affiliates that are Debtors, as debtors in possession, from
all Liabilities, (ii) of interests of, and rights, interest and Claims of the
holders of Claims against and interests in, Seller
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and its Affiliates that are Debtors and (iii) of Encumbrances on, or interests
of Persons (other than Seller or its Affiliates) in, the Transferred Assets.
"Disclosure Statement" has the meaning set forth in Section 5.13(a).
"Disclosure Statement Motion" has the meaning set forth in Section
5.13(a).
"Disputed MCE System" has the meaning set forth in Section 2.7(a).
"Disputed MCE System Adjustment Amount" means, with respect to the
Disputed MCE Systems sold to Buyer pursuant to Section 2.7(c), the sum of the
Net Liabilities Adjustment Amount in respect of such Disputed MCE Systems as
determined pursuant to the last sentence of Section 2.7(c) plus the Initial
Disputed MCE System Adjustment Amount in respect of such Disputed MCE Systems.
"Eligible Basic Subscriber" means a Basic Subscriber who, as of the
Measurement Date, is a paying customer (A) who subscribes to at least the lowest
level of video programming offered by an Acquired System, (B) who has been
installed, and (C) either (1) whose rate of service for all services (not
including any installation costs) provided to such Basic Subscriber is not
subject to any discount or promotion as of the Measurement Date or for any
period thereafter other than (x) as to any Cable System, the customary package
rates applicable to such Cable System as in effect as of March 31, 2005 as may
be subsequently increased by Seller or, with the consent of Buyer not to be
unreasonably withheld, reduced by Seller or (y) standard employee rate discounts
or (2) who is a Qualified Customer who is subject to no discount or promotion
other than a Permitted Promotion or an Historic Promotion. For the avoidance of
doubt, the customary reduction in the HSI rate applicable to any HSI-only
subscriber who subscribes to video services shall not be considered a discount
or promotion for purposes of the definition of "Eligible Basic Subscriber."
"Employees" means all current and former employees who are or were
primarily employed in connection with the Acquired Business and all employees of
the Business identified on Schedule 5.8(a)(ii) of the Seller Disclosure
Schedule. Employees does not include (a) any employees performing services in
Puerto Rico or outside of the United States or (b) any individual performing
services in connection with the Acquired Business who Seller or its Affiliates
has classified as an independent contractor as of immediately prior to the
Closing Date.
"Encumbrance" means any lien, pledge, charge, security interest, option,
right of first refusal, mortgage, easement, right of way, lease, sublease,
license, sublicense, adverse claim, title defect, encroachment, other survey
defect, or other encumbrance of any kind, including, with respect to real
property, any covenant or restriction relating thereto. For purposes of this
Agreement, a Person shall be deemed to own subject to an Encumbrance any Asset
that it has acquired or holds subject to the interest of a vendor or lessor
under any conditional sale agreement, Capital Lease or other title retention
agreement relating to such Asset.
14
"Environmental Law" means any Law (including common law), Governmental
Authorization or agreement with any Government Entity or third party relating to
(i) the protection of the environment or human health and safety (including air,
surface water, ground water, drinking water supply, and surface or subsurface
land or structures), (ii) the exposure to, or the use, storage, recycling,
treatment, generation, transportation, processing, handling, labeling,
management, release or disposal of, any Hazardous Substance or (iii) noise, odor
or electromagnetic emissions.
"Environmental Permits" means all licenses, permits, certificates and
other authorizations and approvals issued by or obtained from a Government
Entity relating to or required by Environmental Laws.
"Environmental Self-Audit" means, subject to Section 5.16, the self-audit
to be conducted by Seller pursuant to an agreement between the United States
Environmental Protection Agency and Seller relating to compliance with
Environmental Laws.
"Environmental Self-Audit Deficiencies" means any deficiencies identified
as a result of the performance of the Environmental Self-Audit, including
current or historical violations of, or actual or potential Liabilities under,
any Environmental Law.
"Environmental Transfer Act Liabilities" means any Liabilities arising out
of compliance with the Connecticut Transfer Act or the New Jersey Industrial
Site Recovery Act as a result of the completion of the Transaction or the
Exchange.
"Equipment Leases" means all leases for vehicles included in the Fixtures
and Equipment and all Capital Leases of other Fixtures and Equipment.
"Equity Security" has the meaning ascribed to such term in Rule 405
promulgated under the Securities Act as in effect on the date hereof and, in any
event, shall also include (i) any capital stock of a corporation, any
partnership interest, any limited liability company interest and any other
equity interest, (ii) any security or right convertible into, exchangeable for,
or evidencing the right to subscribe for any such stock, equity interest or
security referred to in clause (i), (iii) any stock appreciation right,
contingent value right or similar security or right that is derivative of any
such stock, equity interest or security referred to in clause (i) or (ii), and
(iv) any contract to grant, issue, award, convey or sell any of the foregoing.
"ERISA" means the Employee Retirement Income Security Act of 1974.
"ERISA Affiliate" has the meaning set forth in Section 3.10(c).
"Escrow Account" has the meaning set forth in Section 2.5.
"Escrow Agent" has the meaning set forth in the Recitals.
"Escrow Agreement" has the meaning set forth in the Recitals.
15
"Escrow Amount" has the meaning set forth in Section 2.5.
"Escrow Payment" means, as to any amount payable from the Escrow Account,
an aggregate amount payable, first, in cash, and, to the extent no cash remains
in the Escrow Account, in Purchase Shares or, if applicable, MCE Purchase Shares
(where each share is valued at the Per Share Value of the Purchase Shares);
provided, however, that (i) the cash portion of such amount shall be increased
by (A) in respect of the portion of any cash payment pursuant to Section 2.6(f),
interest on such portion from the date of the Closing to the date of payment at
LIBOR calculated on a 365-day basis, and (B) in respect of the portion of any
cash payment pursuant to Section 7.2, interest on such portion at LIBOR
calculated on a 365-day basis from the date notice of the Losses for which
indemnification is sought was delivered until the date of payment of
indemnification by the Indemnifying Party, and (ii) the stock portion of such
amount shall be increased by Interim Dividends made in respect of such shares.
"Estimated Closing Adjustment Amount" has the meaning set forth in Section
2.6(a).
"Exchange" has the meaning set forth in the Recitals.
"Exchange Act" means the Securities Exchange Act of 1934.
"Exchange Agreement" means the Exchange Agreement, dated as of the date
hereof, by and among Friendco, Comcast Cable Communications Holdings, Inc.,
Comcast of Georgia, Inc., TCI Holdings, Inc., Parent, Buyer and Urban Cable
Works of Philadelphia, L.P.
"Excluded Assets" has the meaning set forth in Section 2.2.
"Excluded Claim" means any claim to the extent (and only to the extent)
relating to (i) the failure of the Purchase Shares to have been issued in
compliance with section 1145 of the Bankruptcy Code or Section 5 of the
Securities Act, as applicable, or (ii) the failure of Parent to be deemed a
successor to Seller in accordance with Rule 12(g)-3 of the Exchange Act.
"Excluded Liabilities" means, notwithstanding anything to the contrary in
this Agreement, all Liabilities of Seller or any of its Affiliates other than
the Assumed Liabilities. For the avoidance of doubt, Excluded Liabilities shall
include (i) Liabilities to the extent related to the Excluded Assets, including
Liabilities under any Contract that is not an Assigned Contract (other than as
set forth in clause (v) of the definition of "Assumed Liabilities"), (ii)
subject to clause (ii) of the definition of "Assumed Liabilities" (except with
respect to litigation that is pending or threatened as of the Closing),
Liabilities to the extent arising in connection with the ownership, use,
operation or maintenance of the Transferred Assets or the conduct of any
Specified Business on or prior to the Closing, including those arising under or
related to (A) Environmental Laws (other than as expressly provided in clause
(viii) of the definition of "Assumed Liabilities") or (B) any Claim (other than
under clauses (ii) (except with respect to litigation that is pending or
threatened as of the Closing), (iii), (iv), (v), (vii), (viii) or (ix)
16
of the definition of "Assumed Liabilities") including any Claim in respect of
Losses to Persons or property, and any Claim relating to any filings made by
Seller or any of its Affiliates under the Exchange Act or the Securities Act
(other than any Excluded Claim), (iii) Liabilities under any Indebtedness of
Seller or any of its Affiliates, (iv) except for the Assumed Cure Costs,
Liabilities for Cure Costs, (v) Liabilities for Chapter 11 Expenses, (vi)
Excluded Taxes, (vii) Intercompany Payables, (viii) Liabilities related to the
SEC/DOJ Matters, including any SEC/DOJ Settlement, (ix) Liabilities for any
Claims filed against Seller or any other Debtor after the bar date established
in the Reorganization Case, (x) Liabilities that are subject to the Discharge,
any MCE Discharge or any Additional Discharge, (xi) except as provided in clause
(iii) of the definition of "Assumed Liabilities," Liabilities under any Benefit
Plan, including under the Adelphia Communications Corporation Key Employee
Continuity Program, the Amended and Restated Adelphia Communications Corporation
Performance Retention Plan, the Sale Bonus Program and any Stock Award, (xii)
Liabilities identified as Excluded Liabilities in Sections 5.2(j), 5.8(a) and
5.8(q), (xiii) Liabilities to Seller, any member of the Rigas family, any
Managed Cable Entity or any of their respective Affiliates other than
Liabilities under this Agreement or any Ancillary Agreement, (xiv) except
pursuant to Section 5.13(d), Liabilities in respect of Rejection Claims and (xv)
Liabilities allocated to the Friendco Business pursuant to the proviso to
Section 2.3.
"Excluded Taxes" means any Taxes imposed with respect to any Specified
Business or any Transferred Assets Related thereto or any income or gain derived
with respect thereto, in each case, other than Assumed Taxes. For the avoidance
of doubt, Excluded Taxes shall include any income Tax liability payable by
Seller or its Subsidiaries in respect of the Transaction.
"Expanded Agreement" has the meaning set forth in Section 5.15(a)(i).
"Extended Outside Date" has the meaning set forth in Section 8.2.
"FCC" means the Federal Communications Commission.
"Final Adjustment Amount" means, with respect to each Specified Business,
the Closing Adjustment Amount as set forth in the Buyer's Statement for such
Specified Business and, in the event of a Seller's Objection, as adjusted by
either the agreement of Buyer and Seller, or by the CPA Firm, acting pursuant to
Section 2.6.
"Final MCE Purchase Price" means the Initial MCE Purchase Price in respect
of all Disputed MCE Systems the Assets of which are to be transferred to Buyer
at the MCE Closing plus the Disputed MCE System Adjustment Amount in respect of
all such Disputed MCE Systems.
"Final Order" means an order or judgment of the Bankruptcy Court, or other
court of competent jurisdiction with respect to the subject matter, (i) which
has not been reversed, stayed, modified, amended, enjoined, set aside, annulled
or suspended, (ii) with respect to which no request for a stay, motion or
application for reconsideration or rehearing, notice of appeal or petition for
certiorari is filed within the deadline
17
provided by applicable statute or regulation or as to which any appeal that has
been taken or any petition for certiorari that has been or may be filed has been
resolved by the highest court to which the order or judgment was appealed or
from which certiorari was sought and (iii) as to which the deadlines for filing
such request, motion, petition, application, appeal or notice referred to in
clause (ii) above have expired; provided, however, that a request for a stay,
appeal, motion to reconsider or petition for certiorari referred to in clause
(ii) shall be disregarded for purposes of such clause if such appeal, motion to
reconsider or petition for certiorari would not, individually or in the
aggregate, reasonably be expected to be materially adverse to the Transaction,
any Specified Business, Parent or any of its Affiliates (in the case of Parent
or its Affiliates, only to the extent related to the Transaction and not in
their capacity as creditors or, with respect to Plan distribution matters,
equityholders) (taking into account whether such request for a stay, appeal,
motion to reconsider or petition for certiorari would be rendered moot under the
doctrine of "equitable mootness" as a result of the occurrence of the Closing
and any findings of the Bankruptcy Court contained in any such order or
judgment, including under section 363(m) of the Bankruptcy Code).
"Financial Advisors" has the meaning set forth in Section 4.26.
"Financial Information" has the meaning set forth in Section 5.11(a).
"Fixtures and Equipment" means, with respect to each Specified Business,
all furniture, office equipment, furnishings, fixtures, vehicles, equipment,
testing equipment, computers, set-top boxes, tools, electronic devices, towers,
tower equipment, trunk and distribution cable, other aboveground and underground
cable, decoders and spare decoders for scrambled satellite signals, amplifiers,
microwave equipment, power supplies, conduits, vaults and pedestals, grounding
and pole hardware, installed subscriber devices (including drop lines,
converters, encoders, transformers behind television sets and fittings),
headends and hubs (origination, transmission and distribution systems) hardware,
spare parts, supplies and closed circuit devices, inventory, other physical
Assets (other than real property) and other tangible personal property Related
to such Specified Business, wherever located.
"Franchise" means, with respect to each Specified Business, each
franchise, as such term is defined in the Communications Act, granted by a
Government Entity authorizing the construction, upgrade, maintenance or
operation of any part of the Cable Systems that are part of such Specified
Business.
"Friendco" has the meaning set forth in the Recitals.
"Friendco Business" has the meaning set forth in the Recitals.
"Friendco Purchase Agreement" has the meaning set forth in the Recitals.
"Friendco Purchase Price" has the meaning ascribed to the term "Purchase
Price" in the Friendco Purchase Agreement.
"Friendco Transaction" means the Redemptions and the Exchange.
18
"Friendco Transferred Assets" has the meaning ascribed to the term
"Transferred Assets" in the Friendco Purchase Agreement.
"Fully Diluted Basis" means all Equity Securities of Parent, without
regard to any restrictions or conditions with respect to the exercisability of
such Equity Securities, other than (i) any Equity Securities issued following
the date hereof on arm's length terms for fair consideration, as determined in
good faith by Parent's board of directors or any committee thereof, and, in
connection with any such issuance to TWX or any of its Affiliates (other than
Parent or its wholly owned Subsidiaries), also subject to Section 5.3(c), and
(ii) any Equity Securities issued following the date hereof pursuant to employee
stock option or restricted stock programs (A) as approved by Parent's board of
directors or compensation committee from time to time pursuant to which
Permitted Parent Incentive Awards are issued or (B) in connection with any
acquisition transaction satisfying clause (i) of this definition.
"GAAP" means United States generally accepted accounting principles in
effect from time to time.
"Government Antitrust Entity" means any Government Entity with
jurisdiction over the enforcement of any U.S. Antitrust Law or other similar
Law.
"Government Entity" means any federal, state or local court,
administrative body or other governmental or quasi-governmental entity with
competent jurisdiction.
"Governmental Authorizations" means, with respect to each Specified
Business, all licenses (including cable television relay service, business radio
and other licenses issued by the FCC or any other Government Entity), permits
(including construction permits), certificates, waivers, amendments, consents,
Franchises (including similar authorizations or permits), exemptions, variances,
expirations and terminations of any waiting period requirements (including
pursuant to the HSR Act), other actions by, and notices, filings, registrations,
qualifications, declarations and designations with, and other authorizations and
approvals Related to such Specified Business and issued by or obtained from a
Government Entity or Self-Regulatory Organization.
"Group 1 Business" has the meaning set forth in the Recitals.
"Group 1 Cap Amount" means $296,700,000, plus any amounts paid into the
Escrow Account by Buyer minus any amounts paid out of the Escrow Account to
Buyer, in each such case after Closing with respect to adjustments in respect of
the Group 1 Business under Sections 2.6(f) and 2.7(c).
"Group 1 Shared Assets and Liabilities" means the Shared Assets and
Liabilities that are allocated to the Group 1 Business as set forth on Schedule
1.1(h) of the Seller Disclosure Schedule and any other Assets or Liabilities
(other than those solely Related to the Group 1 Business), as applicable, that
are allocated to the Group 1 Business pursuant to the Designated Allocation or
the proviso to Section 2.3.
19
"Group 1 Systems" has the meaning set forth in the Recitals.
"Group 1 Threshold Amount" means $74,000,000.
"Group 2 Business" has the meaning set forth in the Recitals.
"Group 2 Cap Amount" means $267,900,000, plus any amounts paid into
the Escrow Account by Buyer minus any amounts paid out of the Escrow Account to
Buyer, in each such case after Closing with respect to adjustments in respect of
the Group 2 Business under Sections 2.6(f) and 2.7(c).
"Group 2 Shared Assets and Liabilities" means the Shared Assets and
Liabilities that are allocated to the Group 2 Business as set forth on Schedule
1.1(h) of the Seller Disclosure Schedule and any other Assets or Liabilities
(other than those solely Related to the Group 2 Business), as applicable, that
are allocated to the Group 2 Business pursuant to the Designated Allocation or
the proviso to Section 2.3.
"Group 2 Systems" has the meaning set forth in the Recitals.
"Group 2 Threshold Amount" means $67,000,000.
"Hazardous Substance" means any substance that is listed, defined,
designated or classified as hazardous, toxic or otherwise harmful under
applicable Laws or is otherwise regulated by a Government Entity, including
petroleum products and byproducts, asbestos-containing material, polychlorinated
biphenyls, lead-containing products and mold.
"Historic Promotion" means, as to any Basic Subscriber (other than
Subscribers that only receive the lowest tier of service (i.e., lifeline or "B1
only" Subscribers)), any discount or promotion that (i) such Basic Subscriber is
subject to as of the date hereof (without any modification, extension or renewal
thereof after the date hereof) and (ii) does not extend beyond twelve months
following the date hereof.
"HSI Subscriber" means an "HSI Customer" as determined pursuant to
the Seller Subscriber Accounting Policy.
"HSR Act" means the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of
1976.
"Indebtedness" of any Person shall mean, without duplication, (i)
all indebtedness of such Person for money borrowed or with respect to deposits
or advances of any kind, whether short-term or long-term and whether secured or
unsecured and whether or not required to be disclosed on a balance sheet or in
the related notes to financial statements under GAAP, (ii) the undrawn face
amount of, and unpaid reimbursement obligations in respect of, all letters of
credit and bankers' acceptances issued for the account of such Person, (iii)
obligations under any Capital Lease, (iv) all obligations of such Person
evidenced by bonds, debentures, notes or other similar instruments, (v) all
obligations of such Person upon which interest charges are
20
customarily paid (excluding trade accounts payable and accrued obligations in
the ordinary course of business) excluding Cure Costs or Rejection Claims, (vi)
all obligations of such Person under conditional sale or other title retention
agreements relating to Assets purchased by such Person, (vii) all obligations of
such Person issued or assumed as the deferred purchase price of property or
services (excluding trade accounts payable and accrued obligations in the
ordinary course of business), (viii) all obligations of such Person in respect
of interest rate protection agreements, foreign currency exchange agreements or
other interest or exchange rate hedging arrangements, (ix) all obligations of
such Person to purchase, redeem, retire, defease or otherwise acquire for value
any Equity Securities of such Person or any trust or Subsidiary of such Person
(including any preferred stock of such Person or any obligations of such Person
in respect of trust preferred, but excluding any such obligations under the
Investment Documents listed on Schedule 1.1(i) of the Seller Disclosure Schedule
and provided that such Investment Documents have been made available to Buyer
prior to the date hereof), (x) any "keep well" or other agreement to maintain
the financial condition of another Person (other than a wholly owned Subsidiary
of such Person), (xi) any arrangement having the economic effect of any of the
foregoing, (xii) any indebtedness of the types referred to in clauses (i)
through (xi) above of another Person that is guaranteed directly or indirectly
by such Person or secured by (or for which the holder of such indebtedness has
an existing right, contingent or otherwise, to be secured by) the Assets of such
Person, whether or not the obligations secured thereby have been assumed, (xiii)
renewals, extensions, refundings, deferrals, restructurings, amendments and
modifications of any such indebtedness, obligation or guarantee and (xiv) any
interest, charges or penalties in respect of any of the foregoing.
"Indemnified Parties" has the meaning set forth in Section 7.2(a).
"Indemnifying Party" has the meaning set forth in Section 7.4(a).
"Initial Disputed MCE System Adjustment Amount" has the meaning set
forth in Section 2.7(a).
"Initial MCE Purchase Price" has the meaning set forth in Section
2.7(a).
"Insurance Claims" means, with respect to each Specified Business,
all title, property, casualty, fire or, to the extent it relates to periods
following the Closing, business interruption, insurance proceeds received or
receivable by such Specified Business in respect of any Transferred Asset or
Assumed Liability, all title, property, casualty, fire or, to the extent it
relates to periods following the Closing, business interruption, insurance
proceeds (to the extent not already expended (including expenditures of other
monies) by Seller or any Affiliate of Seller to restore or replace the lost or
damaged Asset, which replacement Asset shall be a Transferred Asset) received or
receivable by such Specified Business in respect of any Asset damaged or lost
after December 31, 2004 and which, if not so damaged or lost, would have been a
Transferred Asset and all insurance proceeds received or receivable by such
Specified Business in respect of business interruption of such Specified
Business to the extent relating to any period after the Closing.
21
"Insurance Policies" has the meaning set forth in Section 3.23.
"Intellectual Property" means, as they exist anywhere in the world,
(i) trademarks, service marks, brand names, certification marks, collective
marks, logos, symbols, trade dress, trade names, and other indicia of origin,
all applications and registrations for the foregoing, and all goodwill
associated therewith and symbolized thereby, including all renewals of same,
(ii) inventions and discoveries, whether patentable or not, and all patents,
invention disclosures and applications therefor, and designs and improvements
claimed therein, including divisions, continuations, continuations-in-part and
renewal applications, and including renewals, reexaminations, interferences,
extensions and reissues, (iii) trade secrets, confidential information and
know-how, including processes, schematics, business methods, formulae, drawings,
prototypes, models, designs, customer lists and supplier lists, (iv) published
and unpublished works of authorship, whether copyrightable or not (including
databases and other compilations of information), including mask rights and
computer software (including all source code, object code, specifications,
designs and documentation related to such programs), copyrights therein and
thereto, registrations and applications therefor, and all renewals, extensions,
restorations and reversions thereof, (v) domain names, Internet addresses and
other computer identifiers, web sites, web pages and similar rights and items,
and (vi) any other intellectual property or proprietary rights to the extent
entitled to legal protection as such.
"Intellectual Property Assignment Agreement" means, with respect to
each Specified Business, an agreement in form and substance reasonably
acceptable to Seller and Buyer, providing for the assignment of the Transferred
Intellectual Property Related to such Specified Business.
"Intercompany Payables" means, with respect to each Specified
Business, all account, note or loan payables (including credit balance
intercompany receivables), whether or not recorded on the books of Seller or any
of its Affiliates, for goods or services purchased by such Specified Business or
provided to such Specified Business, or advances (cash or otherwise) or any
other extensions of credit to such Specified Business, in each case from Seller
or any of its Affiliates, including amounts recorded on the Derivative 2004
Financial Statements, whether current or non-current, as either intercompany,
affiliate or related party payables, on a gross or net basis.
"Intercompany Receivables" means, with respect to each Specified
Business, all account, note or loan receivables, whether or not recorded on the
books of Seller or any of its Affiliates, for goods or services sold or provided
by such Specified Business to Seller, any of its Affiliates or advances (cash or
otherwise) or any other extensions of credit made by such Specified Business to
Seller or any of its Affiliates, including amounts recorded on the Derivative
2004 Financial Statements, whether current or non-current, as either
intercompany, affiliate or related party receivables, on a gross or net basis.
"Interim Dividends" means, with respect to any shares of Parent
Class A Common Stock delivered after the Closing, any dividends declared and
paid between the
22
Closing and the delivery of such shares, plus (to the extent of any dividends
paid in cash) interest from the respective dates on which such dividends were
paid to the date of payment, at LIBOR calculated on a 365-day basis; it being
understood that the holder of such shares shall be entitled to receive any
dividends declared but not paid between the Closing and the delivery of such
shares upon the payment of such dividend to the holders of Parent Class A Common
Stock.
"Intermediate Subsidiary" has the meaning set forth in Section
3.2(a).
"Investment Documents" means the documents governing any Transferred
Investment.
"Investment Entity" means any issuer of a Transferred Investment.
"Investment Entity Securities" means, with respect to each
Investment Entity, the Equity Securities of such Investment Entity.
"IRS" means the United States Internal Revenue Service.
"Knowledge" means (i) with respect to Seller and its Affiliates, the
collective actual knowledge of any of Seller's executive officers, the vice
president of law and governmental affairs, the vice president for engineering,
the vice president for finance, the vice president of financial planning, the
vice president - treasurer, the applicable regional senior vice presidents, the
applicable direct reports to the regional senior vice presidents, including the
senior executive officer of each Cable System or group of Cable Systems, the
most senior employee that is responsible for tax matters (currently, the vice
president of taxation), the senior officer responsible for environmental matters
including the Environmental Self-Audit and each regional vice president of
finance, each regional vice president of engineering, and each regional vice
president of law and governmental affairs, and (ii) with respect to Buyer, the
collective actual knowledge of Buyer's Chief Executive Officer, and any of
Parent's executive officers, applicable executive vice presidents and applicable
division presidents and each group vice president of finance.
"Law" means any law, statute, ordinance, rule, regulation, code,
order, judgment, injunction or decree enacted, issued, promulgated, enforced or
entered by a Government Entity or Self-Regulatory Organization.
"Lease Assignment Agreement" means, with respect to each Specified
Business, one or more agreements in form and substance reasonably acceptable to
Seller and Buyer and reasonably necessary to cause such agreements to be
recordable, assigning to Buyer the Transferred Real Property Leases Related to
such Specified Business.
"Leased Real Property" means real property subject to the Real
Property Leases.
"LFA Approvals" means all consents, approvals or waivers required to
be obtained from Government Entities with respect to the transfer or change in
control of
23
Franchises in connection with the Transaction and, except for purposes of
Section 6.2(e), the Exchange.
"Liabilities" means any and all Indebtedness, losses, claims,
charges, demands, actions, damages, obligations, payments, costs and expenses,
sums of money, bonds, indemnities and similar obligations, covenants, contracts,
controversies, omissions, make whole agreements and similar obligations, and
other liabilities, including all contractual obligations, whether due or to
become due, fixed, contingent or absolute, inchoate or otherwise, matured or
unmatured, liquidated or unliquidated, accrued or not accrued, asserted or not
asserted, known or unknown, determined, determinable or otherwise, whenever or
however arising, including, those arising under any Law, principles of common
law (including out of any contract or tort based on negligence or strict
liability) action, threatened or contemplated action (including the costs and
expenses of demands, assessments, judgments, settlements and compromises
relating thereto and attorneys' fees and any and all costs and expenses
(including allocated costs of in-house counsel and other personnel), whatsoever
reasonably incurred in investigating, preparing or defending against any such
actions or threatened or contemplated actions), order or consent decree of any
Government Entity or any award of any arbitrator or mediator of any kind, and
those arising under any contract, commitment or undertaking, whether or not the
same would be required by GAAP to be recorded or reflected in financial
statements or disclosed in the notes thereto.
"LIBOR" means the six-month Interbank Official Rate with respect to
deposits in Dollars which appears on the Telerate Page 3750 as of 11:00 a.m.,
London time, on the day that is two business days in London preceding the
Closing.
"Losses" has the meaning set forth in Section 7.2(a).
"Managed Cable Entity" means, with respect to an MCE System, each
Person (other than the Debtors, Buyer and its Affiliates) that owns or purports
to own any Equity Security or profits interest in such MCE System.
"Material Adverse Effect" means (i) a material adverse effect on the
business, condition (financial or otherwise), Assets or results of operations of
any Specified Business (or, solely for purposes of Section 6.2(f), any Specified
Business or the Acquired Business), taken as a whole, or (ii) a material
impairment or delay of Seller's or its Affiliates' ability to effect the Closing
or to perform its obligations under this Agreement or any Ancillary Agreement to
which it is a party; provided, however, that none of the following (or the
results thereof) shall be taken into account: (A) any change in Law or
accounting standards or interpretations thereof that is of general application;
(B) any change in general economic or business conditions or industry-wide or
financial market conditions generally; (C) except with respect to Sections 3.4,
3.5, 6.1(f) and 6.2(e), any adverse effect as a result of the execution or
announcement of this Agreement, the Ancillary Agreements, the Transaction or the
transactions contemplated by the Ancillary Agreements; and (D) any loss of
Subscribers reflected in the Base Subscriber Number for such Specified Business
(or, solely for purposes of Section 6.2(f), any or all Specified Businesses )
and any loss of Subscribers to the extent reflected in the
24
Subscriber Change used in calculating the Final Adjustment Amount for such
Specified Business (or, solely for purposes of Section 6.2(f), any or all
Specified Businesses).
"MCE Base Subscriber Number" means, with respect to each MCE System,
the number of Basic Subscribers of such MCE System corresponding to the month
prior to the month in which the Closing occurs, as set forth on Schedule 1.1(j)
of the Seller Disclosure Schedule.
"MCE Closing" has the meaning set forth in Section 2.7(c).
"MCE Discharge" means, with respect to each MCE System, except as
otherwise provided in the Plan and the Confirmation Order (or, to the extent
approved by Buyer (such approval not to be unreasonably withheld), such other
plan that includes the applicable Managed Cable Entity as a debtor and the
confirmation order of the Bankruptcy Court approving such plan and effecting the
MCE Discharge), the discharge and/or equivalent effect granted pursuant to such
confirmation order and sections 363, 1123 and 1141 of the Bankruptcy Code or the
equivalent effect pursuant to any other governmental proceeding to the extent
approved by Buyer (such approval not to be unreasonably withheld; it being
understood that it would be reasonable for Buyer to refuse to grant such
approval if such other governmental proceeding would not have the same effect as
a bankruptcy discharge in all respects relative to the Transaction), of (i) each
applicable Managed Cable Entity, as a debtor in possession, from Liabilities,
(ii) interests of, and rights, interest and Claims of the holders of Claims
against and interests in, such MCE System and Managed Cable Entity and (iii)
Encumbrances on, or interests of Persons (other than Seller and its Affiliates)
in, the Transferred Assets that are Related to such MCE System; it being
understood that an MCE Discharge may occur pursuant to the Plan.
"MCE Financial Statements" has the meaning set forth in Section
5.11(b).
"MCE Fraction" means, with respect to the Disputed MCE Systems
transferred to Buyer at the MCE Closing (or, as used in the definitions of "MCE
Subscriber Cap Component" and "MCE Subscriber Basket Component," with respect to
all Disputed MCE Systems not transferred to Buyer at the Closing), a fraction,
the numerator of which is the aggregate number of Basic Subscribers served by
such Disputed MCE Systems and the denominator of which is the aggregate number
of Basic Subscribers served by all Group 2 Systems and MCE Systems, in each case
as of December 31, 2004.
"MCE Management Agreement" has the meaning set forth in Section
2.7(b).
"MCE Period" has the meaning set forth in Section 2.7(b).
"MCE Purchase Price" means $390,000,000.
"MCE Purchase Shares" has the meaning set forth in Section 2.7(c).
25
"MCE Resolution" has the meaning set forth in Section 2.7(b).
"MCE Subscriber Basket Component" means the Subscriber Basket set
forth on Schedule 1.1(q)(i) of the Seller Disclosure Schedule with respect to
the Group 2 Systems multiplied by the MCE Fraction.
"MCE Subscriber Cap Component" means the Subscriber Cap set forth
with respect to the Group 2 Systems on Schedule 1.1(q)(ii) of the Seller
Disclosure Schedule multiplied by the MCE Fraction.
"MCE Systems" has the meaning set forth in the Recitals.
"Measurement Date" means the subscriber cut-off date during the
calendar month immediately preceding the month in which the Closing occurs.
"Most Recent Balance Sheet" means, with respect to each Specified
Business, the unaudited balance sheet included in the Derivative 2004 Financial
Statements for such Specified Business.
"Multiemployer Plan" has the meaning set forth in Section 3.10(a).
"Net Liabilities Adjustment Amount" means, with respect to each
Specified Business, the Closing Net Liabilities Amount minus the Base Net
Liabilities Amount of such Specified Business, expressed as a positive, if
positive, or as a negative, if negative.
"Non-Debtor Subsidiaries" has the meaning set forth in Section
5.13(h).
"Non-Debtor Transfer" has the meaning set forth in Section 5.13(h).
"Non-Governmental Authorizations" means, with respect to each
Specified Business, all licenses, permits (including construction permits),
certificates, waivers, amendments, consents, franchises, exemptions, variances,
expirations and terminations of any waiting period requirements, other actions
by, and notices, filings, registrations, qualifications, declarations and
designations with, any Person and other authorizations and approvals that are
Related to such Specified Business other than Governmental Authorizations.
"Non-Referred Proposal" has the meaning set forth in the definition
of "Proposed Change in Tax Law."
"Notice Period" has the meaning set forth in Section 7.4(a).
"NYSE" means the New York Stock Exchange.
"OCB Contract" means, with respect to each Specified Business, a
Contract Related to such Specified Business that (i) (A) is in a Contract
Category Expected to be Assumed, (B) is entered into in the Ordinary Course and
(C) contains no
26
Special Terms (provided, that with respect to Contracts described on Schedule
1.1(k)(i) of the Seller Disclosure Schedule, clause (i) of the definition of
"Special Terms" shall be disregarded for purposes of this definition) or (ii) is
set forth on Schedule 1.1(k)(ii) of the Seller Disclosure Schedule; provided,
however, that any Contract that would otherwise be an OCB Contract and which
cannot be assigned to Buyer at the Closing without consent or waivers of a third
party that are not obtained by the Closing (and the use and benefits of which
cannot in all material respects be provided to Buyer pursuant to Section 2.11)
shall be deemed not to be an OCB Contract; provided, further, that Buyer shall
be entitled to remove from Schedule 1.1(k)(i) of the Seller Disclosure Schedule
any Contract that was amended in any material respect prior to the date hereof
if such amendment is not identified with such Contract on Schedule 1.1(k)(i).
"Ordinary Course" or "Ordinary Course of Business" means (i) with
respect to each Specified Business, the conduct of such Specified Business as a
going concern in accordance with Seller's normal day-to-day customs, practices
and procedures, without regard to the Sale Process (it being understood that the
use of regional or national resources utilized by a Cable System shall be deemed
to be so conducted if utilized in accordance with Seller's normal, day-to-day
customs, practices and procedures in the Business as applied to such Cable
System), and (ii) with respect to the Parent Business, the conduct of the Parent
Business as a going concern in accordance with Parent's normal day-to-day
customs, practices and procedures, except to the extent such customs, practices
and procedures relate to transactions entered into following the date hereof
that have the intended effect of benefiting any Affiliate of Parent (other than
any Subsidiary of Parent) at the expense of Parent or any Subsidiary of Parent
in a manner that would deprive Parent or any Subsidiary of Parent of the benefit
they would otherwise have obtained if the transaction were to have been effected
on terms that were negotiated on an arm's length basis.
"Outside Date" has the meaning set forth in Section 8.2.
"Owned Real Property" means, with respect to each Specified
Business, all fee interests in real property (including improvements thereon)
Related to such Specified Business, including those listed on Schedule 1.1(l) of
the Seller Disclosure Schedule and identified as Related to such Specified
Business.
"Parent" has the meaning set forth in the Recitals.
"Parent Agreement" has the meaning set forth in the Recitals.
"Parent Audited Financial Statements" has the meaning set forth in
Section 4.9(a).
"Parent Basic Subscriber" means a paying customer who subscribes to
at least the lowest level of video programming offered by the Parent Cable
Systems as determined pursuant to the Parent Subscriber Accounting Policy.
"Parent Benefit Plans" has the meaning set forth in Section 4.12(a).
27
"Parent Business" has the meaning set forth in the Recitals.
"Parent Cable System" means each System that is Related to the
Parent Business.
"Parent Capital Stock" has the meaning set forth in Section 4.4(b).
"Parent Class A Common Stock" has the meaning set forth in Section
2.5(c).
"Parent Class B Common Stock" has the meaning set forth in Section
4.4(b).
"Parent Digital Subscriber" means a paying customer who subscribes
to any level of service received via digital technology (including the digital
guide tier, digital basic tier, digital sports tier and digital movie tier) from
the Parent Cable Systems as determined pursuant to the Parent Subscriber
Accounting Policy.
"Parent Franchise" means each franchise, as such term is defined in
the Communications Act, granted by a Government Entity authorizing the
construction, upgrade, maintenance or operation of any part of the Parent Cable
Systems.
"Parent Governmental Authorizations" means all licenses (including
cable television relay service, business radio and other licenses issued by the
FCC or any other Government Entity), permits (including construction permits),
certificates, waivers, amendments, consents, franchises (including similar
authorizations or permits), exemptions, variances, expirations and terminations
of any waiting period requirements (including pursuant to the HSR Act), other
actions by, and notices, filings, registrations, qualifications, declarations
and designations with, and other authorizations and approvals Related to the
Parent Business and issued by or obtained from a Government Entity or
Self-Regulatory Organization.
"Parent HSD Subscriber" means a paying customer who subscribes to
high speed data service offered by the Parent Cable Systems as determined
pursuant to the Parent Subscriber Accounting Policy.
"Parent Material Adverse Effect" means (i) a material adverse effect
on the business, condition (financial or otherwise), Assets or results of
operations of the Parent Business, taken as a whole or (ii) a material
impairment or delay of Parent's or its Controlled Affiliates' ability to effect
the Closing or to perform its obligations under this Agreement or any Ancillary
Agreement to which it is a party; provided, however, that none of the following
(or the results thereof) shall be taken into account: (A) any change in Law or
accounting standards or interpretations thereof that is of general application;
(B) any change in general economic or business conditions or Broadband
Industry-wide or financial market conditions generally; and (C) except with
respect to Sections 4.6, 4.7 and 6.1(f), any adverse effect as a result of the
execution or announcement of this Agreement, the Ancillary Agreements, the
Transaction or the transactions contemplated by the Ancillary Agreements.
28
"Parent Material Contracts" means those Contracts set forth on
Schedule 4.17(a) of the Buyer Disclosure Schedule.
"Parent Preferred Stock" has the meaning set forth in Section
4.4(b).
"Parent Real Property" means all fee interests in real property
(including improvements thereon) Related to the Parent Business.
"Parent Redemption" means the redemption of the Parent Class A
Common Stock pursuant to the Parent Redemption Agreement.
"Parent Redemption Agreement" means the Redemption Agreement, dated
as of the date hereof, by and among Friendco, Comcast Cable Communications
Holdings, Inc., MOC Holdco II, Inc., TWE Holdings I Trust, TWE Holdings II
Trust, Cable Holdco II Inc., TWE Holding I LLC, TWX and Parent.
"Parent Subscriber" means any Parent Basic Subscriber, Parent
Digital Subscriber or Parent HSD Subscriber.
"Parent Subscriber Accounting Policy" has the meaning set forth in
Section 4.18(e).
"Per Share Value of the Purchase Shares" means the amount obtained
by dividing the Aggregate Value of the Purchase Shares by the aggregate number
of Purchase Shares that would be delivered by Buyer at the Closing before giving
effect to any adjustment thereto pursuant to Section 2.6(f) or 2.7.
"Permitted Encumbrances" means (i) Encumbrances reflected or
reserved against or otherwise disclosed in the Most Recent Balance Sheet, (ii)
mechanics', materialmen's, warehousemen's, carriers', workers', or repairmen's
liens or other similar common law or statutory Encumbrances arising or incurred
in the Ordinary Course and that are not material in amount or effect on any
Specified Business or are being contested in good faith by appropriate
proceedings, (iii) liens for Taxes, assessments and other governmental charges
that are not due or payable or are being contested in good faith by appropriate
proceedings, (iv) with respect to real property, (A) easements, quasi-easements,
licenses, covenants running with the land, rights-of-way, rights of re-entry,
restrictions or other similar encumbrances, conditions or restrictions that
would be disclosed on current title reports or surveys, which do not,
individually or in the aggregate with one or more other Encumbrances, interfere
in any material respect with the right or ability to own, use, enjoy or operate
such real property as currently used or operated or to convey good and
indefeasible fee simple title to the same (with respect to Owned Real Property)
or materially detract from the value of such real property, (B) zoning,
building, subdivision or other similar requirements or restrictions, provided,
that the same are not violated in any material respect by the existing
improvements or the current use and operation of such real property, and (C)
Transferred Real Property Subleases which do not, individually or in the
aggregate with one or more other Encumbrances, interfere in any material respect
with the right or ability to use, enjoy or operate such real property as
currently used or operated or materially detract from the
29
value of such real property, (v) Encumbrances, other than Encumbrances on real
property, incurred in the Ordinary Course that are not material to any Specified
Business, (vi) any transfer restrictions set forth in any Assigned Contract
(other than any such restriction that could reasonably be expected, individually
or in the aggregate, to adversely affect the Transaction or the Exchange in any
material respect) and (vii) Encumbrances imposed by any Contract or any Law
governing a Franchise, provided, that in the case of clauses (i), (ii), (iii),
(iv) (as to any Encumbrances that can be satisfied solely through the payment of
money) and (v), any such Encumbrance shall be a Permitted Encumbrance only to
the extent that such Encumbrance (x) shall be discharged pursuant to the
Discharge or, with respect to MCE Systems or Transferred Assets owned by
Non-Debtor Subsidiaries, an MCE Discharge or Additional Discharge, respectively,
or (y) is reflected in the Closing Net Liabilities Amount used in calculating
the Final Adjustment Amount.
"Permitted Parent Incentive Awards" means an amount of Equity
Securities that, during the 12-month period commencing on the date hereof, does
not exceed 1.5% of the outstanding Equity Securities of Parent calculated on a
Fully Diluted Basis and, for each 90-day period thereafter, does not exceed an
additional 0.375% of the outstanding Equity Securities of Parent calculated on a
Fully Diluted Basis (provided, that (i) no more than ten percent of Permitted
Parent Incentive Awards shall be shares of restricted stock and (ii) any such
employee stock option shall not be issued at less than fair market value as
determined in good faith by Parent's board of directors or compensation
committee).
"Permitted Promotion" means, as to any Basic Subscriber (other than
Subscribers that only receive the lowest tier of service (i.e., lifeline or "B1
only" Subscribers)), any discount or promotion (i) which does not extend beyond
two months following the Closing Date or provide for a discount equal to (or in
excess of) the entire Applicable Monthly Rate in any consecutive months or in
more than any one month if such discount or promotion is for a period of less
than four months and (ii) the dollar amounts or values of which do not (A)
exceed, over the life of such discount or promotion, an amount equal to two
times the full monthly rate card pricing applicable to all services provided to
such Subscriber (the "Applicable Monthly Rate") or (B) exceed 50% of an amount
equal to the product of (x) the Applicable Monthly Rate multiplied by (y) the
number of months (including any fraction thereof) in the life of such discount
or promotion.
"Person" means an individual, a corporation, a partnership, an
association, a limited liability company, a Government Entity, a trust, a labor
union or other entity or organization.
"Petition Date" has the meaning set forth in the Recitals.
"Plan" means the chapter 11 plan filed by Seller and/or its
Affiliates in connection with the Reorganization Case, providing, among other
things, for the effectuation of the Transaction, as amended from time to time,
and satisfying the requirements of Section 5.13.
30
"Primarily Related" means, with respect to any business or System,
owned or held primarily by, required primarily for, or used, intended for use,
leased, licensed, accrued, reserved or incurred primarily in connection with,
such business or System, including to the extent allocated thereto pursuant to
Schedule 1.1(m) of the Seller Disclosure Schedule.
"Pro Rata Payment" means, as to any amount, an aggregate amount of
cash and Purchase Shares (where each Purchase Share is valued at the Per Share
Value of the Purchase Shares) equal to such amount and allocated as between cash
and Purchase Shares such that 35.14% of such amount shall be in the form of
Purchase Shares and 64.86% of such amount shall be in cash; provided, however,
that (i) the cash portion of such amount shall be increased by (A) any Interim
Dividend paid in cash on the Purchase Shares included in such Pro Rata Payment
and (B) in respect of the portion of any cash payment by Buyer pursuant to (x)
Section 2.6(f), interest on such portion (without giving effect to the foregoing
clause (A)) from the date of the Closing, as applicable, to the date of payment
at LIBOR calculated on a 365-day basis and (y) Section 7.2, interest on such
portion (without giving effect to the foregoing clause (A)) at LIBOR calculated
on a 365-day basis from the date notice of the Losses for which indemnification
is sought was delivered until the date of payment of indemnification by the
Buyer Indemnifying Party and (ii) the stock portion of such amount shall be
increased by Interim Dividends paid in stock on the Purchase Shares included in
such Pro Rata Payment.
"Programming Agreement" means any Contract pursuant to which Seller
or any of its Affiliates has the right to carry audio and/or video content or
programming (or pay for or otherwise provide compensation with regard to cable
television programming) on any Cable System and all related arrangements,
including with respect to programming and launch initiatives and support;
provided, that "Programming Agreement" shall not include any local Cable System
leased access agreement required by Law.
"Proposed Change in Tax Law" means a proposal published in writing
by (i) the President of the United States, (ii) the U.S. Treasury Department or
any official on behalf of the U.S. Treasury Department (including the Office of
Tax Policy), (iii) the Commissioner of the Internal Revenue Service or any
official on behalf of the Internal Revenue Service, (iv) the House Ways and
Means Committee or any member thereof (each such member, except for the chair
and ranking minority member, a "Specified HWMC Member"), (v) the Senate Finance
Committee or any member thereof (each such member, except for the chair and
ranking minority member, a "Specified SFC Member") or (vi) any other
Congressional Committee (any such proposal that is not reported out of such
Congressional Committee for sequential referral to either the House Ways and
Means Committee or the Senate Finance Committee, a "Non-Referred Proposal").
"Protections Order" means an order of the Bankruptcy Court approving
Section 5.10 and Article VIII pursuant to sections 105, 363, 503(b) and 364 of
the Bankruptcy Code.
"Proximate Cause Party" has the meaning set forth in Section 8.2.
31
"Purchase Price" has the meaning set forth in Section 2.5(c).
"Purchase Price Allocation Schedule" has the meaning set forth in
Section 5.7(d).
"Purchase Price Per Subscriber" means $3,810.
"Purchase Rights" means any purchase options, rights of first
refusal or other rights that any Person may have (under the terms of any
franchise or otherwise) to purchase all or any portion of a System owned or
operated by any Person as a result of the Transaction or the transfer of any
System pursuant to the Exchange.
"Purchase Shares" has the meaning set forth in Section 2.5(c).
"Qualified Customer" means a Basic Subscriber who, prior to the
Closing, has been billed and, prior to one month following the Closing, has paid
(disregarding payments subject to any rebates or similar programs) for services
delivered during the period commencing two months prior to the Measurement Date
and ending on the Measurement Date an amount no less than (i) for each month in
such period, 50% of the Applicable Monthly Rate or (ii) 66.67% of the Applicable
Monthly Rate in respect of any single month during such period. For the
avoidance of doubt, in calculating a Qualified Customer for purposes of the
Estimated Closing Adjustment Amount and the condition set forth in the second
sentence of Section 6.2(h), the parties shall assume that no payments will be
made by such Basic Subscriber after the Closing.
"Rate Regulatory Matter" means any proceeding or investigation with
respect to a Cable System arising out of or related to the Cable Act (other than
those affecting the cable television industry generally) dealing with, limiting
or affecting the rates which can be charged by such Cable System for
programming, equipment, installation, service or otherwise.
"Real Property Leases" means, with respect to each Specified
Business, those leases, subleases, license agreements, and sublicense
agreements, together with all extensions, supplements, amendments, other
modifications and nondisturbance agreements relating thereto, governing real
property Related to such Specified Business, including those with respect to the
real properties listed on Schedule 1.1(n) of the Seller Disclosure Schedule and
identified as Related to such Specified Business.
"Real Property Sublease" means, with respect to any Specified
Business, any lease, sublease, license or sublicense, together with all
extensions, supplements, amendments and other modifications relating thereto,
pursuant to which the Owned Real Property or the Leased Real Property (or any
portion thereof) Related to such Specified Business is leased, subleased,
licensed or sublicensed to others.
"Redemptions" means the transactions that are the subject matter of
the Parent Redemption Agreement and of the TWE Redemption Agreement, including
the Parent Redemption and the TWE Redemption.
32
"Registered" means issued by, registered with, renewed by, or the
subject of a pending application before, any Government Entity or domain name
registrar.
"Rejected Contracts" has the meaning set forth in Section 5.13(b).
"Rejection Claim" means, with respect to a Contract, any Claim
arising out of (i) the termination of such Contract or the rejection of such
Contract under section 365 of the Bankruptcy Code or (ii) a breach of or default
under any such Contract entered into following the Petition Date as a result of
the termination, rejection or breach of such Contract as a result of Buyer's
determination not to make such Contract an Assigned Contract, in each case
assuming such termination, rejection or breach occurred as of the earlier of (A)
the date on which such Contract is terminated or rejected or (B) the Closing
Date.
"Related" means, with respect to any business or System, owned or
held by, required for, or used, intended for use, leased, licensed, accrued,
reserved or incurred in connection with, such business or System.
"Related to the Parent Business" means owned or held by, required
for, used or intended for use, leased or licensed in connection with, the Parent
Business as conducted by Parent and its Affiliates prior to the Closing.
"Reorganization Case" has the meaning set forth in the Recitals.
"Retained Books and Records" has the meaning set forth in Section
5.1(d).
"Rigas Litigation" means the litigation described on Schedule 1.1(o)
of the Seller Disclosure Schedule.
"Rights-of-Way" means, with respect to each Specified Business, the
written rights-of-way easements, rights of access, rights of use, pole line or
joint line agreements, underground conduit agreements, crossing agreements,
railroad agreements, leases, subleases, licenses, sublicenses and other similar
interests in real property (other than Owned Real Property and Leased Real
Property), together with all extensions, supplements, amendments, other
modifications and nondisturbance agreements relating thereto, Related to such
Specified Business.
"Rights-of-Way Assignment Agreement" means, with respect to each
Specified Business, an agreement in form and substance reasonably acceptable to
Seller and Buyer and, to the extent relating to Transferred Rights-of-Way that
are currently recorded, reasonably necessary to cause such assignments to be in
recordable form, assigning to Buyer the Transferred Rights-of-Way Related to
such Specified Business.
"Sale Bonus Program" has the meaning set forth in the definition of
"Assumed Liabilities."
"Sale Process" means the formal sale process of Seller's Business
announced by Seller on April 22, 2004 and commenced by Seller in September 2004.
33
"Schedule A Part" has the meaning set forth in the definition of
"System Group."
"SEC" means the Securities and Exchange Commission.
"SEC/DOJ Matters" means (i) the civil enforcement action captioned
Securities and Exchange Commission v. Adelphia Communications Corporation, Xxxx
X. Xxxxx, Xxxxxxx X. Xxxxx, Xxxxxxx X. Xxxxx, Xxxxx X. Xxxxx, Xxxxx X. Xxxxx and
Xxxxxxx X. Xxxxxxxx, filed on July 24, 2002, alleging various securities fraud
claims arising out of the Rigas family's alleged misconduct, and the Department
of Justice's investigation related thereto, in each case as amended, modified
and/or supplemented from time to time, and any related action or investigation
commenced from time to time and (ii) any and all other Claims that the SEC or
Department of Justice may have against Seller or any of its Affiliates (other
than any Excluded Claim); provided, that, solely for purposes of Section 6.1(c),
clause (ii) shall be deemed to exclude any such Claims that shall not have been
asserted or threatened by the SEC or Department of Justice as of the Closing
Date.
"SEC/DOJ Settlement" means a settlement, dismissal or other
resolution of the SEC/DOJ Matters in full and pursuant to which after the
Closing no Specified Business or any owner thereof shall have any Liability
(including risk of criminal prosecution), including any obligation with respect
to behavioral relief or similar action or limitation other than obligations not
greater than those set forth in the form of letter agreement delivered by
representatives of Friendco to representatives of Seller and Buyer on April 17,
2005.
"Securities Act" means the Securities Act of 1933.
"Self-Regulatory Organization" means the National Association of
Securities Dealers, Inc., the American Stock Exchange, the NYSE, any national
securities exchange (as defined in the Exchange Act) or any other similar
self-regulatory body or organization.
"Seller" has the meaning set forth in the Preamble.
"Seller Audited Financial Statements" has the meaning set forth in
Section 5.11(b).
"Seller Confidentiality Agreement" means the letter agreement, dated
October 22, 2004, among Seller, Friendco and TWX, as amended by the letter
agreement, dated November 9, 2004, the letter agreement, dated January 7, 2005
and the letter agreement dated as of the date hereof.
"Seller Disclosure Schedule" means the disclosure schedule attached
hereto as Annex A.
"Seller Indemnified Parties" has the meaning set forth in Section
7.3.
34
"Seller Required Approvals" means, with respect to each Specified
Business, all consents, approvals, waivers, authorizations, notices and filings,
(a) required to be obtained by Seller or any of its Affiliates from, or to be
given by Seller or any of its Affiliates to, or made by Seller or any of its
Affiliates with, any Person, in connection with the execution, delivery and
performance by Seller or any of its Affiliates of this Agreement, the Ancillary
Agreements and the agreements contemplated thereby to which it is (or will be) a
party, the failure of which to obtain or make would, individually or in the
aggregate, reasonably be expected to result in a Material Adverse Effect, other
than the Confirmation Order and the LFA Approvals, or (b) that are listed on
Schedule 1.1(p) of the Seller Disclosure Schedule and identified as Related to
such Specified Business.
"Seller Severance Plan" has the meaning set forth in Section 5.8(c).
"Seller Subscriber Accounting Policy" has the meaning set forth in
Section 3.16(e).
"Seller's 401(k) Plan" has the meaning set forth in Section 5.8(j).
"Seller's Objection" has the meaning set forth in Section 2.6(c).
"Seller's Statement" has the meaning set forth in Section 2.6(a).
"Shared Assets and Liabilities" means the Assets and Liabilities set
forth on Schedule 1.1(h) of the Seller Disclosure Schedule and any other Assets
required to have been listed thereon in order for the representation and
warranty in Section 3.20(b) to be true and correct.
"Significant Subsidiary" of any Person means a Subsidiary of such
Person that would constitute a "significant subsidiary" (within the meaning of
Rule 102 of Regulation S-X of the SEC).
"SOA" means the Xxxxxxxx-Xxxxx Act of 2002.
"Special Term" has the meaning set forth in Section 3.15(b).
"Specified Business" means each of the Group 1 Business and the
Group 2 Business.
"Specified HWMC Member" has the meaning set forth in the definition
of "Proposed Change in Tax Law."
"Specified SFC Member" has the meaning set forth in the definition
of "Proposed Change in Tax Law."
"Specified Systems" means each of the Group 1 Systems, the Group 2
Systems and the MCE Systems.
"Stock Awards" has the meaning set forth in Section 5.8(q).
35
"Sublease Assignment Agreement" means, with respect to each
Specified Business, one or more agreements in form and substance reasonably
acceptable to Seller and Buyer and reasonably necessary to cause such agreements
to be recordable, assigning to Buyer the Transferred Real Property Subleases
Related to such Specified Business.
"Subscriber" means any Basic Subscriber, Digital Subscriber or HSI
Subscriber.
"Subscriber Accounting System" has the meaning set forth in Section
5.23.
"Subscriber Adjustment Amount" means, with respect to each Specified
Business, the product of (i) Purchase Price Per Subscriber multiplied by (ii) if
(A) the absolute value of the Subscriber Change is less than or equal to the
Subscriber Basket, zero and (B) the absolute value of the Subscriber Change is
greater than the Subscriber Basket, (1) if the Subscriber Change is a negative
amount, the sum of the Subscriber Change plus the Subscriber Basket for such
Specified Business and (2) if the Subscriber Change is a positive amount, the
sum of the Subscriber Change minus the Subscriber Basket for such Specified
Business.
"Subscriber Basket" means, with respect to each Specified Business,
the number of Basic Subscribers set forth opposite such Specified Business in
Schedule 1.1(q)(i) of the Seller Disclosure Schedule; provided, however, that
the Subscriber Basket allocated to the Group 2 Business shall be reduced by the
MCE Subscriber Basket Component (if there are any Disputed MCE Systems).
"Subscriber Cap" means, with respect to each Specified Business, the
number of Basic Subscribers set forth with respect to such Specified Business in
Schedule 1.1(q)(ii) of the Seller Disclosure Schedule; provided, however, that
the Subscriber Cap allocated to the Group 2 Business shall be reduced by the MCE
Subscriber Cap Component (if there are any Disputed MCE Systems).
"Subscriber Change" means, with respect to each Specified Business,
the Base Subscriber Number for such Specified Business minus the Closing
Subscriber Number for such Specified Business, expressed as a positive, if
positive, or as a negative, if negative; provided, that, except for purposes of
calculating the Subscriber Adjustment Amount for each Disputed MCE System
pursuant to Section 2.7(a), the absolute value of the Subscriber Change shall
not exceed the Subscriber Cap for such Specified Business.
"Subsequent Adjustment Amount" has the meaning set forth in Section
2.6(f).
"Subsidiary" means, with respect to any Person, any entity whether
incorporated or unincorporated, of which at least a majority of the securities
or ownership interests having by their terms voting power to elect a majority of
the board of directors or other persons performing similar functions is directly
or indirectly owned or controlled by such Person or by one or more of its
respective Subsidiaries; it being understood that (i) Bright House Networks, LLC
shall be deemed not to be a Subsidiary of Parent or any
36
of its Affiliates so long as its day-to-day operations are managed by Advance
Publications, Inc., a New York corporation, Advance/Xxxxxxxx Partnership, a New
York general partnership, or any of their respective Affiliates pursuant to the
Partnership Agreement for Time Warner Entertainment-Advance/Xxxxxxxx
Partnership, a New York general partnership ("TWE-A/N"), (ii) TWE-A/N shall be
deemed a wholly owned, indirect Subsidiary of Parent, and (iii) the Tele-Media
Entities shall be deemed to be Subsidiaries of Seller.
"Superior Alternate Plan" has the meaning set forth in Section
5.10(b).
"Superior Proposal" has the meaning set forth in Section 5.10(a).
"System" means (i) a cable system, as such term is defined in the
Communications Act, and (ii) to the extent relating to areas referred to on a
Schedule A Part as a non-primary Cost Center, a multichannel video programming
distribution system operated through (A) bulk, commercial or multiple dwelling
units, (B) satellite master antenna television units or (C) former Verizon cable
systems in Thousand Oaks, Oxnard, Port Hueneme and El Rio, California.
"System Group" means, with respect to each Specified Business and
each Specified Business (as defined in the Friendco Purchase Agreement), the
Systems that are a part of such Specified Business as set forth in the
applicable part of Schedule A of the Seller Disclosure Schedule or Schedule A of
the Seller Disclosure Schedule (as defined in the Friendco Asset Purchase
Agreement) (each, a "Schedule A Part").
"Target Capital Expenditure Amount" means, with respect to each
Specified Business, the aggregate amount of capital expenditures budgeted to be
made in respect thereof, respectively, subsequent to December 31, 2004 and up to
and including the end of the month immediately preceding the Closing Date or, if
the Closing occurs on a month-end, up to and including such month, as set forth
in the Budget; provided, however, that in the event any Disputed MCE Systems
exist as of the Closing, then the Target Capital Expenditure Amount in respect
of the Group 2 Business shall be reduced by the amounts included in the Budget
in respect of each Disputed MCE System through the month ending (i) on the
Closing Date if the Closing occurs on a month-end or (ii) immediately prior to
the Closing Date if the Closing does not occur on a month-end (it being
understood that the amounts included in the Budget in respect of each Disputed
MCE System shall be deemed for purposes hereof to equal the amounts included in
the Budget in respect of all MCE Systems multiplied by the quotient obtained by
dividing (x) the aggregate number of Basic Subscribers served by such Disputed
MCE System as of December 31, 2004 by (y) the aggregate number of Basic
Subscribers served by all MCE Systems as of December 31, 2004); provided,
further, that, if the Subscriber Change for a Specified Business is a positive
number, the Target Capital Expenditure Amount for such Specified Business shall
be reduced by an amount equal to the lesser of (A) the product of the Subscriber
Change multiplied by $210.00 and (B) (1) with respect to the Group 1 Business,
$21,100,000 and (2) with respect to the Group 2 Business, $19,100,000.
37
"Tax Law" means the Code, final, temporary or proposed Treasury
regulations, published pronouncements of the U.S. Treasury Department or IRS,
court decisions or other relevant binding legal authority (and similar
provisions, pronouncements, decisions and other authorities of state, local and
foreign Law).
"Tax Return" shall mean any report, return or other information
(including any attached schedules or any amendments to such report, return or
other information) required to be supplied to or filed with a Government Entity
with respect to any Tax, including an information return, claim for refund,
amended return, declaration, or estimated Tax returns in connection with the
determination, assessment, collection or administration of any income Tax.
"Taxes" means all federal, state or local and all foreign taxes,
including income, gross receipts, windfall profits, value added, severance,
property, production, sales, use, duty, license, excise, franchise, employment,
withholding or similar taxes (including any payment required to be made to any
state abandoned property administrator or other public official pursuant to an
abandoned property, escheat or similar Law) together with any interest,
additions or penalties with respect thereto and any interest in respect of such
additions or penalties.
"Tele-Media Entities" means each of TMC Holding Corporation, a
Delaware corporation, TMC Holdings, LLC, a Delaware limited liability company,
Adelphia Company of Western Connecticut, a Connecticut corporation, Tele-Media
Investment Partnership, L.P., a Delaware limited partnership, Eastern Virginia
Cablevision, L.P., a Delaware limited partnership, Eastern Virginia Cablevision
Holdings LLC, a Delaware limited liability company, Tele-Media Company of
Hopewell-Prince Xxxxxx, a Virginia general partnership, Tele-Media Company of
Tri-States, L.P., a Delaware limited partnership, CMA Cablevision Associates
VII, L.P., a Pennsylvania limited partnership, and CMA Cablevision Associates
XI, L.P., a Pennsylvania limited partnership.
"Third Party Claim" has the meaning set forth in Section 7.4(a).
"Third Party Confidentiality Agreement" has the meaning set forth in
Section 5.21.
"Total Liabilities" means, with respect to each Specified Business,
all Liabilities, expressed as a positive number, of such Specified Business as
of the Closing (after giving effect to the Transaction), as would be reflected
on the face of a balance sheet (excluding any footnotes thereto) prepared in
accordance with GAAP consistently applied (to the extent GAAP was previously
applied) for such Specified Business; provided, however, that Total Liabilities
shall include the following: accounts payable, accrued expenses (including all
accrued vacation time, sick days, paid time off, copyright fees, franchise fees
and other license fees or charges), Liabilities with respect to unearned income
and advance payments (including subscriber prepayments and deposits for
converters, encoders, cable television service and related sales) and interest,
if any, required to be paid on advance payments; provided, further, that (a) in
no event shall
38
Total Liabilities include (i) Liabilities that constitute Assumed Liabilities
pursuant to clauses (iii) (other than part (C) thereof), (iv) (other than
accrued but unpaid Franchise fees and any reserves for Franchise fee audits),
(v), (vi), and (vii) of the definition of "Assumed Liabilities" or (ii) Excluded
Liabilities, and (b) Liabilities (i) under the Sale Bonus Program included in
clause (iii)(C) of the definition of "Assumed Liabilities" and (ii) under
purchase orders outstanding as of the Closing will be treated, for purposes
hereof, as part of the Total Liabilities of the relevant Specified Business as
of the Closing regardless of whether they would otherwise be treated as such
under GAAP but subject in any event to the remainder of this definition. For
purposes of determining Total Liabilities in respect of any Disputed MCE System,
all references above to the Closing shall be deemed to mean, with respect to any
Disputed MCE System, the MCE Closing.
"Transaction" means the transactions that are the subject of this
Agreement, including the purchase and sale of the Transferred Assets and the
assumption of the Assumed Liabilities; provided, however, that Transaction shall
not include the Friendco Transaction.
"Transfer Tax Returns" has the meaning set forth in Section
5.7(c)(ii).
"Transfer Taxes" has the meaning set forth in Section 5.7(c)(i).
"Transferred Assets" has the meaning set forth in Section 2.1.
"Transferred Cash" has the meaning set forth in Section 2.1(a).
"Transferred Employees" has the meaning set forth in Section
5.8(e)(ii).
"Transferred Employees' Records" means all personnel files related
to the Transferred Employees, but not including any files the transfer of which
would be prohibited by Law.
"Transferred Intellectual Property" means, with respect to each
Specified Business, the Intellectual Property owned by Seller or its Affiliates
and Related to such Specified Business, including that set forth on Schedule
1.1(r) of the Seller Disclosure Schedule and identified as Related to such
Specified Business.
"Transferred Intellectual Property Contracts" means, with respect to
each Specified Business, (i) the licenses, sublicenses, distributor agreements
and permissions, and royalty agreements concerning Intellectual Property to
which Seller or any of its Affiliates is a party and which are Related to such
Specified Business and are Assigned Contracts and (ii) the rights and
entitlements, including the right to receive royalty payments, pursuant to any
licenses, sublicenses, distributor agreements and permissions or royalty
agreements to which Seller or any of its Affiliates is a party and under which a
third party licensee obtains benefits pursuant to section 365(n) of the
Bankruptcy Code and which are Related to such Specified Business and are
Assigned Contracts.
39
"Transferred Investment Assignment Agreement" means, with respect to
each Specified Business, an agreement in form and substance reasonably
acceptable to Seller and Buyer, providing for the assignment and assumption of
Transferred Investments Related to such Specified Business.
"Transferred Investments" means, with respect to each Specified
Business, (i) the Equity Securities identified on Schedule 1.1(s)(i) of the
Seller Disclosure Schedule and allocated to such Specified Business pursuant to
the Designated Allocation, it being understood that, by written notice to Seller
delivered on one or more occasions and no fewer than 10 Business Days prior to
the Closing, Buyer shall be entitled to remove any item from Schedule 1.1(s)(i)
of the Seller Disclosure Schedule with respect to which any material Investment
Document was not provided to Buyer prior to the date hereof, and (ii) those
Equity Securities identified on Schedule 1.1(s)(ii) of the Seller Disclosure
Schedule that Buyer selects to be allocated to a Specified Business, it being
understood that such selection shall be made in the same manner, and subject to
the same conditions, as are applicable to the selection of Contracts as Assigned
Contracts pursuant to Section 5.13 (with the determination of whether or not an
item will be treated as an OCB Contract made on the basis of the primary
agreement containing the business terms applicable to the applicable Investment
Entity).
"Transferred Joint Venture Parents" has the meaning ascribed to such
term in the Friendco Purchase Agreement.
"Transferred Leased Real Property" means Leased Real Property that
is the subject of a Transferred Real Property Lease.
"Transferred Owned Real Property" means Owned Real Property that is
not an Excluded Asset pursuant to Section 2.2(h).
"Transferred Real Property Leases" means Real Property Leases that
are Assigned Contracts.
"Transferred Real Property Subleases" means Real Property Subleases
that are Assigned Contracts and that relate to (i) the Transferred Owned Real
Property or (ii) the Transferred Leased Real Property.
"Transferred Rights-of-Way" means all Rights-of-Way, provided that
to the extent a Right-of-Way is a Contract, Transferred Rights-of-Way shall mean
Rights-of-Way that are Assigned Contracts.
"Transitional Services" has the meaning set forth in Section 5.24.
"TWE" means Time Warner Entertainment Company, L.P., a Delaware
limited partnership.
"TWE-A/N" has the meaning set forth in the definition of
"Subsidiary."
40
"TWE Redemption" means the redemption of limited partnership
interests in TWE pursuant to the TWE Redemption Agreement.
"TWE Redemption Agreement" means the Redemption Agreement, dated as
of the date hereof, by and among Friendco, Comcast Cable Communications
Holdings, Inc., MOC Holdco I, LLC, TWE Holdings I Trust, Cable Holdco III LLC,
TWE, TWX and Parent.
"TWX" means Time Warner Inc., a Delaware corporation.
"TWX Agreement" means that certain Agreement, dated March 31, 2003,
between TWX, Parent and an Affiliate of Friendco.
"TWX Confidentiality Agreement" means the letter agreement, dated
November 9, 2004, between TWX and Seller.
"Unallocated Shared Assets and Liabilities" means those Assets and
Liabilities (and the related revenue and expenses) identified as such on
Schedule 1.1(h) of the Seller Disclosure Schedule.
"Union Employee" has the meaning set forth in Section 5.8(b).
"U.S. Antitrust Laws" means the Xxxxxxx Act, the Xxxxxxx Act, the
HSR Act, the Federal Trade Commission Act, and all other federal and state
statutes, rules, regulations, orders, decrees, administrative and judicial
doctrines, and other Laws that are designed or intended to prohibit, restrict or
regulate actions having the purpose or effect of monopolization or restraint of
trade.
"US Trustee" means the United States Trustee for Region 2 or such
other region in which the reorganization case of any Managed Cable Entity or
Non-Debtor Subsidiary is pending.
"WARN" means the Worker Adjustment and Retraining Notification Act.
Section 1.2 Other Interpretive Provisions. Unless the express
context otherwise requires:
(a) the words "hereof," "herein," and "hereunder" and words of
similar import, when used in this Agreement, shall refer to this Agreement as a
whole and not to any particular provision of this Agreement;
(b) the terms defined in the singular have a comparable meaning when
used in the plural, and vice versa;
(c) the terms "Dollars" and "$" mean United States Dollars;
(d) any payment hereunder to be made in the form of shares of Parent
Class A Common Stock shall be made only in whole shares and, in lieu of payment
of
41
any fractional shares, a cash payment shall be made in an amount equal to the
value of such fractional shares valued at the Per Share Value of the Purchase
Shares;
(e) references herein to a specific Section, Subsection, Recital,
Schedule or Exhibit shall refer, respectively, to Sections, Subsections,
Recitals, Schedules or Exhibits of this Agreement;
(f) wherever the word "include," "includes," or "including" is used
in this Agreement, it shall be deemed to be followed by the words "without
limitation";
(g) references herein to any gender include each other gender;
(h) references herein to any Person include such Person's heirs,
executors, personal representatives, administrators, successors and assigns;
provided, however, that nothing contained in this clause (h) is intended to
authorize any assignment or transfer not otherwise permitted by this Agreement;
(i) references herein to a Person in a particular capacity or
capacities exclude such Person in any other capacity;
(j) references herein to any contract or agreement (including this
Agreement) mean such contract or agreement as amended, supplemented or modified
from time to time in accordance with the terms thereof;
(k) with respect to the determination of any period of time, the
word "from" means "from and including" and the words "to" and "until" each means
"to but excluding";
(l) references herein to any Law or any license mean such Law or
license as amended, modified, codified, reenacted, supplemented or superseded in
whole or in part, and in effect from time to time;
(m) references herein to any Law shall be deemed also to refer to
all rules and regulations promulgated thereunder, unless the context requires
otherwise;
(n) references herein to sections of the Code shall be construed to
also refer to any successor sections;
(o) the rules of construction contained in section 102 of the
Bankruptcy Code (except section 102(8) of the Bankruptcy Code) shall apply; and
(p) in the event of any inconsistency between the terms of the Plan
and this Agreement, the terms of this Agreement shall control.
42
ARTICLE II
PURCHASE AND SALE OF THE SPECIFIED BUSINESSES
Section 2.1 Purchase and Sale of Assets. Subject to Sections 2.7,
2.11 and 5.13(h), on the terms and subject to the conditions set forth herein,
at the Closing, Seller shall, and shall cause each of its Affiliates to, sell,
convey, transfer, assign and deliver to Buyer, and Buyer shall purchase from
Seller and each of its Affiliates (x) the Transferred Investments and (y) all of
Seller's and each of its Affiliates' Assets that are Related to the Acquired
Business, including the Acquired Systems, except for the Excluded Assets
(clauses (x) and (y), collectively, the "Transferred Assets"), free and clear of
all Encumbrances, other than Permitted Encumbrances (or, in the case of the
Transferred Investments, Encumbrances under the Investment Documents), including
the following:
(a) all cash and cash equivalents consisting of (i) xxxxx
cash-on-hand, (ii) Condemnation Proceeds and (iii) Insurance Claims
(collectively, the "Transferred Cash");
(b) Accounts Receivable;
(c) Assigned Contracts;
(d) Transferred Intellectual Property and Transferred Intellectual
Property Contracts;
(e) Books and Records;
(f) Fixtures and Equipment;
(g) Transferred Real Property Leases;
(h) Transferred Real Property Subleases;
(i) Transferred Owned Real Property;
(j) Transferred Rights-of-Way;
(k) Insurance Claims and Condemnation Proceeds to the extent not
included under subsection (a) above;
(l) except as set forth in Section 2.2(k), all claims (and the
proceeds related thereto) available to or being pursued by Seller or any of its
Affiliates to the extent related to the Transferred Assets, the Assumed
Liabilities or the ownership, use, function or value of any Transferred Asset;
(m) all credits, prepaid expenses, advance payments, security
deposits, prepaid items and duties to the extent related to a Transferred Asset;
43
(n) to the extent their transfer is not prohibited by Law, all
Authorizations held by Seller or any of its Affiliates and all applications
therefor;
(o) all guaranties, representations, warranties, indemnities and
similar rights in favor of Seller or any of its Affiliates to the extent related
to any Transferred Asset, except to the extent included in Excluded Assets;
(p) all other current assets; and
(q) all rights of Seller set forth in Section 5.12 of the Friendco
Purchase Agreement;
provided, that the sale, conveyance, transfer, assignment or delivery of a
Transferred Asset shall, except as otherwise directed by Buyer in a manner
consistent with the like allocations of Friendco pursuant to the Friendco
Purchase Agreement (provided, that the effect of any such allocation so directed
by Buyer that is different than the allocation that would occur in the absence
of such direction shall be disregarded for the purposes of making any
determination with respect to (x) the representations, warranties or covenants
of Seller herein, (y) the Closing Adjustment Amount and (z) the satisfaction of
the conditions set forth in Article VI, in each case, to the extent such
determination would be different (but in the case of the Closing Adjustment
Amount, only to the extent the aggregate Closing Adjustment Amount and the
Closing Adjustment Amount (as defined in the Friendco Purchase Agreement) would
be different) as a result of such direction), be allocated among each of the
Specified Businesses and the Friendco Business in the following manner
(provided, that (A) in no event will any of the following allocations result in
the transfer of subscribers from one System Group to another and (B) any
allocation of capital expenditures shall be made in accordance with Schedule
5.2(s) of the Seller Disclosure Schedule or, if not addressed in such Schedule
as set forth below): if such Transferred Asset is (i) Related only to a single
Specified Business and not to the Friendco Business, to such Specified Business,
(ii) included in the Group 1 Shared Assets and Liabilities pursuant to Schedule
1.1(h) of the Seller Disclosure Schedule, to the Group 1 Business, (iii)
included in the Group 2 Shared Assets and Liabilities pursuant to Schedule
1.1(h) of the Seller Disclosure Schedule, to the Group 2 Business, (iv) solely
Related to the Friendco Business or allocated to the Friendco Business pursuant
to Schedule 1.1(f) of the Seller Disclosure Schedule (as defined in the Friendco
Purchase Agreement), to the Friendco Business, (v) is readily divisible, Related
to more than one of the Group 1 Business, the Group 2 Business and the Friendco
Business and not allocated pursuant to clause (i), (ii), (iii) or (iv),
allocated to such Group 1 Business, Group 2 Business and/or Friendco Business to
which it is Related pro rata based on the number of Basic Subscribers served by
such Group 1 Business, Group 2 Business or Friendco Business (as applicable) as
of the Closing and (vi) not allocated pursuant to clause (i), (ii), (iii), (iv)
or (v) and is (A) Primarily Related to the Friendco Business, to the Friendco
Business, (B) Primarily Related to the Group 1 Business, to the Group 1 Business
or (C) not Primarily Related to the Friendco Business or the Group 1 Business,
to the Group 2 Business (the allocation of such assets pursuant to this proviso
to this Section 2.1, the "Designated Allocation"). Notwithstanding anything to
the contrary in this Section 2.1, any Asset included in the Unallocated Shared
Assets and Liabilities that
44
is not a Transferred Asset pursuant to the Designated Allocation shall not be
deemed to be a Transferred Asset.
Section 2.2 Excluded Assets. Notwithstanding anything herein to the
contrary, from and after the Closing, Seller and its Affiliates shall retain,
and there shall be excluded from the sale, conveyance, assignment or transfer to
Buyer hereunder, and the Transferred Assets shall not include, any of the
Friendco Transferred Assets (except as set forth in Section 5.15) or the
following Assets (collectively, the "Excluded Assets"):
(a) all Assets with respect to Taxes (including duty and tax refunds
and prepayments) and net operating losses of Seller or any of its Affiliates;
(b) except to the extent set forth in Section 5.1(d), all Tax
Returns of Seller or any of its Affiliates and all Books and Records (including
working papers) and tax software to the extent directly related thereto;
(c) all insurance policies and rights thereunder other than the
Insurance Claims;
(d) all credits, prepaid expenses, deferred charges, advance
payments, security deposits and prepaid items, in each case, only to the extent
related to any Asset that is not a Transferred Asset;
(e) all cash and cash equivalents, except for the Transferred Cash;
(f) all Intercompany Receivables;
(g) all Contracts (including all Third Party Confidentiality
Agreements) other than Assigned Contracts;
(h) (i) any Owned Real Property that, and any lease (other than a
lease designated by Buyer as an Assigned Contract) for real property that, (A)
is vacant, (B) contains only inactive headends, inactive hubsites or inactive
optical transition nodes or (C) is solely residential in nature and (ii) the
Owned Real Property set forth on Schedule 2.2(h) of the Seller Disclosure
Schedule; provided, however, that, from time to time prior to the Closing but no
later than ten Business Days prior to the Closing, Buyer may designate any other
Owned Real Property to be included on such Schedule 2.2(h) of the Seller
Disclosure Schedule;
(i) all Programming Agreements (other than any retransmission
consent agreement that is an Assigned Contract);
(j) all Assets listed on Schedule 2.2(j) of the Seller Disclosure
Schedule;
(k) (i) all claims (and proceeds related thereto) set forth on
Schedule 2.2(k) of the Seller Disclosure Schedule relating to (A) the Rigas
Litigation or (B) the Designated Litigation, (ii) all other claims (and proceeds
related thereto) that
45
Seller or any of its Affiliates may make after the date hereof to the extent not
affecting any Specified Business (including any Transferred Asset or Assumed
Liability) in any material respect and (iii) any claims of Seller or its
Affiliates against Seller or any of its Affiliates (other than any claim against
any Investment Entity) to the extent not affecting any Specified Business
(including any Transferred Asset or Assumed Liability);
(l) all personnel records, other than the Transferred Employees'
Records;
(m) all rights in connection with and Assets of the Benefit Plans;
(n) except for the Transferred Investments, all Equity Securities or
other rights of Seller or any of its Affiliates in any other Person, including
any Asset Transferring Subsidiary;
(o) Assets allocated to the Friendco Business pursuant to the
Designated Allocation; and
(p) state certificates of public convenience and necessity or
similar state telecommunication Authorizations except for those that Buyer
designates in writing as Transferred Assets at least ten Business Days prior to
the Closing.
Section 2.3 Assumption of Liabilities. On the terms and subject to
the conditions set forth herein and in partial consideration of the sale of the
Transferred Assets, at the Closing, Buyer shall assume and discharge or perform
when due all the Assumed Liabilities; it being understood that the assumption of
an Assumed Liability shall, except as otherwise allocated by Buyer in a manner
consistent with the like allocations of Friendco pursuant to the Friendco
Purchase Agreement (provided, that the effect of any such allocation so directed
by Buyer that is different than the allocation that would occur in the absence
of such direction shall be disregarded for the purposes of making any
determination with respect to (x) the representations, warranties or covenants
of Seller herein, (y) the Closing Adjustment Amount and (z) the satisfaction of
the conditions set forth in Article VI, in each case, to the extent such
determination would be different (but in the case of the Closing Adjustment
Amount, only to the extent the aggregate Closing Adjustment Amount and the
Closing Adjustment Amount (as defined in the Friendco Purchase Agreement) would
be different) as a result of such direction), be allocated among each of the
Specified Businesses and the Friendco Business in the following manner: if such
Assumed Liability is (i) Related only to a single Specified Business and not to
the Friendco Business, to such Specified Business, (ii) included in the Group 1
Shared Assets and Liabilities pursuant to Schedule 1.1(h) of the Seller
Disclosure Schedule, to the Group 1 Business, (iii) included in the Group 2
Shared Assets and Liabilities pursuant to Schedule 1.1(h) of the Seller
Disclosure Schedule, to the Group 2 Business, (iv) solely Related to the
Friendco Business or allocated to the Friendco Business pursuant to Schedule
1.1(f) of the Seller Disclosure Schedule (as defined in the Friendco Purchase
Agreement), to the Friendco Business and (v) not allocated pursuant to clause
(i), (ii), (iii) or (iv), then to the Friendco Business, to the extent Related
to the Friendco Business, to the Group 1 Business, to the extent Related to
46
the Group 1 Business, and to the Group 2 Business, to the extent Related to the
Group 2 Business (which allocations shall be made in each case after giving
effect to the allocations to each such Friendco Business and Specified Business
pursuant to the Designated Allocation).
Section 2.4 Excluded Liabilities. Seller and its Affiliates shall
retain and be responsible for all Excluded Liabilities. Notwithstanding anything
to the contrary in this Agreement, Buyer shall not assume, and neither Buyer nor
any of its Affiliates shall have any Liability for, any Liability of Seller or
any Affiliate of Seller that is not expressly assumed by Buyer pursuant to
Section 2.3.
Section 2.5 Purchase Price. On the terms and subject to the
conditions set forth herein, in consideration of the sale of the Transferred
Assets, at the Closing, Buyer shall:
(a) assume the Assumed Liabilities;
(b) pay to Seller an aggregate amount in cash equal to
$9,154,000,000, as adjusted pursuant to Sections 2.6(a) and 2.6(f) (as so
adjusted, the "Cash Consideration"); and
(c) cause Parent to issue and deliver, on behalf of Buyer, to Seller
such number of shares of Parent's Class A Common Stock, par value $0.01 per
share (the "Parent Class A Common Stock"), as shall represent 16% of the
outstanding Equity Securities of Parent calculated on a Fully Diluted Basis
(after giving effect to such issuance and assuming for purposes of such
calculation the completion of the Redemption pursuant to the Parent Redemption
Agreement but without giving effect to any adjustment pursuant to Section 2.6 or
2.7), subject to adjustment of such number of shares pursuant to Sections 2.6(f)
and 2.7 (as so adjusted, the "Purchase Shares" and, together with the Cash
Consideration, the "Purchase Price");
provided, however, that, in lieu of payment to Seller, Buyer shall deliver or
cause to be delivered, at the Closing, 4% of the Purchase Price in the form of a
Pro Rata Payment (after giving effect to any adjustment thereof that is effected
as of the Closing) (collectively, as such amount may be increased in accordance
with Section 2.6(f) or 2.7(c), the "Escrow Amount") to be held by the Escrow
Agent in an account, the cash component of which shall bear interest (the
"Escrow Account"), pursuant to the Escrow Agreement, which Escrow Amount shall
be paid in whole or in part in accordance with the terms of the Escrow Agreement
to (i) the Buyer Indemnified Parties to the extent necessary to satisfy any
obligation of Seller pursuant to Section 7.2(a), (ii) Buyer to the extent
necessary to satisfy a payment obligation of Seller, if any, pursuant to Section
2.6(f) or 2.7(d), (iii) Seller, on the date that is six months following the
Closing Date, to the extent of the excess, if any, of 33% of the Escrow Amount
deposited at the Closing over the sum of (A) all amounts paid pursuant to the
immediately preceding clauses (i) and (ii), plus (B) the maximum amount that
could reasonably be expected to be necessary to satisfy all claims by the Buyer
Indemnified Parties pursuant to Section 7.2(a) asserted on or prior to such
date, and (iv) Seller to the extent of any
47
remaining funds and/or shares in the Escrow Account as of the Buyer
Indemnification Deadline (subject, with respect only to the MCE Purchase Shares,
to Section 2.7(d)), except to the extent of the maximum amount that could
reasonably be expected to be necessary to satisfy all claims by the Buyer
Indemnified Parties pursuant to Section 7.2(a) asserted on or prior to the Buyer
Indemnification Deadline (subject, with respect only to the MCE Purchase Shares,
to Section 2.7(d)). All amounts payable from the Escrow Account shall be paid in
the form of an Escrow Payment. Any Escrow Payment or Pro Rata Payment to be made
hereunder shall be made (x) in respect of any distribution of shares of Parent
Class A Common Stock by (I) delivery of stock certificates representing such
shares, registered in the name of Buyer or Seller, as the case may be, or (II)
confirmation of a book-entry transfer of such shares in form and substance
reasonably satisfactory to Buyer or Seller, as the case may be, and the Escrow
Agent, and (y) in respect of any distribution of cash, by wire transfer of
immediately available funds to an account designated by Buyer or Seller, as the
case may be, at least five Business Days prior to such payment.
Section 2.5A Purchase Shares. For the avoidance of doubt, 156.380952
shares of Parent Class A Common Stock would be the number of shares required to
be delivered pursuant to Section 2.5(c) at the Closing (before giving effect to
any adjustment under Section 2.6 or 2.7) assuming that (a) the number of
outstanding Equity Securities as of the date hereof is as represented in
Sections 4.4(b)(i) and (b)(ii), (b) the Equity Securities subject to redemption
under the Parent Redemption Agreement is 179 shares of Parent Class A Common
Stock, and (c) no additional Equity Securities were issued by Parent on or after
the date hereof in violation of Section 5.3 hereof; provided that if any pro
rata stock dividend (or any stock split or similar recapitalization) is effected
between the date hereof and Closing as permitted hereunder then such number of
shares would be adjusted accordingly (by operation of the definition of Fully
Diluted Basis).
Section 2.6 Closing Adjustment Amount.
(a) No later than ten Business Days prior to the Closing Date,
Seller shall prepare, or cause to be prepared, and deliver to Buyer, with
respect to each Specified Business, a statement (each, a "Seller's Statement"),
which shall set forth Seller's good faith estimate of the Closing Adjustment
Amount which shall be determined in accordance with this Agreement (the
"Estimated Closing Adjustment Amount"). Each Seller's Statement shall be
accompanied by a certification of Seller's Chief Financial Officer to the effect
that such Seller's Statement has been prepared in good faith in accordance with
this Agreement based on the books and records of such Specified Business and be
reasonably satisfactory to Buyer. If the sum of the Estimated Closing Adjustment
Amounts for the Specified Businesses is a negative number, then the Cash
Consideration payable at the Closing shall be decreased by the absolute value of
such sum. If the sum of the Estimated Closing Adjustment Amounts for the
Specified Businesses is a positive number, then the Cash Consideration payable
at the Closing shall be increased by such sum.
(b) As soon as practicable but in no event more than 90 days
following the Closing, Buyer shall prepare, or cause to be prepared, and deliver
to Seller, with
48
respect to each Specified Business, a statement (each, a "Buyer's Statement") of
the actual Closing Adjustment Amount, as of the Closing Date, which shall be
determined in accordance with this Agreement. Each Buyer's Statement shall be
accompanied by a certification of Buyer's Chief Financial Officer to the effect
that such Buyer's Statement has been prepared in accordance with this Agreement
based on the books and records of such Specified Business.
(c) Seller and Seller's accountants shall complete their review of
each of the Buyer's Statements and Buyer's calculations of the Closing
Adjustment Amount within 30 days after delivery thereof by Buyer. In the event
that Seller determines in good faith that any Buyer's Statement has not been
prepared in accordance with this Agreement, Seller shall, on or before the last
day of such 30-day period, so inform Buyer in writing setting forth a specific
description of the basis of Seller's determination and the adjustments to such
Buyer's Statement and the corresponding adjustments to the applicable Closing
Adjustment Amount that Seller believes should be made in accordance with this
Agreement (a "Seller's Objection"). If no Seller's Objection is received by
Buyer on or before the last day of such 30-day period, then the Closing
Adjustment Amount set forth in a Buyer's Statement shall be final and binding
upon Seller. Buyer shall have 30 days from its receipt of a Seller's Objection
to review and respond to such Seller's Objection.
(d) If Seller and Buyer are unable to resolve all of their
disagreements with respect to the proposed adjustments set forth in any Seller's
Objection within 15 days following the completion of Buyer's review of such
Seller's Objection, they shall refer any remaining disagreements to the CPA Firm
which, acting as experts and not as arbitrators, shall determine, in accordance
with this Agreement based on the books and records of the applicable Specified
Business, and only with respect to the remaining differences so submitted (and
within the range of dispute between Buyer's Statement and Seller's Objection
with respect to each such difference), whether and to what extent, if any, any
Closing Adjustment Amount requires adjustment. Buyer and Seller shall instruct
the CPA Firm to deliver its written determination to Buyer and Seller no later
than 30 days after the remaining differences underlying any such Seller's
Objection are referred to the CPA Firm. The CPA Firm's determination shall be
conclusive and binding upon Buyer and Seller and their respective Affiliates.
With respect to each Seller's Objection, the fees and disbursements of the CPA
Firm shall be borne equally by Seller and Buyer. Buyer and Seller shall make
readily available to the CPA Firm all relevant books and records and any work
papers (including those of the parties' respective accountants, to the extent
permitted by such accountants) relating to the determination of any Closing
Adjustment Amount and all other items reasonably requested by the CPA Firm in
connection therewith.
(e) Buyer shall provide to Seller and its accountants full access to
the books and records of each Specified Business and to any other information,
including work papers of its accountants (to the extent permitted by such
accountants), and to any employees during regular business hours and on
reasonable advance notice, to the extent reasonably necessary for Seller to
review each Buyer's Statement, to prepare a Seller's Objection, if any, and to
prepare materials for presentation to the CPA Firm in connection
49
with Section 2.6(d). Seller and its accountants shall have full access to all
information used by Buyer in preparing such Buyer's Statement, including the
work papers of its accountants (to the extent permitted by such accountants).
(f) Upon satisfaction of the applicable procedures of this Section
2.6, the Purchase Price shall be adjusted with respect to each Specified
Business by an amount equal to (i) the Final Adjustment Amount of such Specified
Business minus (ii) the Estimated Closing Adjustment Amount of such Specified
Business (the "Subsequent Adjustment Amount"). If the Subsequent Adjustment
Amount is a positive number, then the Purchase Price allocated to such Specified
Business shall be increased by the Subsequent Adjustment Amount and Buyer shall
promptly (and in any event within five Business Days) after the final
determination thereof pay to the Escrow Agent, for deposit into the Escrow
Account, a Pro Rata Payment equal to the Subsequent Adjustment Amount. If the
Subsequent Adjustment Amount is a negative number, then the Purchase Price
allocated to such Specified Business shall be decreased by the absolute value of
the Subsequent Adjustment Amount and Buyer shall be entitled to an Escrow
Payment equal to the Subsequent Adjustment Amount from the Escrow Account
promptly (and in any event within five Business Days) after the final
determination of the Subsequent Adjustment Amount; provided, however, that, to
the extent the payment obligations pursuant to this sentence exceed the
remaining funds in the Escrow Account, Seller shall promptly (and in any event
with five Business Days) after the final determination of the Subsequent
Adjustment Amount, pay such excess amount to Buyer by wire transfer of
immediately available funds to an account designated by Buyer.
Section 2.7 MCE Systems.
(a) Notwithstanding anything to the contrary contained herein, if
any MCE System has not been finally determined to be wholly owned by Seller or
its wholly owned Subsidiaries (it being understood that, for purposes of this
Section 2.7(a), if Seller has the right to cause the transfer of good and
marketable title to the Assets of any MCE System (free and clear of all
Encumbrances other than Permitted Encumbrances) to Buyer (or has otherwise
arranged for such transfer to occur at the Closing to the reasonable
satisfaction of Buyer), such Disputed MCE System shall be deemed to be wholly
owned by Seller) or has been finally determined to be so owned but as to which
there has not been an MCE Discharge as of the date on which the Seller's
Statements are delivered under Section 2.6(a) (each such MCE System, a "Disputed
MCE System"), then (i) the geographical areas serviced by such Disputed MCE
System shall be deemed not to be listed on Schedule A of the Seller Disclosure
Schedule and such Disputed MCE System shall be deemed not to be included in the
Group 2 Business or otherwise Related to the Group 2 Business or the Acquired
Business, (ii) any Assets, Liabilities or Employees that would, but for clause
(i) above, have been Transferred Assets, Assumed Liabilities or Transferred
Employees shall be deemed not to be Transferred Assets, Assumed Liabilities or
Transferred Employees, respectively, (iii) the Closing shall be effected without
such Disputed MCE System, (iv) the Purchase Price (before adjustment under
Section 2.6) shall be reduced by an aggregate amount equal to the product of (A)
the MCE Purchase Price multiplied by (B) the quotient obtained by dividing (1)
the aggregate number of Basic Subscribers served by all such Disputed MCE
Systems as of
50
December 31, 2004 by (2) the aggregate number of Basic Subscribers served by all
MCE Systems as of December 31, 2004, such reduction to be applied solely to the
Purchase Shares (where each Purchase Share is valued at the Per Share Value of
the Purchase Shares) (the amount of such Purchase Share reduction with respect
to each such Disputed MCE System, the "Initial MCE Purchase Price"), (v) the
Seller's Statement delivered in respect of the Group 2 Business shall be
prepared to reflect the foregoing and (vi) with respect to the Disputed MCE
Systems, the determination of the Closing Adjustment Amount (calculated as to
each such Disputed MCE System separately as if it were its own Specified
Business and assuming the Net Liabilities Adjustment Amount for each such
Disputed MCE System is zero) shall be made in accordance with Section 2.6 except
that the Subscriber Cap shall not apply to the determination of the Subscriber
Adjustment Amount and there shall be no adjustment to the Purchase Price at the
Closing as a result of such determination (the amount by which the Purchase
Price would have been adjusted (expressed as a negative if decreased and as a
positive if increased) in respect of each such Disputed MCE System as determined
pursuant to this clause (vi), the "Initial Disputed MCE System Adjustment
Amount").
(b) With respect to any Disputed MCE System, Seller shall (i) use
commercially reasonable efforts to cause each such Disputed MCE System to be
bound by a written management agreement with Buyer (or its designee) as of the
Closing, in form and substance reasonably acceptable to Buyer and Seller (each
such agreement, an "MCE Management Agreement"), and (ii) continue during the
succeeding 15 months (the "MCE Period") using commercially reasonable efforts to
obtain full direct or indirect ownership of, and an MCE Discharge with respect
to, such Disputed MCE System (it being understood that, for purposes of this
Section 2.7(b), if Seller has the right to cause the transfer of good and
marketable title to the Assets of any MCE System (free and clear of all
Encumbrances other than Permitted Encumbrances) to Buyer (or has otherwise
arranged for such transfer to occur at the MCE Closing to the reasonable
satisfaction of Buyer), such Disputed MCE System shall be deemed to be wholly
owned by Seller) (an "MCE Resolution"). Buyer shall not have any obligation to
enter into an MCE Management Agreement unless Buyer is provided with reasonably
satisfactory evidence of (A) the enforceability of such MCE Management Agreement
from and after the Closing, (B) the authority of the counterpart(ies) to enter
into and perform such MCE Management Agreement and to bind such Disputed MCE
System and (C) the creditworthiness of such MCE System (or such other Person who
or such instrument that guarantees the Liabilities of such MCE System pursuant
to the applicable MCE Management Agreement). Seller shall notify Buyer of any
MCE Resolution as promptly as practicable and in any event within three Business
Days of obtaining any such MCE Resolution and shall provide Buyer with such
information and documentation related thereto as Buyer reasonably requests.
(c) As to any Disputed MCE System that is the subject of an MCE
Resolution that occurs prior to the expiration of the MCE Period, and with
respect to which (i) Buyer (or its designee) enters into an MCE Management
Agreement that has not been terminated in accordance with its terms (other than
by Seller as a direct result of a breach by Buyer (or its designee)) or rejected
and remains in full force and effect until the completion of the MCE Closing (a
"Buyer Managed MCE System") or (ii) Buyer (or
51
its designee) does not enter into such an MCE Management Agreement but, within
60 days of such MCE Resolution, Buyer makes an election to purchase such
Disputed MCE System, the parties agree that Seller shall sell, or cause to be
sold, to Buyer and Buyer shall purchase from Seller (or the applicable
transferor which Seller causes to sell) the Assets of such Disputed MCE Systems
in exchange for shares (the "MCE Purchase Shares") of Parent Class A Common
Stock (where each such share is valued at the Per Share Value of the Purchase
Shares) in an amount equal to the Final MCE Purchase Price to be delivered by
Buyer at a single closing (the "MCE Closing"), plus any Interim Dividends
thereon, that, subject to satisfaction of the conditions set forth in Sections
6.1, 6.2 (other than, without limiting Section 2.7(d)(ii), Sections 6.2(a),
6.2(f) (but only if Buyer is a Proximate Cause Party) and 6.2(h)) and 6.3 (other
than, without limiting Section 2.7(d)(ii), Sections 6.3(a) and 6.3(e)) (applied
with respect to such Disputed MCE Systems (treating such Systems as a Specified
Business) and applied with respect to the MCE Purchase Shares (treating such MCE
Purchase Shares as Purchase Shares) mutatis mutandis), shall occur on the fifth
Business Day following the earlier of (A) the expiration of the MCE Period and
(B) the date all Disputed MCE Systems have been subject to an MCE Resolution;
provided, however, that 4% of the MCE Purchase Shares so delivered plus any
Interim Dividends thereon will be deposited in the Escrow Account. At the MCE
Closing, the parties will assign or assume, as applicable, the Transferred
Assets and Assumed Liabilities with respect to each such Disputed MCE System
(treating such System as a Specified Business) that would have been assigned and
assumed as if the Closing had been delayed until the date of the MCE Closing and
shall execute such conveyance, assumption and other instruments as are required
pursuant to Sections 2.9 and 2.10 (applied with respect to such Disputed MCE
Systems (treating such Systems as a Specified Business) and applied with respect
to the MCE Purchase Shares (treating such MCE Purchase Shares as Purchase
Shares) mutatis mutandis. For purposes of determining the Disputed MCE System
Adjustment Amount, the Net Liabilities Adjustment Amount in respect of each such
Disputed MCE System shall be determined as of the date of the MCE Closing in
accordance with Section 2.6 applied mutatis mutandis (treating each such System
as a Specified Business) except that any resulting adjustments shall be made
solely in MCE Purchase Shares, where each MCE Purchase Share is valued at the
Per Share Value of the Purchase Shares.
(d) In connection with the transfer to Buyer of any Disputed MCE
Systems, (i) Assumed Liabilities related to such Disputed MCE Systems shall be
deemed to have been assumed effective as of the date of the MCE Closing only,
and (ii) at, and as a condition to, the MCE Closing, (A) Seller shall be deemed
to have restated the representations and warranties in Article III in respect of
such Disputed MCE Systems (x) with respect to the Class 2 Representations and
Warranties, as of the date made and as of the Closing, and (y) with respect to
the Class 1 Representations and Warranties, as of the date made and as of the
MCE Closing, (B) Seller shall deliver to Buyer a certificate certifying to the
satisfaction of Section 6.2(a) with respect to such Disputed MCE Systems
(treating such Disputed MCE Systems as if they were a Specified Business and
multiplying all applicable monetary and materiality thresholds by the MCE
Fraction) (x) with respect to the Class 2 Representations and Warranties, as of
the Closing, and (y) with respect to the Class 1 Representations and Warranties,
as of the MCE Closing, (C) Article VII shall apply to such Disputed MCE Systems
mutatis mutandis (including
52
by multiplying the applicable basket and cap amounts by the MCE Fraction),
provided, that, notwithstanding Section 7.1, all the representations and
warranties in Article III shall, with respect to such Disputed MCE Systems,
survive the MCE Closing until the expiration of the later of the survival period
in Section 7.1 and twelve months after the date of the MCE Closing (and the
Buyer Indemnification Deadline shall be extended with respect to such Disputed
MCE Systems by a corresponding period), (D) Buyer shall deliver to Seller a
certificate certifying as to the truth and accuracy of the first sentence of
Section 4.5 as to the MCE Purchase Shares as of the MCE Closing and (E) Sections
2.11 and 5.12 shall apply mutatis mutandis. For purposes of any covenants in
this Agreement governing the parties hereto following the Closing and any
Ancillary Agreement, any Assets related to any such Disputed MCE Systems which
are transferred to Buyer after Closing under this Section 2.7 shall become part
of the Group 2 Business as of the time of the MCE Closing.
Section 2.8 Closing. The Closing shall take place at the offices of
Xxxx, Weiss, Rifkind, Xxxxxxx & Xxxxxxxx LLP, 0000 Xxxxxx xx xxx Xxxxxxxx, Xxx
Xxxx, Xxx Xxxx 00000-0000 at 10:00 a.m. New York City time, on the last Business
Day of the calendar month in which the conditions set forth in Article VI (other
than those conditions that by their nature are to be satisfied at the Closing
but subject to the fulfillment or waiver of those conditions) have been
satisfied or waived, unless such conditions have not been so satisfied or waived
(other than those conditions that by their nature are to be satisfied at the
Closing but subject to the fulfillment or waiver of those conditions) by the
fifth Business Day preceding the last Business Day of such calendar month, in
which case the Closing shall take place on the last Business Day of the next
calendar month (or at such other time and place as the parties hereto may
mutually agree); provided, however, that the Closing shall not occur prior to
the earliest of (a) immediately following the closing of the Redemption under
the Parent Redemption Agreement, (b) 30 days following the date on which the
conditions set forth in Article VI (other than those conditions that by their
nature are to be satisfied at the Closing but subject to the fulfillment or
waiver of those conditions) have been satisfied or waived (provided, that the
Outside Date or the Extended Outside Date, as the case may be, shall be extended
to the last Business Day of the calendar month in which the end of such 30-day
period occurs if the Outside Date or Extended Outside Date, as the case may be,
would otherwise occur prior to such last Business Day), and (c) the termination
of the Parent Redemption Agreement. The date on which the Closing occurs is
called the "Closing Date."
Section 2.9 Deliveries by Buyer. At the Closing, Buyer shall:
(a) deliver to Seller, the Cash Consideration less the cash portion
of the Escrow Amount to be delivered at Closing in immediately available funds
by wire transfer to an account which has been designated by Seller at least two
Business Days prior to the Closing Date;
(b) deliver, or cause to be delivered, to Seller, (i) stock
certificates representing the Purchase Shares (less the stock portion of the
Escrow Amount to be delivered at the Closing), duly endorsed for transfer or
accompanied by executed stock
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transfer powers or other appropriate instruments of assignment and transfer or
(ii) confirmation of a book-entry transfer of the Purchase Shares (less the
stock portion of the Escrow Amount to be delivered at the Closing) in form and
substance reasonably satisfactory to Buyer and Seller, in each case, free and
clear of all Encumbrances, other than those arising as a result of the ownership
of such Purchase Shares by the recipient thereunder or under applicable
securities Laws;
(c) deliver to the Escrow Agent, (i) the cash portion of the Escrow
Amount to be delivered at Closing in immediately available funds by wire
transfer to the Escrow Agent and (ii) the stock portion of the Escrow Amount to
be delivered at Closing, by (A) delivery of stock certificates representing such
stock portion of the Escrow Amount or (B) confirmation of a book-entry transfer
of such stock portion of the Escrow Amount in form and substance reasonably
satisfactory to Buyer, Seller and the Escrow Agent, each to be held by the
Escrow Agent in the Escrow Account;
(d) deliver to Seller (or to the applicable Affiliate of Seller),
with respect to each Specified Business, such bills of sale, instruments of
assumption and other instruments or documents, in form and substance reasonably
acceptable to Seller and Buyer, as may be reasonably necessary to effect, in
each case in accordance with the terms of this Agreement (x) the assumption by
Buyer of the Assumed Liabilities Related to such Specified Business and (y) the
conveyance, transfer and assignment to Buyer of the Transferred Assets Related
to such Specified Business, including the following:
(I) a duly executed counterpart of one or more Bills of Sale;
(II) a duly executed counterpart of one or more Assignment and
Assumption Agreements;
(III) evidence of the obtaining of, or, with respect to Buyer
Required Approvals that only require notice or filing, the notice or filing with
respect to, the Buyer Required Approvals;
(IV) a duly executed counterpart of one or more Transferred
Investment Assignment Agreements;
(V) a duly executed counterpart of one or more Intellectual
Property Assignment Agreements;
(VI) a duly executed counterpart of one or more Lease
Assignment Agreements;
(VII) a duly executed counterpart of one or more Sublease
Assignment Agreements;
(VIII) a duly executed counterpart of one or more
Rights-of-Way Assignment Agreements;
(IX) the certificate to be delivered pursuant to Section
6.3(d);
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(X) a duly executed counterpart of the Escrow Agreement;
(XI) duly executed counterparts of such other customary
instruments of transfer, assumptions, filings or documents, in form and
substance reasonably satisfactory to Buyer and Seller, as may be reasonably
required to give effect to this Agreement; and
(e) deliver to Seller the opinion of counsel referred to in Section
6.3(f).
Section 2.10 Deliveries by Seller. At the Closing, Seller shall
deliver, or cause to be delivered, to Buyer, with respect to each Specified
Business, such bills of sale, instruments of assumption and other instruments or
documents, in form and substance reasonably acceptable to Seller and Buyer, as
may be reasonably necessary to effect, in each case in accordance with the terms
of this Agreement (x) the assumption by Buyer of the Assumed Liabilities Related
to such Specified Business and (y) the conveyance, transfer and assignment to
Buyer of the Transferred Assets Related to such Specified Business, including
the following:
(a) a duly executed counterpart of one or more Bills of Sale;
(b) a duly executed counterpart of one or more Assignment and
Assumption Agreements;
(c) a duly executed counterpart of one or more Transferred
Investment Assignment Agreements;
(d) a duly executed counterpart of one or more Intellectual Property
Assignment Agreements;
(e) a duly executed counterpart of one or more Lease Assignment
Agreements;
(f) a duly executed counterpart of one or more Sublease Assignment
Agreements;
(g) a duly executed counterpart of one or more Rights-of-Way
Assignment Agreements;
(h) special warranty deeds (or local equivalent) in respect of the
Transferred Owned Real Property Related to such Specified Business;
(i) duly executed certifications from Seller and each Subsidiary
that in this Transaction will be a transferor described in Treasury Regulations
Section 1.1445-1(g)(3) that Seller and such Subsidiaries are not foreign Persons
within the meaning set forth in Treasury Regulation Section
1.1445-2(b)(2)(iii)(A); it being understood that, notwithstanding anything to
the contrary contained herein, if Seller fails to provide Buyer with such
certifications, Buyer shall be entitled to withhold a portion of
55
the Purchase Price in accordance with Section 1445 of the Code and the
applicable Treasury Regulations;
(j) the Books and Records Related to such Specified Business that
are Transferred Assets (it being understood that Books and Records located on
real property interests conveyed to Buyer at the Closing shall be deemed
delivered pursuant to this Section 2.10(j));
(k) evidence of the obtaining of, or, with respect to Seller
Required Approvals that only require notice or filing, the notice or filing with
respect to, the Seller Required Approvals or any LFA Approvals, in each case,
Related to such Specified Business;
(l) the certificate to be delivered pursuant to Section 6.2(d);
(m) a certified copy of the Confirmation Order (including any
amendments thereto);
(n) duly executed counterparts of instruments providing Buyer the
limited, irrevocable right, in the name, place and stead of Seller and any of
its Affiliates, as attorney-in-fact of Seller and any of its Affiliates, to
cash, deposit, endorse or negotiate checks received on or after the Closing Date
made out to Seller or any of its Affiliates in payment for cable television,
high speed Internet, telephony and related services and charges provided by the
Specified Systems Related to such Specified Business, and evidence of written
instructions to the lock-box service provider or similar agents of Seller and
any of its Affiliates to promptly forward to Buyer upon receipt all such cash,
deposits and checks representing accounts receivable of such Specified Systems;
(o) to the extent available using commercially reasonable efforts,
(i) subject only to Permitted Encumbrances, such certificates and affidavits of
Seller or its applicable Affiliate as may be reasonably requested by Buyer's
title insurance company necessary and satisfactory to Buyer in connection with
the issuance of title insurance with respect to any Owned Real Property or
Leased Real Property Related to such Specified Business and (ii) customary gap
indemnities covering Seller's acts for the period between Closing and the
recording of the applicable deed or assignment of lease with respect to such
Owned Real Property or Leased Real Property; provided, that, except with respect
to the customary gap indemnities described in clause (ii) above, such
certificates or affidavits shall be deemed not to have been reasonably requested
if they would increase, in each case other than in a de minimis manner, the
Liability of Seller or any of its Affiliates beyond the liability that would be
incurred by Seller or its applicable Affiliates under a special warranty deed or
would contain representations that are more extensive than those set forth in
this Agreement;
(p) the Transferred Cash Related to such Specified Business in
immediately available funds by wire transfer to an account which has been
designated by Buyer at least two Business Days prior to the Closing Date (it
being understood that Transferred Cash shall be deemed delivered if it is either
(i) located on real property
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interests being conveyed to Buyer at Closing or (ii) held in accounts assigned
to Buyer pursuant to duly executed instruments of assignment that are reasonably
satisfactory to Buyer);
(q) stock certificates (or other comparable evidence of ownership,
if issued) representing the Transferred Investments Related to such Specified
Business, duly endorsed for transfer or accompanied by executed stock transfer
powers or other appropriate instruments of assignment and transfer;
(r) a duly executed counterpart of the Escrow Agreement; and
(s) duly executed counterparts of such other customary instruments
of transfer, assumptions, filings or documents, in form and substance reasonably
satisfactory to Buyer and Seller, as may be reasonably required to give effect
to this Agreement.
Section 2.11 Non-Assignability of Assets.
(a) Without limiting Sections 6.1(f) and 6.2(e), if and to the
extent that the transfer or assignment from Seller or any of its Affiliates to
Buyer of any Transferred Asset would be a violation of applicable Law with
respect to such Transferred Asset or otherwise adversely affect the rights of
the applicable transferee thereunder as a result of the failure to obtain or
make any consent, approval, waiver, authorization, notice or filing required to
be made in connection with the Transaction, then the transfer or assignment to
Buyer of such Transferred Asset (each, a "Delayed Transfer Asset") shall be
automatically deemed deferred and any such purported transfer or assignment
shall be null and void until such time as all legal impediments are removed
and/or Authorizations have been made or obtained; it being understood that no
adjustment to the Purchase Price will be made as a result of the failure to
transfer or assign any Delayed Transfer Asset.
(b) If the transfer or assignment of any Transferred Asset (other
than, at the Closing, a Transferred Asset Related to a Disputed MCE System)
intended to be transferred or assigned hereunder is not consummated prior to or
at the Closing as a result of the failure to obtain any Authorization, then
Seller or its Affiliate shall thereafter, directly or indirectly, hold such
Transferred Asset for the use and benefit of Buyer (at the expense of Buyer),
insofar as reasonably possible. In addition, to the extent not prohibited by
Law, Seller shall take or cause to be taken such other actions as may be
reasonably requested by Buyer in order to place Buyer, insofar as reasonably
possible, in the same position as if such Transferred Asset had been transferred
as contemplated hereby and so that all the benefits and burdens relating to such
Transferred Asset, including possession, use, risk of loss, potential for gain,
and dominion, control and command over such Transferred Asset, are to inure from
and after the Closing to Buyer. To the extent permitted by Law and to the extent
otherwise permissible in light of any required Authorization, Buyer shall be
entitled to, and shall be responsible for, the management of any Transferred
Assets not yet transferred to it as a result of this Section 2.11 and the
parties hereto agree to use commercially reasonable efforts to cooperate and
coordinate with respect thereto.
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(c) If and when the Authorizations, the absence of which caused the
deferral of transfer of any Transferred Asset pursuant to this Section 2.11, are
obtained, the transfer of the applicable Transferred Asset to Buyer shall
automatically and without further action be effected in accordance with the
terms of this Agreement and the applicable Ancillary Agreements.
(d) Prior to the Closing Date, Seller shall deliver to Buyer a list
identifying, in reasonable detail and to the Knowledge of Seller, the Delayed
Transfer Assets and the Authorizations required therefor.
(e) The parties hereto further agree that, assuming as set forth in
Section 2.11(b) that all or substantially all of the benefits and burdens
relating to the Transferred Assets inure to Buyer, (i) any Delayed Transferred
Assets referred to in this Section 2.11(e) shall be treated for all income Tax
purposes as Assets of Buyer and (ii) neither Buyer nor Seller shall take, and
each of Buyer and Seller shall prevent any of their respective Affiliates from
taking, any position inconsistent with such treatment for any income Tax
purposes (unless required by a change in applicable income Tax Law or a good
faith resolution of a contest).
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller represents and warrants to Buyer that, except as set forth on
the Seller Disclosure Schedule, as of the date hereof and as of the Closing:
Section 3.1 Organization and Qualification. Seller is a corporation
duly organized, validly existing and in good standing under the laws of Delaware
and has all requisite corporate power and authority to own, lease and operate
its Assets, and to carry on each Specified Business as currently conducted.
Seller is duly qualified to do business and is in good standing as a foreign
corporation in each jurisdiction where the ownership or operation of the
Transferred Assets or the conduct of each Specified Business requires such
qualification, except for failures to be so qualified or in good standing, as
the case may be, that would not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect. Prior to the date hereof, Seller has
made available to Buyer a true and complete copy of Seller's certificate of
incorporation and bylaws, each as amended and in effect as of the date hereof.
Section 3.2 Subsidiaries and Transferred Investments.
(a) Schedule 3.2(a) of the Seller Disclosure Schedule sets forth a
true and complete list of each Asset Transferring Subsidiary, together with its
jurisdiction of organization. The Asset Transferring Subsidiaries are the only
Subsidiaries of Seller that have any right, title or other interest in or to the
Assets of Seller and its Affiliates that are Related to the Acquired Business.
Except for the Non-Debtor Subsidiaries, all of the Asset Transferring
Subsidiaries and Intermediate Subsidiaries are Debtors. Each Asset Transferring
Subsidiary and each Intermediate Subsidiary is duly organized, validly
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existing, and in good standing under the laws of its jurisdiction of
organization and, in the case of the Asset Transferring Subsidiaries, has all
requisite corporate or similar power and authority to own, lease and operate its
Assets and to carry on its portion of each Specified Business as currently
conducted, except for failures to be in good standing that would not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect. Each Asset Transferring Subsidiary and each Intermediate
Subsidiary is duly qualified to do business and is in good standing as a foreign
corporation or other entity in each jurisdiction where the ownership or
operation of its Assets or the conduct of its business requires such
qualification, except for failures to be so duly organized, validly existing,
qualified or in good standing that would not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect. Except to the extent
of any Claims that will be discharged (or the functional equivalent thereof in
terms of its effect on Buyer, each Specified Business, the Transferred Assets
and the Assumed Liabilities) pursuant to the Discharge (or, as applicable, the
MCE Discharge or an Additional Discharge), (i) Seller owns, directly or
indirectly, through one or more other Subsidiaries (each such Subsidiary that is
not also an Asset Transferring Subsidiary is referred to herein as an
"Intermediate Subsidiary"), all right, title and interest in and to all of the
outstanding Equity Securities of the Asset Transferring Subsidiaries and (ii)
all of the outstanding Equity Securities of the Asset Transferring Subsidiaries
and Intermediate Subsidiaries have been duly authorized, and are validly issued,
fully paid and non-assessable. Except to the extent of any Claims that will be
discharged (or the functional equivalent thereof in terms of its effect on
Buyer, each Specified Business, the Transferred Assets and the Assumed
Liabilities) pursuant to the Discharge (or, as applicable, the MCE Discharge or
an Additional Discharge), Seller has, directly or indirectly, good and valid
title to the Equity Securities of each Asset Transferring Subsidiary and each
Intermediate Subsidiary, free and clear of all Encumbrances, other than
Permitted Encumbrances.
(b) Schedule 3.2(b) of the Seller Disclosure Schedule sets forth a
true and complete list of each Investment Entity, the Equity Securities of
Seller and its Affiliates in each Investment Entity and, to the Knowledge of
Seller, with respect to those Investment Entities identified on Schedule
3.2(b)(i) of the Seller Disclosure Schedule, the jurisdiction of organization
and authorized and outstanding Equity Securities of such Investment Entities.
Seller has provided or made available to Buyer true and complete copies of the
Investment Documents. Except to the extent of any Claims that will be discharged
(or the functional equivalent thereof in terms of its effect on Buyer, each
Specified Business, the Transferred Assets and the Assumed Liabilities) pursuant
to the Discharge (or, as applicable, the MCE Discharge or an Additional
Discharge), the outstanding Equity Securities held by Seller or any of its
Affiliates in respect of each Transferred Investment identified on Schedule
3.2(b)(i) of the Seller Disclosure Schedule and, to the Knowledge of Seller, in
respect of any other Investment Entities, have been duly authorized, and are
validly issued, fully paid and non-assessable.
(c) Except to the extent of any Claims that will be discharged (or
the functional equivalent thereof in terms of its effect on Buyer, each
Specified Business, the Transferred Assets and the Assumed Liabilities) pursuant
to the Discharge (or, as applicable, the MCE Discharge or an Additional
Discharge), Seller has good and valid title to the
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Transferred Investments, free and clear of all Encumbrances, other than as set
forth in any Investment Document, and upon delivery by Seller and/or any of its
Affiliates of the Transferred Investments at Closing, good and valid title to
the Transferred Investments, free and clear of all Encumbrances, other than as
set forth in any Investment Document and those resulting from Buyer's ownership,
will pass to Buyer. Except for the Transferred Investments, none of Seller or
any of its Affiliates owns, directly or indirectly, any Equity Securities of any
Person (other than a Subsidiary of Seller) or has any direct or indirect equity
or ownership interest in any business (other than any business operated by a
Subsidiary of Seller), or is a member of or participant in any partnership,
joint venture or similar Person (other than a Subsidiary of Seller) that is
Related to the Acquired Business or the Friendco Business.
Section 3.3 Corporate Authorization.
(a) Seller has, with respect to Section 5.10 and Article VIII, full
corporate power and authority to execute and deliver this Agreement, and to
perform its obligations hereunder. The execution, delivery and performance by
Seller of this Agreement, with respect to Section 5.10 and Article VIII, have
been duly and validly authorized and no additional corporate, shareholder or
similar authorization or consent is required in connection with the execution,
delivery and performance by Seller of this Agreement.
(b) Without limiting Section 3.3(a), subject to the entry of the
Confirmation Order and its effectiveness at the Closing, (i) Seller has full
corporate power and authority to execute and deliver this Agreement and each of
the Ancillary Agreements to which it is a party, and to perform its obligations
hereunder and thereunder and (ii) the execution, delivery and performance by
Seller of this Agreement and each of the Ancillary Agreements to which it is a
party have been duly and validly authorized and no additional corporate,
shareholder or similar authorization or consent is required in connection with
the execution, delivery and performance by Seller of this Agreement or any of
the Ancillary Agreements to which it is a party.
(c) Each Affiliate of Seller has or prior to the Closing will have,
subject to the entry of the Confirmation Order and its effectiveness at the
Closing, full corporate, partnership or similar power and authority to execute
and deliver each Ancillary Agreement or Closing document to which it is (or will
be) a party and to perform its obligations thereunder. Subject to the entry of
the Confirmation Order, the execution, delivery and performance by each
Affiliate of Seller of each Ancillary Agreement or Closing document to which it
is (or will be) a party has been or prior to the Closing will have been duly and
validly authorized, and no additional corporate authorization or consent is or
will be required in connection with the execution, delivery and performance by
any Affiliate of Seller of the Ancillary Agreements or Closing documents to
which such Affiliate is (or will be) a party or signatory.
(d) At a meeting duly called and held, the Board and the board of
directors (or similar governing body) of each Asset Transferring Subsidiary
(other than the Tele-Media Entities (without limiting Section 5.6(h))) has by
the requisite vote
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(i) determined that this Agreement and the Transaction are in the best interests
of Seller, such Asset Transferring Subsidiaries and their respective
stakeholders, (ii) approved and adopted this Agreement and (iii) resolved to
cause each Asset Transferring Subsidiary to perform its obligations under the
Ancillary Agreements to which it is (or will be) a party.
Section 3.4 Consents and Approvals. No consent, approval, waiver,
authorization, notice or filing is required to be obtained by Seller or any of
its Affiliates from, or to be given by Seller or any of its Affiliates to, or
made by Seller or any of its Affiliates with, any Person (and assuming solely
for this purpose that all Contracts Related to the Acquired Business shall
constitute Assigned Contracts but, for purposes of Section 6.2(a) only,
excluding any Contract that is not an Assigned Contract if the consent,
approval, waiver, authorization, notice or filing is required only to the extent
such Contract would have been an Assigned Contract), in connection with (a) the
execution, delivery and performance by Seller or any of its Affiliates of
Section 5.10 and Article VIII and (b) other than the entry by the Bankruptcy
Court of the Confirmation Order (or the entry of an order pursuant to section
365(f) of the Bankruptcy Code authorizing the assumption and, if applicable,
assignment of Assigned Contracts), the execution, delivery and performance by
Seller or any of its Affiliates of the remainder of this Agreement and the
Ancillary Agreements to which it is (or will be) a party, other than, in the
case of this clause (b) only, the consents, approvals, waivers, authorizations,
notices or filings the failure of which to obtain or make would not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect.
Section 3.5 Non-Contravention. The execution, delivery and
performance by Seller and its Affiliates of this Agreement and the Ancillary
Agreements to which they are a party, and the consummation of the transactions
contemplated hereby and thereby (and assuming solely for this purpose that all
Contracts Related to the Acquired Business shall constitute Assigned Contracts
but, for purposes of Section 6.2(a) only, excluding any Contract that is not an
Assigned Contract), do not and will not (a) violate any provision of the
articles of incorporation, bylaws or other organizational documents of Seller or
any of its Affiliates, (b) assuming (i) the entry of the Confirmation Order (or
the entry of an order pursuant to section 365(f) of the Bankruptcy Code
authorizing the assumption and, if applicable, assignment of Assigned
Contracts), and (ii) the receipt of all consents, approvals, waivers and
authorizations and the making of the notices and filings set forth on Schedule
3.4 of the Seller Disclosure Schedule with respect to any Person which is not a
Government Entity or Self-Regulatory Organization (which assumption shall not
apply to Section 5.10 and Article VIII), conflict with, or result in the breach
of, or constitute a default under, or result in the termination, cancellation,
modification or acceleration of any right or obligation of Seller or any of its
Affiliates under, or result in a loss of any benefit to which Seller or any of
its Affiliates is entitled under, any Contract, or result in the creation of any
Encumbrance upon any of the Transferred Assets or give rise to any Purchase
Right, in each case, whether after the filing of notice or the lapse of time or
both, or (c) assuming the entry of the Confirmation Order and the receipt of all
consents, approvals, waivers and authorizations and the making of notices and
filings set forth on Schedule 3.4 of the Seller Disclosure Schedule with respect
to Government Entities or Self-Regulatory Organizations or required to be made
or obtained by Buyer (which assumption shall not apply to
61
Section 5.10 and Article VIII), violate or result in a breach of or constitute a
default under any Law to which Seller or any of its Affiliates is subject, or
under any Governmental Authorization, except for (which exception shall not
apply to Section 5.10 and Article VIII), in the cases of clauses (b) and (c),
conflicts, breaches, terminations, defaults, cancellations, accelerations,
losses, violations, Encumbrances or Purchase Rights that would not, individually
or in the aggregate, reasonably be expected to have a Material Adverse Effect.
Section 3.6 Binding Effect. Subject to the Bankruptcy Court's entry
of the Confirmation Order and its effectiveness at the Closing, this Agreement
and each of the Ancillary Agreements dated the date hereof is, and each other
Ancillary Agreement will constitute, when executed and delivered by Seller and
each Affiliate of Seller party to such agreements and by Buyer and the other
parties thereto, a valid and legally binding obligation of Seller and each
Affiliate of Seller party to such agreements, enforceable against Seller and
each such Affiliate in accordance with their respective terms. Notwithstanding
the foregoing, Section 5.10 and Article VIII constitute valid and legally
binding obligations of Seller, enforceable against Seller in accordance with
their respective terms. Upon the Bankruptcy Court's entry of the Confirmation
Order and subject to its effectiveness at the Closing, each of the unexecuted
Ancillary Agreements to be entered into on or prior to the Closing Date, when
executed and delivered by Seller and each Affiliate of Seller party to such
agreements and by Buyer and the other parties thereto, will constitute a valid
and legally binding obligation of Seller and each Affiliate of Seller party to
such agreements, enforceable against Seller and each such Affiliate in
accordance with its terms.
Section 3.7 Financial Statements.
(a) Set forth on Schedule 3.7(a) of the Seller Disclosure Schedule
is a copy of (i) the consolidated audited balance sheets and audited statements
of income, stockholders' equity and cash flows for Seller and its Affiliates for
the fiscal years ended December 31, 2001, December 31, 2002, and December 31,
2003 (the "Audited Financial Statements"), (ii) the unaudited balance sheet and
unaudited statements of income, stockholders' equity and cash flows of each
Specified Business, but including the Excluded Assets and the Excluded
Liabilities to the extent Related to such Specified Business, at and for the
fiscal year ended December 31, 2003 (but not including, except with respect to
the unaudited statements of income, Unallocated Shared Assets and Liabilities),
in each case derived from the Audited Financial Statements for the corresponding
time period (the "Derivative 2003 Financial Statements"), (iii) the unaudited
balance sheet and unaudited statements of income, stockholders' equity and cash
flows for each Specified Business, but including the Excluded Assets and the
Excluded Liabilities Related to such Specified Business, at and for the fiscal
year ended December 31, 2004 (but not including, except with respect to the
unaudited statements of income, Unallocated Shared Assets and Liabilities) (the
"Derivative 2004 Financial Statements") and (iv) the unaudited balance sheet and
unaudited statements of income, stockholders' equity and cash flows for the
Unallocated Shared Assets and Liabilities at and for the fiscal year ended
December 31, 2004 (the "Derivative Unallocated 2004 Financial Statements"). The
Audited Financial Statements have been prepared from the
62
books and records of Seller and its Affiliates in accordance with GAAP
consistently applied (except as may be indicated in the notes thereto), and
fairly present, in all material respects, the financial condition and results of
operations, stockholders' equity and cash flows of Seller and its Affiliates
(assuming the exclusion of the MCE Systems and the MCE Systems (as defined in
the Friendco Purchase Agreement) from the Business) as of the dates thereof or
for the periods then ended. The Derivative 2003 Financial Statements and the
Derivative 2004 Financial Statements have been specially prepared from the books
and records of Seller and its Affiliates in accordance with GAAP consistently
applied (except as may be indicated in the notes thereto) and fairly present, in
all material respects, the financial condition and results of operations,
stockholders' equity and cash flows of each such Specified Business (including
the MCE Systems) as of the dates thereof or for the periods then ended, subject
to the absence of footnotes and similar presentation items therein and excluding
the Unallocated Shared Assets and Liabilities (other than the related revenues
and expenses). The Derivative Unallocated 2004 Financial Statements have been
specially prepared from the books and records of Seller and its Affiliates in
accordance with GAAP consistently applied (except as may be indicated in the
notes thereto) and fairly present, in all material respects, the Unallocated
Shared Assets and Liabilities as of December 31, 2004 or for the period ended
thereon.
(b) The Chief Executive Officer and the Chief Financial Officer of
Seller and any Significant Subsidiary of Seller have disclosed, based on their
most recent evaluation, to Seller's auditors and the audit committee of the
Board (i) all significant deficiencies in the design or operation of internal
controls that could adversely affect Seller's or any of Seller's Affiliates'
ability to record, process, summarize and report financial data and have
identified for Seller's auditors any material weaknesses in internal controls
and (ii) any fraud, whether or not material, that involves management or other
employees who have a significant role in Seller's or any of Seller's
Subsidiaries' internal controls. Copies of all disclosures described in the
foregoing sentence have been made available to Buyer. Seller and its
consolidated Subsidiaries have established and maintain disclosure controls and
procedures (as such term is defined in Rule 13a-15(e) under the Exchange Act);
such disclosure controls and procedures are designed to ensure that material
information relating to Seller, including its consolidated Subsidiaries, is made
known to Seller's Chief Executive Officer and its Chief Financial Officer by
others within those entities; and such disclosure controls and procedures are
effective in alerting Seller's Chief Executive Officer and its Chief Financial
Officer to material information of the nature required to be disclosed in
periodic reports pursuant to the Exchange Act in a timely fashion.
(c) The financial statements prepared by Seller and delivered to
Buyer pursuant to Section 5.11(a) shall, when so delivered, be prepared from the
books and records of Seller and its Affiliates in accordance with GAAP
consistently applied (except as may be indicated in the notes thereto), and
fairly present, in all material respects, the financial condition and results of
operations, stockholders' equity and cash flows of each Specified Business as of
the dates thereof or the period then ended, subject to, in the case of interim
financial statements, normal year-end adjustments and the absence of footnotes
and similar presentation items therein.
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(d) The Additional Financial Statements prepared by Seller and
delivered to Buyer pursuant to Section 5.11(b) shall, when so delivered, be
prepared from the books and records of Seller and its Affiliates in accordance
with GAAP consistently applied (except as may be indicated in the notes
thereto), and will fairly present, in all material respects, the financial
condition and results of operations, stockholders' equity and cash flows of (i)
in the case of the Seller Audited Financial Statements, Seller and its
Affiliates (assuming, with respect to any period prior to January 1, 2004, the
exclusion of the MCE Systems and the MCE Systems (as defined in the Friendco
Purchase Agreement) from the Business), (ii) in the case of the Derivative
Audited Financial Statements, each such Specified Business (assuming, with
respect to any period prior to January 1, 2004, the exclusion of the MCE Systems
and the MCE Systems (as defined in the Friendco Purchase Agreement) from such
Specified Business) and (iii) in the case of the MCE Financial Statements, the
MCE Systems, in each case as of the dates thereof or for the periods then ended,
subject, solely in the case of the MCE Financial Statements, to the absence of
footnotes and similar presentation items therein.
Section 3.8 Litigation and Claims.
(a) Except (i) to the extent of any Claims that will be discharged
(or the functional equivalent thereof in terms of its effect on Buyer, each
Specified Business, the Transferred Assets and the Assumed Liabilities) pursuant
to the Discharge (or, as applicable, the MCE Discharge or an Additional
Discharge) and, to the Knowledge of Seller, not arising from actions, omissions
or circumstances continuing as of the Closing and affecting or otherwise
relating to Seller or any of its Affiliates, the Transferred Assets or any
Specified Business and (ii) for the SEC/DOJ Matters and the pendency of the
Reorganization Case, there are no civil, criminal or administrative actions,
suits, demands, claims, hearings, proceedings or investigations pending against,
or, to the Knowledge of Seller, threatened against or affecting, or otherwise
relating to Seller or any of its Affiliates, the Transferred Assets, any
Specified Business or the Transaction, other than those that would not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect.
(b) Except (i) to the extent of any Claims that will be discharged
(or the functional equivalent thereof in terms of its effect on Buyer, each
Specified Business, the Transferred Assets and the Assumed Liabilities) pursuant
to the Discharge (or, as applicable, the MCE Discharge or an Additional
Discharge) and, to the Knowledge of Seller, not arising from actions, omissions
or circumstances continuing as of the Closing and affecting or otherwise
relating to Seller or any of its Affiliates, the Transferred Assets or any
Specified Business and (ii) for the SEC/DOJ Matters and the pendency of the
Reorganization Case, none of Seller, any of its Affiliates or any of the
Transferred Assets is subject to any order, writ, judgment, award, injunction or
decree of any court or governmental or regulatory authority of competent
jurisdiction or any arbitrator or arbitrators, other than those that would not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect.
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Section 3.9 Taxes.
(a) All material Tax Returns with respect to each Specified Business
or any Transferred Assets that are required to be filed have been filed (or
extensions have been duly obtained) and all amounts shown to be due and owing or
to be withheld thereon have been duly and timely paid or withheld as the case
may be (except for the period prior to the commencement of the Reorganization
Case, that may not be paid except pursuant to a Plan); provided, that, solely
for purposes of Section 6.2(a), this Section 3.9(a) shall be qualified by the
Knowledge of Seller.
(b) There is no material lien for Taxes upon any of the Transferred
Assets nor is any taxing authority in the process of imposing, or has threatened
to impose, any material lien for Taxes on any of the Transferred Assets, other
than liens for Taxes that are not yet due and payable or for Taxes the validity
or amount of which is being contested by Seller or one of its Affiliates in good
faith by appropriate action and for which appropriate provision has been made in
accordance with GAAP; provided, that, solely for purposes of Section 6.2(a),
this Section 3.9(b) shall be qualified by the Knowledge of Seller.
(c) Seller and its Affiliates have each withheld from their
respective employees, independent contractors, creditors, stockholders and third
parties and timely paid to the appropriate taxing authority proper and accurate
amounts in all material respects for all taxable periods, or portions thereof,
ending on or before the Closing Date in compliance with all Tax withholding and
remitting provisions of applicable laws and have each complied in all material
respects with all withholding Tax information reporting provisions of all
applicable Laws; provided, that, solely for purposes of Section 6.2(a), this
Section 3.9(c) shall be qualified by the Knowledge of Seller.
(d) None of the Transferred Assets: (i) is property required to be
treated as being owned by another Person pursuant to the provisions of Section
168(f)(8) of the Internal Revenue Code of 1954, as amended and in effect
immediately prior to the enactment of the Tax Reform Act of 1986, (ii)
constitutes "tax-exempt use property" within the meaning of Section 168(h)(1) of
the Code or (iii) is "tax-exempt bond financed property" within the meaning of
Section 168(g)(5) of the Code.
Section 3.10 Employee Benefits.
(a) All benefit and compensation plans, programs, contracts,
policies, agreements or arrangements, including any trusts (including any trusts
required in the future as a result of the Transaction or otherwise), trust
instruments, funding arrangements or insurance contracts, any "employee benefit
plans" within the meaning of Section 3(3) of ERISA, including any multiemployer
pension plans within the meaning of Section 3(37) of ERISA (each, a
"Multiemployer Plan"), any pension, profit-sharing, savings, retirement,
deferred compensation, stock option, stock purchase, stock appreciation rights,
stock based, incentive, bonus, workers' compensation, short term disability,
sick leave, group insurance, hospitalization, medical, dental, life, cafeteria
or flexible spending, vacation, continuity, sale bonus, retention, fringe
benefit, employee
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loan and severance plans and all employment, collective bargaining, consulting,
severance and change in control agreements, plans, policies, programs or
arrangements whether formal or informal, written or oral, and all amendments
thereto, under which (i) any Employee, director or consultant of Seller or any
of its Affiliates has any present or future right to benefits and which are
contributed to, sponsored by or maintained by Seller or any of its Affiliates,
or (ii) Seller or any of its ERISA Affiliates has any present or future
liability (whether contingent or otherwise) (the "Benefit Plans"), are listed on
Schedule 3.10(a) of the Seller Disclosure Schedule. Each Benefit Plan which is
intended to be qualified under Section 401(a) of the Code has received a
favorable determination letter from the Internal Revenue Service National Office
and has been separately identified. Seller has provided or made available to
Buyer true and complete copies of all Benefit Plans (or with respect to any
individual employment agreements shall provide such agreements to Buyer no later
than fourteen Business Days following the date hereof) and, with respect to each
Benefit Plan, to the extent applicable, all related service agreements,
summaries, summary plan descriptions, actuarial reports, the most recently filed
Forms 5500 and the most recent determination letters.
(b) All Benefit Plans, other than Multiemployer Plans, have been
established, maintained and administered in substantial compliance with all
applicable Laws, including ERISA and the Code. Neither Seller nor any of its
Affiliates has engaged in a transaction with respect to any Benefit Plan that is
subject to ERISA that could subject Seller to a tax or penalty imposed by either
Section 4975 of the Code or Section 502(i) of ERISA. No actions, suits, claims,
litigation, audits, investigations, administrative proceedings or disputes are
pending, or, to Seller's Knowledge threatened, with respect to (i) any Benefit
Plan that would be material to any Specified Business or (ii) any Seller stock
fund or trust in any Benefit Plan, and, to Seller's Knowledge, no facts or
circumstances exist that could give rise to any such actions, suits, claims,
litigation, audits, investigations, administrative proceedings or disputes.
(c) Neither Seller nor any other entity which, together with Seller,
would be treated as a single employer under Section 4001 of ERISA or Section 414
of the Code (an "ERISA Affiliate") contributes to or has in the past six years
sponsored, maintained or contributed to any defined benefit pension plan (as
defined in Section 3(35) of ERISA) or is subject to Section 412 of the Code or
Section 302 of ERISA.
(d) Neither Seller nor any of its ERISA Affiliates has, within the
six years preceding the date of this Agreement, or expects to incur any
obligation to contribute to, or any withdrawal liability under Subtitle E of
Title IV of ERISA with respect to, a Multiemployer Plan (whether based on
contributions of Seller or an ERISA Affiliate) nor do Seller or any of its ERISA
Affiliates have any Liabilities under any such plan that remain unsatisfied.
(e) There has been no amendment to, or announcement by Seller or any
of its Affiliates (whether or not written) in respect of the Employees relating
to any Benefit Plan which would increase materially the expense of maintaining
such Benefit
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Plan above the level of the expense incurred therefor for the most recent fiscal
year, except as would not directly or indirectly adversely affect Buyer or
Parent.
(f) Neither Seller nor any of its Affiliates has incurred any
current or projected liability in respect of post-employment or post-retirement
health, medical or life insurance benefits for current, former or retired
employees of Seller or any of its Affiliates, except as required to avoid an
excise tax under Section 4980B of the Code or otherwise, or as may be required
pursuant to any other applicable Law.
(g) No Benefit Plan is a split-dollar life insurance program or
otherwise provides for loans to executive officers (within the meaning of the
SOA).
(h) As of the date hereof with respect to those Employees listed on
Schedule 5.8(a)(ii) of the Seller Disclosure Schedule and as of the date hereof
and as of the Closing Date with respect to all other Employees, no Benefit Plan
exists that, as a result of the execution of this Agreement or the Transaction
(whether alone or in connection with any subsequent event(s)), will (i) entitle
any Employee, director or consultant of Seller or any of its Affiliates to
severance pay or any increase in severance pay upon any termination of
employment after the date of this Agreement, (ii) accelerate the time of payment
or vesting or result in any payment or funding (through a grantor trust or
otherwise) of compensation or benefits under, increase the amount payable or
result in any other material obligation pursuant to, any of the Benefit Plans,
(iii) limit or restrict the right of Seller or any of its Affiliates to merge,
amend or terminate any of the Benefit Plans or (iv) result in payments under any
of the Benefit Plans which would subject any recipient of the payments to excise
taxes under Section 4999 of the Code.
(i) To the extent that, after the Closing, Parent operates each
Specified Business in the same manner operated by Seller and its Affiliates
during the six-month period prior to the Closing, Parent will not incur any
Liability under WARN or any other applicable Law other than on account of any
action or inaction taken by Parent or Buyer following the Closing Date relating
to plant closings or employee separations or severance pay.
(j) Neither Seller nor any of its Affiliates has any material
Liability with respect to any misclassification of any person as an independent
contractor rather than as an employee, or with respect to any employee leased
from another employer, except as would not directly or indirectly adversely
affect Buyer or Parent.
Section 3.11 Compliance with Laws. Each Specified Business and all
of the Transferred Assets have since July 1, 2003 and currently are being
conducted, held and operated in compliance with all applicable Laws and
Governmental Authorizations, including the Communications Act, the Cable
Communications Policy Act of 1984, the Cable Television Consumer Protection and
Competition Act of 1992, the Telecommunications Act of 1996, the Copyright Act
of 1976 and all rules and regulations of the FCC and the United States Copyright
Office, except for failures to comply that would not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect. Since July
1, 2003 and, to the Knowledge of Seller, and except to the
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extent of any Claims that will be discharged (or the functional equivalent
thereof in terms of its effect on Buyer, each Specified Business, the
Transferred Assets and the Assumed Liabilities) pursuant to the Discharge (or,
as applicable, the MCE Discharge or an Additional Discharge), prior to July 1,
2003, neither Seller nor any of its Affiliates has received any notice alleging
any violation by Seller or any of its Affiliates under any applicable Law for a
violation, except for violations that would not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect. Except as
would not, individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect, each Specified Business has all Governmental
Authorizations necessary for the conduct of such Specified Business as currently
conducted and such Governmental Authorizations are in full force and effect.
Nothing in this representation is intended to address any compliance matter that
is specifically addressed by Sections 3.10 (Employee Benefits), 3.12
(Environmental Matters), 3.14 (Labor) and 3.17 (Franchises). Schedule 3.11 of
the Seller Disclosure Schedule sets forth, with respect to each Specified
Business, each Governmental Authorization issued by the FCC, each Governmental
Authorization for the provision of telephony services and each other material
Governmental Authorization, in each case Related to such Specified Business.
Section 3.12 Environmental Matters.
(a) Each Specified Business, the Owned Real Property and the
Transferred Assets are in compliance in all material respects with all
applicable Environmental Laws and Environmental Permits and there are no
material Liabilities under any Environmental Law with respect to any Specified
Business, the Owned Real Property or the Transferred Assets.
(b) As of the date hereof, none of Seller or any of its Affiliates
(nor, to Seller's Knowledge, any predecessor in interest) has received from any
Person any notice, demand, claim, letter, citation, summons, order or request
for information, relating to any material violation or alleged violation of, or
any material Liability under, any Environmental Law in connection with or
affecting any Specified Business, the Owned Real Property or the Transferred
Assets.
(c) There are no material complaints filed, penalties assessed,
writs, injunctions, decrees, orders or judgments outstanding, or any material
actions, suits, proceedings or investigations pending or, to Seller's Knowledge,
threatened, relating to compliance with or Liability under any Environmental Law
affecting any Specified Business, the Owned Real Property or the Transferred
Assets.
(d) There are no underground storage tanks, asbestos-containing
materials, lead-based products or polychlorinated biphenyls on, at or under any
of the Owned Real Property or Transferred Assets other than in compliance in all
material respects with all Environmental Laws; provided, that, solely for
purposes of Section 6.2(a), this Section 3.12(d) shall be deemed to exclude any
such items of which Seller does not have Knowledge.
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(e) None of the Owned Real Property or the Transferred Assets nor
any property to which Hazardous Substances located on or resulting from the use
of any Owned Real Property or Transferred Assets have been transported, nor any
property to which Seller has, directly or indirectly, transported or arranged
for the transportation of any Hazardous Substances is listed or, to Seller's
Knowledge, proposed for listing on the National Priorities List promulgated
pursuant to CERCLA, or CERCLIS (as defined in CERCLA) or on any similar federal,
state, local or foreign list of sites requiring investigation or cleanup.
(f) All material Environmental Permits Related to any Specified
Business, the Owned Real Property or the Transferred Assets are valid, are in
full force and effect, are transferable and, except as would not, individually
or in the aggregate, reasonably be expected to be material, will not be
terminated or impaired or become terminable as a result of the transactions
contemplated hereby.
(g) As of the date hereof, there has been no material environmental
investigation, study, audit, test, review or other analysis conducted of which
Seller has Knowledge in relation to any Owned Real Property or the Transferred
Assets which has not been delivered to Buyer at least ten days prior to the date
hereof.
Section 3.13 Intellectual Property. Seller and its Affiliates own
the Transferred Intellectual Property free and clear of any material
Encumbrances other than Permitted Encumbrances. The Transferred Intellectual
Property that is Registered is subsisting and enforceable in all material
respects. None of the Transferred Intellectual Property or, to the Knowledge of
Seller, the Intellectual Property that is provided to Seller and its Affiliates
pursuant to the Transferred Intellectual Property Contracts, is subject to any
outstanding order, judgment or decree adversely affecting Seller's or its
Affiliates' use thereof or rights thereto as currently used by Seller and its
Affiliates in each Specified Business. Neither Specified Business and none of
the Transferred Assets infringes or has infringed or otherwise violates or has
violated any Person's Intellectual Property rights in any material respect. To
the Knowledge of Seller, no Person is infringing or otherwise violating any
Intellectual Property rights of Seller or its Affiliates in the Transferred
Intellectual Property or the Intellectual Property that is provided to Seller
and its Affiliates pursuant to the Transferred Intellectual Property Contracts,
other than violations that would not, individually or in the aggregate,
reasonably be likely to have a Material Adverse Effect. Immediately after the
Closing, Buyer or its designated Affiliate will own the Transferred Intellectual
Property and hold the Transferred Intellectual Property Contracts on terms and
conditions that are the same in all material respects as those in effect
immediately prior to the Closing, except to the extent that any of the
Transferred Intellectual Property is the subject of a license back to Friendco
or any of its Affiliates pursuant to Section 5.12 of the Friendco Purchase
Agreement. None of Seller, any of its Affiliates or any Specified Business has
infringed or otherwise violated the Intellectual Property rights of any Person
except as would not, individually or in the aggregate, reasonably be expected to
have a Material Adverse Effect.
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Section 3.14 Labor.
(a) Except for the Collective Bargaining Agreements, none of Seller
or any of its Affiliates is a party to or bound by any labor agreement, union
contract or collective bargaining agreement respecting any of the Employees, nor
are there any Employees represented by a collectively bargained unit or labor
organization who are not covered by a Collective Bargaining Agreement.
(b) Seller and its Affiliates are in compliance in all material
respects with all labor Laws applicable to any Specified Business and the
Employees, and are not engaged in any unfair labor practices, as defined in the
National Labor Relations Act or other Law applicable to Employees. There are no
outstanding unfair labor practice charges pending before the National Labor
Relations Board with respect to any Employee.
(c) There is no pending or, to the Knowledge of Seller, threatened
strike, shutdown, dispute, walkout or other work stoppage or any union
organizing effort by, or with respect to, any of the Employees.
Section 3.15 Contracts.
(a) Schedule 3.15(a) of the Seller Disclosure Schedule contains,
with respect to each Specified Business, Seller's good faith estimate, as of the
date hereof, of the number of Contracts (other than Programming Agreements,
Franchises and Governmental Authorizations) to which Seller or any of its
Affiliates or any of their respective Assets are party, bound or subject which
are executory and are Related to such Specified Business. Such list represents
Seller's good faith estimate of the number of such Contracts in each of the
categories set forth on Schedule 3.15(a) of the Seller Disclosure Schedule, and
indicates as to each category, the number of such Contracts that (i) were
entered into prior to the Petition Date, (ii) were entered into following the
Petition Date or (iii) Relate to any Specified Business and any other business
of Seller or its Affiliates, including any part of the Friendco Business.
(b) Except as set forth on Schedule 3.15(b) of the Seller Disclosure
Schedule, none of the Contracts of Seller or any of its Affiliates Related to a
Specified Business contains any of the following terms or provisions (each such
term or provision, a "Special Term"):
(i) consideration payable or receivable by Seller or any of
its Affiliates in excess of $100,000 in any twelve month period or in excess of
$1,000,000 over the remaining term;
(ii) limitations on the freedom of Seller or any of its
Affiliates to compete in any line of business, with any Person or in any
geographic area, and which would limit the freedom of Buyer or any of its
Affiliates to do so after the Closing Date if it were an Assigned Contract;
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(iii) so-called "most favored nation" provisions or any
similar provision requiring Seller or any of its Affiliates to offer a third
party terms or concessions at least as favorable as those offered to one or more
other parties, or which would require Buyer or any of its Affiliates to do so
after the Closing Date if it were an Assigned Contract;
(iv) any terms that do not reflect in all material respects
those that would be obtained in arm's length negotiations;
(v) any exclusivity provision or provision that requires the
purchase of all or a given portion of a party's requirements or any other
similar provision that would, in each case, bind Buyer or its Affiliates after
the Closing if it were an Assigned Contract;
(vi) any terms for the benefit of any members of the Rigas
family (except terms for the general benefit of holders of Equity Securities in
Seller or any of its Affiliates), Seller, any Managed Cable Entity or any of its
or their current or former Affiliates or associates (as defined in Rule 405
under the Securities Act), in each case that would continue to benefit any such
Person after the Closing if it were an Assigned Contract;
(vii) any provision relating to the use by third parties of
any of the Transferred Assets to provide telephone, Internet or data services
other than in Contracts with Subscribers of any such services and other than
under the Contracts listed on Schedule 3.15(b)(vii) of the Seller Disclosure
Schedule; or
(viii) with respect to any Contract entered into following the
entry of the Confirmation Order, any provision that directly or indirectly
restricts (or imposes a penalty or loss of benefit upon) the assignment or
transfer of the rights or obligations thereunder to Buyer, Friendco or their
Affiliates.
(c) Schedule 3.15(c) of the Seller Disclosure Schedule contains a
true and complete list, as of the date hereof, of all Contracts (other than
Equipment Leases and Programming Agreements) to which Seller or any of its
Affiliates or any of their respective Assets are party, bound or subject that
Relate to more than one Specified Business or to both a Specified Business and
any part of the Friendco Business.
(d) Subject to the entry of the Confirmation Order, all Assigned
Contracts will be, when assumed by Seller and assigned to Buyer hereunder and
under the Confirmation Order, in full force and effect and will be enforceable
against each party thereto in accordance with the express terms thereof and any
violation, breach or event of default, or alleged violation, breach or event of
default, or event or condition that, after notice or lapse of time or both,
would constitute a violation, breach or event of default thereunder on the part
of Seller or any of its Affiliates existing prior to such assumption and
assignment will be fully discharged and Buyer shall have no responsibility
therefor except for any Assumed Cure Costs. To the Knowledge of Seller, no other
party to any Contract of Seller or any of its Affiliates is in default,
violation or breach of such
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Contract, and there are no disputes pending or threatened under any such
Contract other than those defaults, violations, breaches and disputes that would
not, individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect. In the last five years, none of Seller or any of its Affiliates
has made any material claim under any Contract pursuant to which any of the
Cable Systems were acquired.
Section 3.16 Cable System and Subscriber Information.
(a) Except for the Friendco Transferred Assets, none of Seller or
any of its Affiliates, directly or indirectly, owns any Systems other than the
Cable Systems listed on Schedule 3.16(a) of the Seller Disclosure Schedule.
(b) Except for the MCE Systems and the Friendco Transferred Assets,
none of Seller or any of its Affiliates, directly or indirectly, manages or
operates any Systems which it does not, directly or indirectly, wholly own.
(c) None of Seller or any of its Affiliates, directly or indirectly,
owns any Systems that it does not, directly or indirectly, manage and operate.
(d) Schedule 3.16(d) of the Seller Disclosure Schedule sets forth
the aggregate number of Basic Subscribers, Digital Subscribers and HSI
Subscribers of each Specified Business (detailed by Cable System) as of December
31, 2004. Each such aggregate number has been determined in accordance with the
Seller Subscriber Accounting Policy.
(e) Schedule 3.16(e) of the Seller Disclosure Schedule sets forth
Seller's policy with respect to calculating subscribers (the "Seller Subscriber
Accounting Policy").
(f) Schedule 3.16(f) of the Seller Disclosure Schedule sets forth
the average total revenue per Basic Subscriber of each Specified Business as of
December 31, 2004.
(g) Schedule 3.16(g) of the Seller Disclosure Schedule sets forth
the Basic Subscriber monthly churn rate for each Specified Business as of
December 31, 2004.
(h) Schedule 3.16(h) of the Seller Disclosure Schedule sets forth a
true and complete list of the Cost Centers comprising each Specified Business.
Section 3.17 Franchises.
(a) Schedule 3.17(a) of the Seller Disclosure Schedule sets forth
(i) a true and complete list of each Franchise operated by Seller or any of its
Affiliates, detailed by Specified Business, Cable System and Cost Center and
(ii) Seller's good faith estimate of the number of Basic Subscribers served by
each such Franchise as of December 31, 2004. Except as disclosed by Seller to
Buyer prior to the date of this Agreement, the Cable Systems are in compliance
with the applicable Franchises in all
72
material respects. There are no material ongoing or, to the Knowledge of Seller,
threatened audits or similar proceedings undertaken by Government Entities with
respect to the Franchises.
(b) Except as disclosed by Seller to Buyer prior to the date of this
Agreement, (i) each of the Franchises is in full force and effect in all
material respects, and a valid request for renewal has been duly and timely
filed under Section 626 of the Communications Act with the proper Government
Entity with respect to each of the Franchises that has expired or will expire
within 30 months after the date of this Agreement, (ii) notices of renewal have
been filed pursuant to the formal renewal procedures established by Section
626(a) of the Communications Act, (iii) there are no applications relating to
any Franchises pending before any Government Entity that are material to any
Specified Business, (iv) none of Seller or any of its Affiliates has received
notice from any Person that any Franchise will not be renewed or that the
applicable Government Entity has challenged or raised any material objection to
or, as of the date hereof, otherwise questioned in any material respect, a
Seller's request for any such renewal under Section 626 of the Communications
Act, and Seller and its Affiliates have duly and timely complied in all material
respects with any and all inquiries and demands by any and all Government
Entities made with respect to Seller's or such Affiliates' requests for any such
renewal, (v) none of Seller, any of its Affiliates or any Government Entity has
commenced or requested the commencement of an administrative proceeding
concerning the renewal of a material Franchise as provided in Section 626(c)(1)
of the Communications Act, and (vi) to the Knowledge of Seller, there exist no
facts or circumstances that make it likely that any material Franchise shall not
be renewed or extended on commercially reasonable terms.
(c) With respect to the Franchises, none of Seller or any of its
Affiliates has made any material commitment to any Government Entity except (i)
as set forth in the Contracts listed on Schedule 3.17(c)(i) of the Seller
Disclosure Schedule, true and complete copies of which have been made available
to Buyer prior to March 31, 2005, and (ii) such other Franchise commitments that
(A) are commercially reasonable given the relevant Franchise and locality and
(B) do not contain unfulfilled commitments except (1) those commitments
reflected in the Budget or the Derivative 2004 Financial Statements (provided,
that any commitment so reflected only in part will be deemed to be covered by
this exception only to the extent so reflected) and (2) those commitments that
are not material relative to Seller's operations or financial performance in the
applicable Franchise area.
(d) Set forth on Schedule 3.17(d) of the Seller Disclosure Schedule
is a list of each Franchise subject to a Purchase Right and except as set forth
on such Schedule no such Purchase Right provides for purchase thereunder at a
price less than fair market value or a third party offer price.
Section 3.18 Network Architecture. Schedule 3.18 of the Seller
Disclosure Schedule sets forth a true and complete statement (detailed by Cable
System) as of December 31, 2004 (or, in the case of clauses (c) and (f), as of
the date hereof), of (a) the approximate number of plant miles (aerial and
underground) for each headend
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located in each Specified Business, (b) the approximate bandwidth capability
expressed in MHz of each such headend, (c) the stations and signals carried by
each such headend and the channel position of each such signal and station, (d)
the approximate number of multiple dwelling units served by such Specified
Business, (e) the approximate number of homes passed in such Specified Business
as reflected in the system records of Seller or any of its Affiliates, (f) a
description of basic and optional or tier services available and the rates
charged for each such Specified Business, (g) the bandwidth capacity of each
Cable System in such Specified Business for each headend, and (h) the
municipalities served by each of the Cable Systems in such Specified Business
and the public service numbers of such municipalities.
Section 3.19 Absence of Changes. Since the date of the Most Recent
Balance Sheet, Seller and its Affiliates have conducted each Specified Business
only in the Ordinary Course, and each Specified Business has not experienced any
event, occurrence, condition or circumstance, and, to Seller's Knowledge, no
event, occurrence, condition or circumstance is threatened, other than those
that would not, individually or in the aggregate, reasonably be expected to have
a Material Adverse Effect.
Section 3.20 Assets.
(a) Other than the Excluded Assets, the right, title and interest of
Seller and its Affiliates in the Transferred Assets constitute all of the Assets
of Seller and its Affiliates owned or held by, used or intended for use, leased,
licensed, accrued, reserved, allocated or incurred in connection with the
conduct of any Specified Business in all material respects as currently
conducted and, immediately after the Closing, shall be sufficient for Buyer to
continue to operate and conduct such Specified Business in all material respects
as currently conducted. At the Closing (after giving effect to the Transaction),
Buyer or its designated Affiliate will have good and marketable title to (or in
the case of Transferred Assets that are leased, valid leasehold interests in)
the Transferred Assets free and clear of any Encumbrances, other than Permitted
Encumbrances (or in the case of the Transferred Investments, Encumbrances under
the Investment Documents), and those created by Buyer or its Affiliates.
(b) The Shared Assets and Liabilities are the only Assets and
Liabilities of Seller or any of its Affiliates that Relate to both of the
Specified Businesses or to any Specified Business and any other business of
Seller or its Affiliates, including any part of the Friendco Business.
(c) The Friendco Transferred Assets are the only Assets that are
Primarily Related to the Cable Systems being purchased by Friendco. None of the
Friendco Transferred Assets are Primarily Related to any Specified Business
except to the extent Buyer has otherwise so consented. Other than the Friendco
Transferred Assets, the Transferred Assets and the Excluded Assets, there are no
Assets of Seller or any of its Affiliates Related to the Business.
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(d) Schedule 3.20(d) of the Seller Disclosure Schedule sets forth a
true and complete list of all of the material Assets Related to each Specified
Business owned, held by, leased or licensed by any Subsidiary of Seller that is
not a Debtor.
(e) Other than the Tele-Media Entities, the Transferred Investments
and the wholly owned Subsidiaries of Seller and as set forth on Schedule 3.20(e)
of the Seller Disclosure Schedule, Seller and its Affiliates have no Equity
Security in any Person which holds Assets Primarily Related to the operations
and business conducted by the Cable Systems.
Section 3.21 Real Property.
(a) Schedule 3.21(a) of the Seller Disclosure Schedule sets forth a
complete and accurate list of all the Real Property Leases and Real Property
Subleases, in each case providing for annual payments in excess of $50,000.
Seller has delivered to Buyer true and complete copies of each of such Real
Property Leases and Real Property Subleases.
(b) Schedule 3.21(b) of the Seller Disclosure Schedule sets forth
the address and/or location and the general use within each Specified Business
of each Owned Real Property and each Leased Real Property listed on Schedule
3.21(a) of the Seller Disclosure Schedule.
(c) Subject to the entry of the Confirmation Order, all Transferred
Real Property Leases and Transferred Rights-of-Way, when assumed by Seller or
its Affiliates and assigned to Buyer or its Affiliates pursuant to this
Agreement and the Confirmation Order, will be in full force and effect and will
be enforceable against each party thereto in accordance with the express terms
thereof and will not require any consent of any Person or any payment thereunder
in respect of such assignment (unless such payment is made by Seller or any of
its Affiliates on or prior to the Closing) and any violation, breach or event of
default, or event or condition that, after notice or lapse of time or both (to
the extent required), would constitute a violation, breach or event of default
thereunder on the part of Seller or any of its Affiliates existing prior to such
assumption and assignment will be fully discharged and none of Buyer nor any of
its Affiliates shall have any responsibility therefor. To the Knowledge of
Seller, no other party to any Transferred Real Property Lease or Transferred
Right-of-Way is in default, violation or breach of such Transferred Real
Property Lease or Transferred Right-of-Way and there are no disputes pending or
threatened thereunder other than those defaults, violations, breaches and
disputes that would not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect. Neither the Transferred Owned Real
Property nor the Transferred Leased Real Property is subject to any material
Real Property Sublease.
(d) Seller has not received notice and has no Knowledge of any
pending, threatened or contemplated material condemnation proceeding affecting
the Transferred Owned Real Property or the Leased Real Property or any part
thereof, or of
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any sale or other disposition of the Transferred Owned Real Property or the
Leased Real Property or any part thereof in lieu of condemnation.
Section 3.22 Absence of Liabilities. Except to the extent of any
Claims that will be discharged (or the functional equivalent thereof in terms of
its effect on Buyer, each Specified Business, the Transferred Assets and the
Assumed Liabilities) pursuant to the Discharge (or, as applicable, the MCE
Discharge or an Additional Discharge), each Specified Business has no
Liabilities and there is no existing condition, situation or set of
circumstances that, individually or in the aggregate, would reasonably be
expected to result in a Liability of any Specified Business, other than (a)
Liabilities specifically reflected, reserved against or otherwise disclosed in
the Derivative 2004 Financial Statements or, only with respect to Liabilities
included in the Unallocated Shared Assets and Liabilities that become Assumed
Liabilities pursuant to Section 2.3, the Derivative Unallocated 2004 Financial
Statements, (b) Excluded Liabilities and (c) Liabilities that were incurred in
the Ordinary Course of Business since the date of the Derivative 2004 Financial
Statements and that would not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect.
Section 3.23 Insurance. Schedule 3.23 of the Seller Disclosure
Schedule lists all material insurance policies covering the properties, assets,
employees and operations of the Business (including policies providing property,
casualty, liability and workers' compensation coverage) (the "Insurance
Policies"). All of the Insurance Policies or renewals thereof are in full force
and effect in all material respects. With such exceptions as would not be
material, all premiums due in respect of the Insurance Policies have been paid
by Seller or its Affiliate and Seller and its Affiliates are otherwise in
compliance with the terms of such policies. Seller carries sufficient third
party insurance to insure in all material respects all reasonable insurable
risks of the Business. Following the Closing, the Insurance Policies shall
continue to provide coverage with respect to acts, omissions and events
occurring prior to the Closing in accordance with their terms as if the Closing
had not occurred. To the Knowledge of Seller, there has not been any threatened
termination of, material premium increase (other than with respect to customary
annual premium increases) with respect to, or material alteration of coverage
under, any Insurance Policy.
Section 3.24 Friendco Purchase Agreement. Seller has previously
delivered to Buyer a true and complete copy of the Friendco Purchase Agreement
as of the date hereof. Except for the Friendco Purchase Agreement and the JV
Documents and any Ancillary Agreements (each as defined in the Friendco Purchase
Agreement) to which Friendco or any of its Affiliates is party, Seller and/or
any of its Affiliates, on the one hand, and Friendco and/or any of its
Affiliates, on the other hand, are not party to any Contract related to the
Transaction or the Friendco Transaction.
Section 3.25 Transactions with Affiliates. Except for this
Agreement, the Ancillary Agreements to which it is a party and any Liability
arising under this Agreement or any such Ancillary Agreement, from and after the
Closing, none of Buyer or its respective Subsidiaries shall, as a result of the
Transaction, be bound by any
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Contract or any other arrangement of any kind whatsoever with, or have any
Liability to, Seller, any Managed Cable Entity or any of their respective
Affiliates.
Section 3.26 Finders' Fees. Except for UBS Securities LLC and Xxxxx
& Company LLC, whose fees will be paid by Seller, there is no investment banker,
broker, finder or other intermediary that has been retained by or is authorized
to act on behalf of Seller or any of its Affiliates who might be entitled to any
fee or commission in connection with the Transaction.
Section 3.27 No Other Representations or Warranties. Except for the
representations and warranties contained in this Article III, neither Seller nor
any other Person makes any other express or implied representation or warranty
on behalf of Seller.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to Seller that, except as set forth on
the Buyer Disclosure Schedule, as of the date hereof and as of the Closing:
Section 4.1 Organization and Qualification.
(a) Buyer is a limited liability company duly organized, validly
existing and in good standing under the laws of Delaware. Buyer has all
requisite limited liability company power and authority to own and operate its
Assets and to carry on its business as currently conducted. Buyer has made
available to Seller a true and complete copy of Buyer's limited liability
company agreement, as amended and in effect as of the date hereof.
(b) Parent is a corporation duly organized, validly existing and in
good standing under the laws of Delaware. Parent has all requisite corporate
power and authority to own and operate its Assets and to carry on its business
as currently conducted. Buyer has made available to Seller a true and complete
copy of Parent's certificate of incorporation and bylaws, each as amended and in
effect as of the date hereof.
Section 4.2 Subsidiaries.
(a) Schedule 4.2(a) of the Buyer Disclosure Schedule sets forth a
true and complete list of each Significant Subsidiary of Parent and each other
Subsidiary of Parent that is not directly or indirectly wholly owned by Parent
or its Significant Subsidiaries, together with its jurisdiction of organization
and its authorized and outstanding Equity Securities as of the date hereof. Each
Subsidiary of Parent is duly organized, validly existing, and in good standing
under the laws of its jurisdiction of organization and has all requisite
corporate or similar power and authority to own, lease and operate its Assets
and to carry on its portion of the Parent Business as currently conducted and is
duly qualified to do business and is in good standing as a foreign corporation
or other entity in each jurisdiction where the ownership or operation of its
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Assets or the conduct of its business requires such qualification, except for
failures to be so duly organized, validly existing, qualified or in good
standing that would not, individually or in the aggregate, reasonably be
expected to have a Parent Material Adverse Effect. Buyer has provided or made
available to Seller true and complete copies of the certificate of incorporation
and bylaws (or similar organizational documents) of each of the Significant
Subsidiaries of Parent as in effect as of the date hereof. As of the date
hereof, Parent owns, directly or indirectly, through one or more of its other
Subsidiaries, all right, title and interest in and to all outstanding Equity
Securities of the Subsidiaries indicated as owned by it on Schedule 4.2(a) of
the Buyer Disclosure Schedule. All of the outstanding Equity Securities of the
Subsidiaries of Parent have been duly authorized, and are validly issued, fully
paid and non-assessable.
(b) As of the date hereof and except in respect of any of the
following rights that are for the benefit of any Person that is, directly or
indirectly, a wholly owned Subsidiary of Parent, (i) there are no preemptive or
other outstanding rights, options, warrants, conversion rights, stock
appreciation rights, redemption rights, repurchase rights, agreements,
arrangements or commitments of any character under which the Subsidiaries of
Parent are or may become obligated to issue or sell, or giving any Person a
right to subscribe for or acquire, or in any way dispose of, any shares of the
Equity Securities of the Subsidiaries of Parent, and no securities or
obligations evidencing such rights are authorized, issued or outstanding, (ii)
the outstanding Equity Securities of the Subsidiaries of Parent are not subject
to any voting trust agreement or other Contract restricting or otherwise
relating to the voting, dividend rights or disposition of such Equity Securities
and (iii) there are no phantom stock or similar rights providing economic
benefits based, directly or indirectly, on the value or price of the Equity
Securities of the Subsidiaries of Parent.
Section 4.3 Corporate Authorization.
(a) Buyer has full limited liability company power and authority to
execute and deliver this Agreement and to perform its obligations hereunder. The
execution, delivery and performance by Buyer of this Agreement have been duly
and validly authorized and no additional limited liability company member or
similar authorization or consent is required in connection with the execution,
delivery and performance by Buyer of this Agreement.
(b) Parent has full corporate power and authority to execute and
deliver the Parent Agreement and to perform its obligations thereunder. The
execution, delivery and performance by Parent of the Parent Agreement have been
duly and validly authorized and no additional corporate, shareholder or similar
authorization or consent is required in connection with the execution, delivery
and performance by Parent of the Parent Agreement.
(c) Prior to the Closing, each of Buyer, Parent and Parent's
Subsidiaries (other than Buyer) will have full limited liability company,
corporate, partnership or similar power and authority to execute and deliver
each of the Ancillary Agreements to which it will be a party and to perform its
obligations thereunder. Prior to
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the Closing, the execution, delivery and performance by each of Buyer, Parent
and Parent's Subsidiaries (other than Buyer) of each of the Ancillary Agreements
to which it will be a party will have been duly and validly authorized and no
additional limited liability company member, shareholder or similar
authorization or consent will be required in connection with the execution,
delivery and performance by each of Buyer, Parent and Parent's Subsidiaries
(other than Buyer) of any of the Ancillary Agreements to which it will be a
party.
Section 4.4 Buyer Interests and Parent Capital Stock.
(a) As of the date hereof, Parent owns directly all right, title and
interest in and to all outstanding Equity Securities of Buyer. As of the
Closing, Buyer will be a Subsidiary of Parent.
(b) As of the date hereof, (i) the authorized capital stock of
Parent (the "Parent Capital Stock") consists of (A) 1,000 shares of common
stock, of which (1) 925 have been designated Parent Class A Common Stock, and
(2) 75 have been designated Class B Common Stock, par value $0.01 per share (the
"Parent Class B Common Stock"), and (B) 1,000 shares of preferred stock, par
value $0.01 per share (the "Parent Preferred Stock"); (ii) there are issued and
outstanding (A) 925 shares of Parent Class A Common Stock and 75 shares of
Parent Class B Common Stock and (B) no shares of Parent Preferred Stock; (iii)
except for the Parent Capital Stock, there are no Equity Securities of Parent
issued, reserved for issuance or outstanding; (iv) the Parent Capital Stock and
any other Equity Securities of Parent have been duly authorized, and are validly
issued, fully paid and nonassessable; (v) there are no preemptive or other
outstanding rights, options, warrants, conversion rights, stock appreciation
rights, redemption rights, repurchase rights, agreements, arrangements or
commitments of any character under which Parent is or may become obligated to
issue or sell, or giving any Person a right to subscribe for or acquire, or in
any way dispose of, any shares of Parent Capital Stock or other Equity
Securities of Parent, and no securities or obligations evidencing such rights
are authorized, issued or outstanding; (vi) the outstanding Parent Capital Stock
and other Equity Securities of Parent are not subject to any voting trust
agreement or other contract, agreement or arrangement restricting or otherwise
relating to the voting, dividend rights or disposition of such stock or other
Equity Securities; (vii) there are no phantom stock or similar rights providing
economic benefits based, directly or indirectly, on the value or price of the
Parent Capital Stock or other Equity Securities of Parent; (viii) there are not
any bonds, debentures, notes or other Indebtedness of Parent having the right to
vote (or convertible into, or exchangeable for, securities having the right to
vote) on any matters on which holders of the Parent Capital Stock may vote; and
(ix) there are not any outstanding contractual obligations of Parent or any of
its Subsidiaries to repurchase, redeem or otherwise acquire any shares of
capital stock of Parent.
(c) As of the Closing, the Purchase Shares (before adjustments under
Section 2.6 or 2.7) shall represent 16% of the total outstanding Equity
Securities of Parent calculated on a Fully Diluted Basis, after giving effect to
the issuance of the Purchase Shares and assuming for purposes of such
calculation the consummation of the
79
Redemption under the Parent Redemption Agreement but without giving effect to
any adjustments under Section 2.6 or 2.7; provided, however, that Equity
Securities issued pursuant to clause (ii) of the definition of "Fully Diluted
Basis" shall not exceed the Permitted Parent Incentive Awards; provided,
further, that such limitation shall not apply to any Equity Securities issued as
contemplated by clause (ii)(B) of the definition of "Fully Diluted Basis."
Section 4.5 Purchase Shares. Upon issuance, the Purchase Shares will
be duly authorized, validly issued, fully paid and nonassessable, and free and
clear of all Encumbrances of any kind whatsoever, including any preemptive
rights, rights of first refusal, call options, subscription rights or any
similar rights under any provision of applicable Law, the charter documents or
bylaws of Parent or any of its Subsidiaries or any Contract to which Parent is a
party or otherwise bound and subject to applicable securities Laws. At the
Closing, Parent will have sufficient authorized but unissued shares of Parent
Capital Stock for Buyer to meet its obligation to cause Parent to deliver the
Purchase Shares under this Agreement. Upon consummation of the Transaction, good
and valid title to the Purchase Shares will pass to the recipients thereof, free
and clear of any Encumbrances, other than those arising as a result of the
ownership of such Purchase Shares by the recipient thereof or under applicable
securities Laws.
Section 4.6 Consents and Approvals. No consent, approval, waiver,
authorization, notice or filing is required to be obtained by Buyer, Parent or
any of Parent's Affiliates from, or to be given by Buyer, Parent or any of
Parent's Affiliates to, or made by Buyer, Parent or any of Parent's Affiliates
with, any Person in connection with the execution, delivery and performance by
Buyer of this Agreement and by Buyer, Parent or any of Parent's Affiliates of
the Ancillary Agreements to which it is a party, other than the consents,
approvals, waivers, authorizations, notices or filings the failure of which to
obtain, give or make would not, individually or in the aggregate, reasonably be
expected to have a Parent Material Adverse Effect.
Section 4.7 Non-Contravention. The execution, delivery and
performance by Buyer of this Agreement and the execution, delivery and
performance by each of Buyer and Parent of each of the Ancillary Agreements to
which it is a party, and the consummation of the transactions contemplated
hereby and thereby, do not and will not (a) violate any provision of the
certificate of incorporation, bylaws or other organizational documents of Buyer,
Parent or any of Parent's Affiliates, (b) assuming the receipt of all consents,
approvals, waivers and authorizations and the making of notices and filings set
forth on Schedule 4.6 of the Buyer Disclosure Schedule with respect to any
Person which is not a Government Entity or Self-Regulatory Organization,
conflict with, or result in the breach of, or constitute a default under, or
result in the termination, cancellation, modification or acceleration (whether
after the filing of notice or the lapse of time or both) of any right or
obligation of Buyer, Parent or any of Parent's Affiliates, under, or result in a
loss of any benefit to which Buyer, Parent or any of Parent's Affiliates is
entitled under, any Contract to which any of them is a party or result in the
creation of any Encumbrance upon any of their Assets or give rise to any
Purchase Right or (c) assuming the receipt of all consents, approvals, waivers
and authorizations and the making of notices and filings set forth on Schedule
4.6 of the Buyer Disclosure
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Schedule with respect to Government Entities or Self-Regulatory Organizations or
required to be made or obtained by Seller, violate or result in a breach of or
constitute a default under any Law to which Buyer, Parent or any of Parent's
Affiliates is subject, or under any Parent Governmental Authorization, other
than, in the case of clauses (b) and (c), conflicts, breaches, terminations,
defaults, cancellations, accelerations, losses, violations or Encumbrances that
would not, individually or in the aggregate, reasonably be expected to have a
Parent Material Adverse Effect.
Section 4.8 Binding Effect. This Agreement and each of the Ancillary
Agreements dated the date hereof is, and each other Ancillary Agreement will
constitute, when executed and delivered by Buyer and each Affiliate of Buyer
party to such agreements and by Seller and the other parties thereto, a valid
and legally binding obligation of Buyer and each Affiliate of Buyer party to
such agreements, enforceable against Buyer and each such Affiliate in accordance
with their respective terms.
Section 4.9 Financial Statements.
(a) Set forth on Schedule 4.9(a) of the Buyer Disclosure Schedule is
a copy of the consolidated audited balance sheets and audited statements of
income, stockholders' equity and cash flows for Parent (and its predecessors in
interest, as the case may be) and its Subsidiaries for the fiscal years ended
December 31, 2002, December 31, 2003 and December 31, 2004 (the "Parent Audited
Financial Statements"). The Parent Audited Financial Statements have been
prepared from the books and records of Parent in accordance with GAAP
consistently applied, and fairly present, in all material respects, the
financial condition and results of operations and cash flows of Parent as of the
dates thereof or the periods then ended.
(b) The Chief Executive Officer and the Chief Financial Officer of
Parent have disclosed, based on their most recent evaluation, to Parent's
auditors and the audit committee of Parent's board of directors (i) all
significant deficiencies in the design or operation of internal controls that
could adversely affect Parent's or any of Parent's Affiliates' ability to
record, process, summarize and report financial data and have identified for
Parent's auditors any material weaknesses in the internal controls and (ii) any
fraud, whether or not material, that involves management or other employees who
have a significant role in Parent's internal controls. Copies of all disclosures
described in the foregoing sentence have been made available to Seller. Parent
and its Significant Subsidiaries have established and maintain disclosure
controls and procedures (as such term is defined in Rule 13a-15(e) under the
Exchange Act); such disclosure controls and procedures are designed to ensure
that material information relating to Parent, including its Significant
Subsidiaries, is made known to Parent's Chief Executive Officer and its Chief
Financial Officer by others within those entities; and such disclosure controls
and procedures are effective in alerting Parent's Chief Executive Officer and
its Chief Financial Officer to material information of the nature required to be
disclosed in periodic reports pursuant to the Exchange Act in a timely fashion.
Section 4.10 Litigation and Claims(a) . There are no civil, criminal
or administrative actions, suits, demands, claims, hearings, proceedings or
investigations
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pending against, or, to the Knowledge of Buyer, threatened against or affecting,
or otherwise relating to Parent or any of its Affiliates, or the Transaction,
other than those that would not, individually or in the aggregate, reasonably be
expected to have a Parent Material Adverse Effect. None of Parent or any of its
Affiliates is subject to any order, writ, judgment, award, injunction or decree
of any court or governmental or regulatory authority of competent jurisdiction
or any arbitrator or arbitrators, other than those that would not, individually
or in the aggregate, reasonably be expected to have a Parent Material Adverse
Effect. To the Knowledge of Buyer, as of the date hereof, the matters described
in the Current Report on Form 8-K, filed December 15, 2004, by TWX with the SEC
would not reasonably be expected to have a Parent Material Adverse Effect.
Section 4.11 Taxes. Each of Parent and its Subsidiaries has filed
all Tax Returns required to have been filed (or extensions have been duly
obtained) and has paid all Taxes required to have been paid by it, except where
failure to file such Tax Returns or pay such Taxes would not, individually or in
the aggregate, reasonably be expected to have a Parent Material Adverse Effect.
Section 4.12 Employee Benefits. Except as would not, individually or
in the aggregate, reasonably be expected to have a Parent Material Adverse
Effect:
(a) all material benefit and compensation plans, programs,
contracts, policies or arrangements, including any trusts, trust instruments and
insurance contracts forming a part thereof, any "employee benefit plans" within
the meaning of Section 3(3) of ERISA, any deferred compensation, stock option,
stock purchase, stock appreciation rights, stock based, incentive, bonus,
workers' compensation, short term disability, vacation, retention and severance
plans and all employment, collective bargaining, consulting, severance and
change in control agreements, and all amendments thereto, in each case under
which any current or former employee of Parent has any right to benefits and
which are contributed to, sponsored by or maintained by Parent (the "Parent
Benefit Plans"), have been maintained in substantial compliance with their terms
and with the requirements prescribed by any applicable statutes, orders, rules
and regulations, including ERISA and the Code;
(b) each Parent Benefit Plan that is intended to be qualified under
an applicable provision of the Code or any regulation thereunder, including
Section 401(a) of the Code, is so qualified and has been so qualified during the
period since its adoption;
(c) each trust created under any such Parent Benefit Plan is exempt
from tax and has been so exempt since its creation and, to the Knowledge of
Buyer, nothing has occurred with respect to the operation of any Parent Benefit
Plan that would cause the loss of such qualification or exemption; and
(d) the Transaction will not result in any new or additional
Liability of Parent or any of its Subsidiaries under any Parent Benefit Plan
that would not have been a Liability of Parent or any of its Subsidiaries absent
the consummation of the Transaction.
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Section 4.13 Compliance with Laws. The Parent Business has been
since July 1, 2003 and is being conducted in compliance with all applicable Laws
and Parent Governmental Authorizations, including the Communications Act, the
Cable Communications Policy Act of 1984, the Cable Television Consumer
Protection and Competition Act of 1992, the Telecommunications Act of 1996, the
Copyright Act of 1976 and all rules and regulations of the FCC and the United
States Copyright Office, except for failures to comply that would not,
individually or in the aggregate, reasonably be expected to have a Parent
Material Adverse Effect. Neither Parent nor any of its Affiliates has received
any notice alleging any material violation by Parent or any of its Subsidiaries
under any applicable Law, except for violations that have been cured or that
would not, individually or in the aggregate, reasonably be expected to have a
Parent Material Adverse Effect. Parent has all Parent Governmental
Authorizations necessary for the conduct of the Parent Business as currently
conducted other than those the absence of which would not, individually or in
the aggregate, reasonably be expected to have a Parent Material Adverse Effect.
Nothing in this representation is intended to address any compliance matter that
is specifically addressed by Sections 4.12 (Employee Benefits), 4.14
(Environmental Matters), 4.16 (Labor) and 4.19 (Parent Franchises).
Section 4.14 Environmental Matters.
(a) Since July 1, 2003, the Parent Business and the Parent Real
Property have been in material compliance with all applicable Environmental Laws
and there are no material Liabilities under any Environmental Law with respect
to the Parent Business.
(b) Since July 1, 2003, none of Parent or any of its Subsidiaries
(nor, to Buyer's Knowledge, any predecessor in interest) has received from any
Person any notice, demand, claim, letter or request for information, relating to
any material violation or alleged material violation of, or any material
Liability under, any Environmental Law in connection with or affecting the
Parent Business or the Parent Real Property.
(c) There are no writs, injunctions, decrees, orders or judgments
outstanding, or any actions, suits, proceedings or investigations pending or, to
Buyer's Knowledge, threatened, relating to material compliance with or material
Liability under any Environmental Law affecting the Parent Business or the
Parent Real Property.
(d) To Buyer's Knowledge, there are no underground storage tanks,
asbestos containing materials, lead based products or polychlorinated biphenyls
on any of the Parent Real Property other than as in compliance in all material
respects with all Environmental Laws.
Section 4.15 Intellectual Property. Except as would not,
individually or in the aggregate, reasonably be expected to have a Parent
Material Adverse Effect, as of the Closing Date, Parent or its Subsidiaries will
own or have a valid license or other right to use the Intellectual Property
necessary to conduct the Parent Business substantially as currently conducted.
Parent has not received any notice that (a) use of such Intellectual Property in
the Parent Business substantially as currently used by Parent and its
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Subsidiaries infringes or otherwise violates any Person's Intellectual Property
rights or (b) any Person is infringing or otherwise violating any Intellectual
Property rights of Parent or its Subsidiaries in such Intellectual Property,
that, in either such case, would, individually or in the aggregate, reasonably
be expected to have a Parent Material Adverse Effect.
Section 4.16 Labor.
(a) None of Parent or any of its Subsidiaries is a party to or bound
by any material labor agreement, union contract or collective bargaining
agreement respecting the employees of Parent and its Subsidiaries, nor are there
any employees of Parent or its Subsidiaries represented by a collectively
bargained unit or labor organization who are not covered by a Collective
Bargaining Agreement.
(b) Parent and its Subsidiaries are in compliance in all material
respects with all labor Laws applicable to the Parent Business and the employees
of Parent, and are not engaged in any unfair labor practices, as defined in the
National Labor Relations Act or other Law applicable to employees of Parent and
its Subsidiaries. There are no outstanding unfair labor practice charges pending
before the National Labor Relations Board with respect to any employees of
Parent.
(c) There is no pending, or to the Knowledge of Buyer threatened,
strike, walkout or other work stoppage or any union organizing effort by any of
the employees of Parent and its Subsidiaries.
Section 4.17 Contracts.
(a) Except for such Contracts or arrangements as are entered into
between the date hereof and the Closing and that are not prohibited by this
Agreement, neither Parent nor any of its Subsidiaries is bound by or subject to
(i) except for programming agreements or Contracts with Affiliates, any Contract
that is material (as such term is defined in Item 601(b)(10) of Regulation S-K
promulgated under the Securities Act) to the Parent Business, (ii) any
programming agreement involving consideration in excess of $25,000,000 in any
twelve month period, (iii) any Contract involving consideration in excess of
$1,000,000 in any twelve month period with any Affiliate of Parent (other than
any Subsidiary of Parent) or having the intended effect of benefiting any
Affiliate of Parent (other than any Subsidiary of Parent) at the expense of
Parent or any Subsidiary of Parent in a manner that would deprive Parent or such
Parent Subsidiary of the benefit it would otherwise have obtained if the
transaction were to have been effected on terms that were on an arm's length
basis or (iv) any material Contract with Friendco or any of its Affiliates (A)
related to or entered into in connection with the Transaction or (B) in
connection with the sale or exchange of any Transferred Assets or any
Transferred Assets (as defined in the Friendco Purchase Agreement).
(b) All Parent Material Contracts are in full force and effect and
are enforceable against each party thereto in accordance with the express terms
thereof. There does not exist under any Contract to which Parent or any of its
Affiliates is a party
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or by which its Assets are bound any violation, breach or event of default, or
alleged violation, breach or event of default, or event or condition that, after
notice or lapse of time or both, would constitute a violation, breach or event
of default thereunder on the part of Parent or any of its Affiliates or, to the
Knowledge of Buyer, any other party thereto, except for such violations,
breaches, events or conditions that would not, individually or in the aggregate,
reasonably be expected to have a Parent Material Adverse Effect. There are no
disputes pending or threatened under any Contract to which Parent or any of its
Subsidiaries is a party or by which its Assets are bound other than those
disputes that would not, individually or in the aggregate, reasonably be
expected to have a Parent Material Adverse Effect. All of the Parent Material
Contracts set forth on Schedule 4.17(a)(iii) of the Buyer Disclosure Schedule
were entered into on an arm's length basis and in the Ordinary Course of
Business.
Section 4.18 Parent Cable Systems and Subscriber Information.
(a) None of Parent or any of its Subsidiaries, directly or
indirectly, owns any Systems other than the Parent Cable Systems listed on
Schedule 4.18(a) of the Buyer Disclosure Schedule.
(b) None of Parent or any of its Subsidiaries, directly or
indirectly, manages or operates any Systems which it does not, directly or
indirectly, wholly own.
(c) None of Parent or any of its Subsidiaries, directly or
indirectly, owns any Systems that it does not, directly or indirectly, manage
and operate.
(d) Schedule 4.18(d) of the Buyer Disclosure Schedule sets forth the
aggregate number of Parent Basic Subscribers, Parent Digital Subscribers and
Parent HSD Subscribers as of December 31, 2004. Each such aggregate number has
been determined in accordance with the Parent Subscriber Accounting Policy.
(e) Schedule 4.18(e) of the Buyer Disclosure Schedule sets forth
Parent's policy with respect to calculating Parent Subscribers (the "Parent
Subscriber Accounting Policy").
(f) Schedule 4.18(f) of the Buyer Disclosure Schedule sets forth the
average total revenue per Parent Basic Subscriber as of December 31, 2004.
(g) Schedule 4.18(g) of the Buyer Disclosure Schedule sets forth the
Parent Basic Subscriber monthly churn rate for the Parent Business as of
December 31, 2004. Each such aggregate number has been determined in accordance
with the Parent Subscriber Accounting Policy.
Section 4.19 Parent Franchises.
(a) Schedule 4.19(a) of the Buyer Disclosure Schedule sets forth a
true and complete list of each Parent Franchise operated by Parent or any of its
Subsidiaries as of the date hereof, detailed by Parent Cable System. The Parent
Cable Systems are in compliance with the applicable Parent Franchises except for
such failures to comply that
85
would not, individually or in the aggregate, reasonably be expected to have a
Parent Material Adverse Effect. As of the date hereof, there are no material
ongoing or, to the Knowledge of Buyer, threatened audits or similar proceedings
undertaken by Government Entities with respect to the Parent Franchises.
(b) Each of the Parent Franchises is in full force and effect in all
material respects, and as of the date hereof a valid request for renewal has
been duly and timely filed under Section 626 of the Communications Act with the
proper Government Entity with respect to each of the Franchises that has expired
or will expire within 30 months after the date of this Agreement. None of Parent
or any of its Subsidiaries has received notice as of the date hereof from any
Person that any Parent Franchise will not be renewed or that the applicable
Government Entity has challenged or raised any objection to or otherwise
questioned a Parent's request for any such renewal under Section 626 of the
Communications Act, and Parent and its Subsidiaries have duly and timely
complied in all material respects with any and all inquiries and demands by any
and all Government Entities made with respect to Parent's or such Subsidiaries'
requests for any such renewal.
(c) With respect to the Parent Franchises, none of Parent or any of
its Subsidiaries has made any commitments to any Government Entity, except any
commitments that would not, individually or in the aggregate, reasonably be
expected to have a Parent Material Adverse Effect.
Section 4.20 Network Architecture. Schedule 4.20 of the Buyer
Disclosure Schedule sets forth in all material respects a true and complete
statement as of December 31, 2004, of (a) the approximate number of plant miles
(aerial and underground) for each division of the Parent Business, (b) the
approximate bandwidth capability expressed in MHz of each such division of the
Parent Business, (c) the stations and signals carried by each such division and
the channel position of each such signal and station of the Parent Business, (d)
the approximate number of bulk accounts served by the Parent Cable Systems, (e)
the approximate number of homes passed in the Parent Business as reflected in
the system records of Parent or any of its Affiliates, (f) a description of
basic and optional or tier services available from each such division of the
Parent Business and the rates charged for each, (g) the channel capacity of each
such division of the Parent Business, and (h) the municipalities served by each
such division of the Parent Business and the community unit numbers of such
municipalities.
Section 4.21 Absence of Changes. Since December 31, 2004, the Parent
Business has not experienced any event, occurrence, condition or circumstance,
and, to Buyer's Knowledge, no event, occurrence, condition or circumstance is
threatened that, individually or in the aggregate, has had or is reasonably
expected to have, a Parent Material Adverse Effect.
Section 4.22 Assets. The Assets held by Parent and its Subsidiaries
constitute all the Assets and rights of Parent and its Subsidiaries owned, used
or held for use primarily in connection with the conduct of the Parent Business
in all material respects as currently conducted.
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Section 4.23 Absence of Liabilities. The Parent Business has no
Liabilities and there is no existing condition, situation or set of
circumstances that, individually or in the aggregate, would reasonably be
expected to result in a Liability of the Parent Business, other than (a)
Liabilities specifically reflected, reserved against or otherwise disclosed in
the Parent Audited Financial Statements and (b) Liabilities that were incurred
since the date of the Parent Audited Financial Statements and that would not,
individually or in the aggregate, reasonably be expected to have a Parent
Material Adverse Effect.
Section 4.24 Friendco Agreements.
(a) Buyer has delivered to Seller true and complete copies of the
Parent Redemption Agreement, TWE Redemption Agreement and Exchange Agreement,
each as in effect as of the date hereof.
(b) Each of the Parent Redemption Agreement, the TWE Redemption
Agreement and the Exchange Agreement constitutes a valid and legally binding
obligation of each of Buyer, Parent and any of their Affiliates that are parties
thereto, enforceable against each of them in accordance with its terms.
(c) As of the date hereof, except for the Exchange Agreement, the
TWE Redemption Agreement and the Parent Redemption Agreement, none of Buyer or
its Affiliates have entered into any material agreements or understandings with
Friendco or any of its Affiliates Relating to any of the Transferred Assets or
otherwise in connection with the Transaction or the Friendco Transaction.
Section 4.25 No On-Sale Agreements. Except with respect to the
Transaction, the Exchange or the Redemptions, as of the date hereof, Buyer and
its Affiliates have not entered into any binding agreement with any third party
(other than Seller) with respect to a purchase and sale transaction, whether by
merger, stock sale, asset sale or otherwise, for any of the Transferred Assets.
Section 4.26 Finders' Fees. Except for Bear, Xxxxxxx & Co. Inc. and
Xxxxxx Brothers Inc. (the "Financial Advisors"), whose fees will be paid by
Buyer, there is no investment banker, broker, finder or other intermediary that
has been retained by or is authorized to act on behalf of Buyer or any Affiliate
of Buyer who might be entitled to any fee or commission in connection with the
Transaction.
Section 4.27 Opinion of Financial Advisors. The board of directors
of Parent and the Managing Member of Buyer have received the opinions of the
Financial Advisors, each dated April 19, 2005, to the effect that, as of such
date and subject to the assumptions, qualifications and other limitations set
forth therein, (i) to the Parent, the consideration to be paid in the Parent
Redemption, (ii) to TWE, the consideration to be paid in the TWE Redemption, and
(iii) to Parent and Buyer, the consideration to be received in the Exchange are
fair from a financial point of view. The opinions were delivered solely for the
use and benefit of the board of directors of Parent, the managing member of
Buyer and the board of representatives of TWE and may not be relied upon by
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Seller or any third party or used for any other purpose without the prior
approval of the Financial Advisors, which approval shall not be implied by
inclusion of this representation in the Agreement.
Section 4.28 No Other Representations or Warranties. Except for the
representations and warranties contained in this Article IV, neither Buyer nor
any other Person makes any other express or implied representation or warranty
on behalf of Buyer.
ARTICLE V
COVENANTS
Section 5.1 Access and Information.
(a) From the date hereof until the Closing (and, with respect to any
Disputed MCE System, until the expiration of the MCE Period), subject to
applicable Laws, Seller shall (i) afford Buyer and its authorized
representatives reasonable access, during regular business hours, upon
reasonable advance notice, to the Employees, each Specified Business, the
Friendco Business, Assets that will be Transferred Assets as of the Closing and
the Friendco Transferred Assets, (ii) furnish, or cause to be furnished, to
Buyer any financial and operating data and other information with respect to
each Specified Business or in furtherance of the Transaction or the Exchange as
Buyer from time to time reasonably requests, including, subject to Section 5.11,
by providing to Buyer or its accountants sufficient information (A) for the
preparation of the pro-forma balance sheet and statements of income,
stockholders' equity and cash flows for the Parent Business (in each case, if
requested, assuming the Friendco Transaction and/or the Exchange have occurred)
and (B) regarding compliance by Seller and its Affiliates with the requirements
of the SOA with respect to the Business, and (iii) instruct the Employees, and
its counsel and financial advisors to cooperate with Buyer in its investigation
of each Specified Business and the Friendco Business, including instructing its
accountants to give Buyer access to their work papers; provided, however, that
in no event shall Buyer have access to any information that, based on advice of
Seller's counsel, would (A) reasonably be expected to create Liability under
applicable Laws, including U.S. Antitrust Laws, or waive any material legal
privilege (provided, that in such latter event Buyer and Seller shall use
commercially reasonable efforts to cooperate to permit disclosure of such
information in a manner consistent with the preservation of such legal
privilege), (B) result in the disclosure of any trade secrets of third parties
or (C) violate any obligation of Seller with respect to confidentiality so long
as, with respect to confidentiality, to the extent specifically requested by
Buyer, Seller has made commercially reasonable efforts to obtain a waiver
regarding the possible disclosure from the third party to whom it owes an
obligation of confidentiality; it being understood that Buyer shall not conduct
any environmental sampling without the prior written consent of Seller, which
consent may be withheld in Seller's reasonable discretion. All requests made
pursuant to this Section 5.1(a) shall be directed to an executive officer of
Seller or such Person or Persons as may be designated by Seller. All information
received pursuant to this Section 5.1(a) shall, prior to the Closing, be
governed by the terms of the Seller Confidentiality Agreement. No information or
knowledge obtained in any
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investigation by Buyer pursuant to this Section 5.1(a) shall affect or be deemed
to modify any representation or warranty made by Seller hereunder.
(b) From the date hereof until the Closing, subject to applicable
Laws, Buyer shall, and shall cause Parent and its Controlled Affiliates to, (i)
afford Seller and its authorized representatives reasonable access, during
regular business hours and upon reasonable advance notice, to the Parent
Business, (ii) furnish, or cause to be furnished, to Seller any financial and
operating data and other information with respect to the Parent Business, the
Exchange, the Redemptions or in furtherance of the Transaction as Seller from
time to time reasonably requests and (iii) instruct its employees, and its
counsel and financial advisors to cooperate with Seller in its investigation of
the Parent Business including instructing its accountants to give Seller access
to their work papers; provided, however, that in no event shall Seller have
access to any information that, based on advice of Buyer's counsel, would (A)
reasonably be expected to create Liability under applicable Laws, including U.S.
Antitrust Laws, or waive any material legal privilege (provided, that in such
latter event Buyer and Seller shall use commercially reasonable efforts to
cooperate to permit disclosure of such information in a manner consistent with
the preservation of such legal privilege), (B) result in the disclosure of any
trade secrets of third parties or (C) violate any obligation of Parent with
respect to confidentiality so long as, with respect to confidentiality, to the
extent specifically requested by Seller, Buyer or Parent has made commercially
reasonable efforts to obtain a waiver regarding the possible disclosure from the
third party to whom it owes an obligation of confidentiality; it being
understood that Seller shall not conduct any environmental sampling without the
prior written consent of Buyer, which consent may be withheld in Buyer's
absolute discretion. All requests made pursuant to this Section 5.1(b) shall be
directed to an executive officer of Buyer or such Person or Persons as may be
designated by Buyer. All information received pursuant to this Section 5.1(b)
shall be governed by the terms of the TWX Confidentiality Agreement. No
information or knowledge obtained in any investigation by Seller pursuant to
this Section 5.1(b) shall affect or be deemed to modify any representation or
warranty made by Buyer hereunder.
(c) Following the Closing and until all applicable statutes of
limitations (including periods of waiver) have expired, Buyer agrees to retain
all Books and Records in existence on the Closing Date, and to the extent
permitted by Law and confidentiality obligations existing as of the Closing
Date, grant to Seller and its representatives during regular business hours and
subject to reasonable rules and regulations, the right, at the expense of
Seller, (i) to inspect and copy the Books and Records and (ii) to have personnel
of Buyer made reasonably available to them or have Buyer otherwise cooperate to
the extent reasonably necessary, including in connection with (A) preparing and
filing Tax Returns and/or any Tax inquiry, audit, investigation or dispute, (B)
any litigation or investigation or (C) the claims resolution, plan
administration and case closing processes in the Reorganization Case; provided,
however, that in no event shall Seller have access to any information that,
based on advice of Buyer's counsel, would (1) reasonably be expected to create
Liability under applicable Laws, including U.S. Antitrust Laws, or waive any
material legal privilege (provided, that in such latter event Buyer and Seller
shall use commercially reasonable efforts to cooperate to permit disclosure of
such information in a manner consistent with the
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preservation of such legal privilege), (2) result in the disclosure of any
trade secrets of third parties or (3) violate any obligation of Buyer with
respect to confidentiality (provided, that with respect to clause (3), to the
extent specifically requested by Seller, Buyer or Parent has in good faith
sought to obtain a waiver regarding the possible disclosure from the third party
to whom it owes an obligation of confidentiality). In no event shall Seller or
its representatives have access to the Tax Returns of Buyer. No Books and
Records shall be destroyed by Buyer without first advising Seller in writing and
giving Seller a reasonable opportunity to obtain possession thereof at the
transferee's expense. All information received pursuant to this Section 5.1(c)
shall be governed by the terms of Section 5.1(e).
(d) Following the Closing and until all applicable statutes of
limitations (including periods of waiver) have expired (and with respect to Tax
Returns, until the later of (I) the five year anniversary of the Closing and
(II) the expiration of the statute of limitations with respect to such Tax
Return), Seller agrees to retain all Books and Records in existence on the
Closing Date and not transferred to Buyer (the "Retained Books and Records"),
and to the extent permitted by Law and confidentiality obligations existing as
of the Closing Date, (i) convey to Buyer copies of any Tax Returns of Seller or
its Subsidiaries relating to periods (or portions thereof) ending on or after
December 31, 1999 and on or before the Closing (including any amended Tax
Returns relating to such periods that are filed by Seller after the Closing)
(ii) grant to Buyer and its representatives the right, at the expense of Buyer
and subject to reasonable rules and regulations, to inspect and make copies of
any other Tax Returns of Seller or any of its Subsidiaries relating to periods
(or portions thereof) ending on or before the Closing and any workpapers and tax
software related to the Tax Returns described in clauses (i) or (ii) hereof,
(iii) grant to Buyer and its representatives during regular business hours and
subject to reasonable rules and regulations the right to inspect and make copies
of Retained Books and Records not described in clauses (i) or (ii) hereof, and
(iv) grant to Buyer and its representatives during regular business hours and
subject to reasonable rules and regulations, the right, at the expense of Buyer,
to have personnel of Seller made reasonably available to them or have Seller
otherwise cooperate to the extent reasonably necessary, in each case, including
in connection with (A) preparing and filing Tax Returns and/or any Tax inquiry,
audit, investigation or dispute or (B) any litigation or investigation;
provided, however, that in no event may Buyer or its representatives inspect,
examine, review, distribute or disclose in any form the specific contents of any
of Seller's or its Subsidiaries' income or franchise Tax Returns (or copies
thereof) provided by Seller either at Closing or at a later date or of
workpapers or tax software related to any such income or franchise Tax Returns
(or copies thereof) until the specific contents of such income or franchise Tax
Returns become relevant to Buyer in connection with (x) preparing and filing Tax
Returns, or (y) any Tax inquiry, audit, investigation or dispute with a
Government Entity, in each case, at which time Buyer may use such Tax Returns
and related workpapers and tax software (or copies thereof) for purposes
reasonably related to the activities described in (x) or (y) above; provided,
further, that in no event shall Buyer or its representatives have access to any
information that, based on advice of Seller's counsel, would (1) reasonably be
expected to create Liability under applicable Laws, including U.S. Antitrust
Laws, or waive any material legal privilege (provided, that in such latter event
Buyer and Seller shall use commercially reasonable
90
efforts to cooperate to permit disclosure of such information in a manner
consistent with the preservation of such legal privilege), (2) result in the
disclosure of any trade secrets of third parties or (3) violate any obligation
of Seller with respect to confidentiality (provided, that with respect to clause
(3), to the extent specifically requested by Buyer or Parent, Seller has in good
faith sought to obtain a waiver regarding the possible disclosure from the third
party to whom it owes an obligation of confidentiality). No Retained Books and
Records shall be destroyed by Seller without first advising Buyer in writing and
giving Buyer a reasonable opportunity to obtain possession thereof at the
transferee's expense.
(e) From and after the Closing, Seller and its Affiliates shall keep
confidential any non-public information in their possession Related to the
Business or related to the Transferred Assets (any such information that is
required to keep confidential pursuant to this sentence shall be referred to as
"Confidential Information"). Neither Seller nor its Affiliates shall disclose,
or permit any of their respective directors, officers, employees or
representatives to disclose, any Confidential Information to any other Person or
use such information to the detriment of Buyer or its Affiliates; provided, that
such party may use and disclose any such information (i) once it has been
publicly disclosed (other than by such party in breach of its obligations under
this Section 5.1(e)) or (ii) to the extent that such party may, in the
reasonable judgment of its counsel, be compelled by Law to disclose any of such
information, such party may disclose such information if it has used
commercially reasonable efforts, and has afforded Buyer the opportunity, to
obtain an appropriate protective order, or other satisfactory assurance of
confidential treatment, for the information compelled to be disclosed. Except in
respect of Excluded Assets and Excluded Liabilities, the Seller Confidentiality
Agreement shall terminate upon the Closing with no further Liability thereunder
on the part of any party thereto.
Section 5.2 Conduct of Business. During the period from the date
hereof to the Closing (and, following the Closing, with respect to any Disputed
MCE System that is not a Buyer Managed MCE System, until the expiration of the
MCE Period), except as otherwise expressly contemplated by this Agreement, as
set forth on Schedule 5.2 of the Seller Disclosure Schedule or as Buyer
otherwise agrees in writing in advance, Seller shall (x) conduct, and shall
cause its Affiliates to conduct, each Specified Business in the Ordinary Course
and in accordance with applicable material Laws (including, subject to Section
5.2(s), completing line extensions, placing conduit or cable in new
developments, fulfilling installation requests and work on existing and planned
construction projects), (y) use its commercially reasonable efforts to preserve
intact each Specified Business and its relationship with its customers,
suppliers, creditors and employees (it being understood that no increases in any
compensation or any incentive compensation or similar compensation shall be
required in respect thereof except to the extent such increase is required in
the Ordinary Course of Business) and (z) use its commercially reasonable efforts
to perform and honor all of its post-petition obligations under any Contract as
they become due and otherwise discharge and satisfy all Liabilities thereunder
as and when they become due. During the period from the date hereof to the
Closing (and, following the Closing, with respect to any Disputed MCE System
that is not a Buyer Managed MCE System, until the expiration of the MCE Period),
except as
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otherwise contemplated by this Agreement or any Ancillary Agreement or as Buyer
shall otherwise consent (provided, that Buyer shall respond as soon as
reasonably practicable but in no event later than five Business Days following
receipt of Seller's written request for such response) or as set forth in the
applicable sections of Schedule 5.2 of the Seller Disclosure Schedule, Seller
shall, and shall cause each of its Affiliates to, with respect to each Specified
Business:
(a) not incur, create or assume any Encumbrance on any of its Assets
other than a Permitted Encumbrance;
(b) not sell, lease, license, transfer or dispose of any Assets
other than in the Ordinary Course of Business; provided, however, that in any
event, such Assets shall not (i) constitute a Cable System or material portion
thereof or (ii) include any Equity Securities of any Asset Transferring
Subsidiary (other than in connection with a transfer to Seller or any of its
wholly owned Subsidiaries that is an Asset Transferring Subsidiary and a
Debtor);
(c) not (i) assume pursuant to an order of the Bankruptcy Court any
OCB Contract, (ii) enter into any Contract in the Contract Categories Expected
to be Assumed that contains any Special Terms (except with respect to clause (i)
of the definition thereof), (iii) modify, renew (except in respect of
Governmental Authorizations pursuant to Section 5.2(r)), suspend, abrogate or
amend in any material respect (including the addition of any Special Term) any
(A) Governmental Authorization that is material, (B) Contract Related to any
Specified Business that is material or that contains Special Terms (except with
respect to clause (i) of the definition thereof), (C) retransmission consent
agreement (in a manner which would result in any compensation being payable
thereunder, other than compensation that is customary, consistent with Seller's
past practice and, in any event, non-monetary), (D) Third Party Confidentiality
Agreement or (E) Contract listed on Schedule 1.1(k)(ii) of the Seller Disclosure
Schedule (other than, with respect to this clause (E), with the consent of
Buyer, such consent not to be unreasonably withheld (other than in the case of
extending the term or amending with like effect any lease on Schedule
1.1(k)(ii), with respect to which such consent shall be at Buyer's discretion)),
(iv) reject or terminate any Contract Related to any Specified Business or (v)
with respect to any Contract Related to any Specified Business, take any action
outside the Ordinary Course of Business or fail to take any action in the
Ordinary Course of Business;
(d) not declare, set aside or pay any dividend or distribution on
any Investment Entity Securities;
(e) not amend any of the Investment Documents;
(f) not issue, sell, pledge, transfer (other than to Seller or any
wholly owned Subsidiary of Seller; provided, that any such wholly owned
Subsidiary shall be an Asset Transferring Subsidiary and a Debtor), dispose of
or encumber any Investment Entity Securities;
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(g) not split, combine, subdivide, reclassify or redeem, or purchase
or otherwise acquire, any Investment Entity Securities;
(h) provide prompt written notice to Buyer of Seller or any of its
Affiliates entering into any OCB Contract that is material to any Specified
Business;
(i) not dispose of, license or permit to abandon, invalidate or
lapse any rights in, to or for the use of any material Transferred Intellectual
Property;
(j) not (i) increase the compensation of any Employee or current
director of Seller or any of its Subsidiaries, except for increases in salary or
wage rates in the Ordinary Course of Business or as required by the terms of
agreements or plans currently in effect and listed on Schedule 3.10(a) of the
Seller Disclosure Schedule or with respect to any Employee listed on Schedule
5.8(a)(ii) of the Seller Disclosure Schedule, (ii) establish, amend, pay, agree
to grant or increase any special bonus, sale bonus, stay bonus, retention bonus,
deal bonus, emergence award or change in control bonus or any other benefit
under Seller's Performance Retention Plan or other plan, agreement, award or
arrangement, other than any such award, entitlement or arrangement that will be
fully paid and satisfied on or prior to the Closing Date (other than any sale
bonus under the Sale Bonus Program as provided below or as otherwise provided in
the parenthetical at the end of this clause (ii) with respect to awards other
than awards under the Sale Bonus Program or Seller's Performance Retention Plan)
and the Liabilities of which will be Excluded Liabilities or, with respect to
any sale bonus under the Sale Bonus Program, to the extent (but only to the
extent) any such sale bonus amount is reflected in the Closing Net Liabilities
Amount used in calculating the Final Adjustment Amount (provided, however, that
an award, entitlement or arrangement under this clause (ii) granted to an
Employee listed on Schedule 5.8(a)(ii) of the Seller Disclosure Schedule may be
paid by Seller in accordance with its terms; provided, further, that (x) all
payments that pursuant to the term of such award, entitlement or arrangement are
to be paid on or prior to the Closing shall be paid by Seller on or prior to the
Closing and (y) if Buyer offers employment to any such Employee pursuant to
Section 5.8(a) and such Employee becomes a Transferred Employee, Seller shall
fully pay and satisfy any such award, entitlement or arrangement as to such
individual on or prior to the Closing Date), (iii) except as provided in clause
(ii) or as required by Law, establish, adopt, enter into, amend or terminate any
Benefit Plan (other than any broad based health or welfare plan) or any plan,
agreement, program, policy, trust, fund or other arrangement that would be a
Benefit Plan if it were in existence as of the date of this Agreement, (iv) hire
any employee for any Specified Business with annual compensation in excess of
the amount of compensation for a Person in a similar position consistent with
past practice, other than to fill vacancies arising in the Ordinary Course of
Business, (v) enter into any new employment or severance agreements or amend any
such existing agreement with any Employee (provided, that the foregoing shall
not restrict Seller from taking any such action with respect to an Employee
listed on Schedule 5.8(a)(ii) of the Seller Disclosure Schedule so long as
Parent or Buyer, as applicable, will not be bound by any such action (including
as it may relate to the terms of employment of any such Employee pursuant to
Section 5.8 hereof) if the Employee becomes employed by Parent or Buyer in
connection with the Transaction), (vi) establish, adopt, enter into, amend or
terminate any plan,
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policy or arrangement providing for severance or termination pay or benefits
(provided, that the foregoing shall not restrict Seller from taking any such
action so long as Parent or Buyer, as applicable, will not be bound by any such
action (including as it may relate to the terms of any offer to any Employee
pursuant to Section 5.8(a) hereof) if any Employee covered thereby becomes
employed by Parent or Buyer in connection with the Transaction), or (vii) engage
in any hiring practices that are not in the Ordinary Course of Business;
(k) not make any material loans, advances or capital contributions
to, or investments in, any other Person (other than, to the extent not in
violation of applicable Law, customary loans or advances to employees in amounts
not material to the maker of such loan or advance and other than to any
Subsidiary of Seller in the Ordinary Course);
(l) not settle any claims, actions, arbitrations, disputes or other
proceedings that would result in Seller or any of its Affiliates being enjoined
in any respect material to the Transaction or any Specified Business or that
would affect any Specified Business after the Closing (other than in a de
minimis manner);
(m) not make any material change in any method of accounting,
keeping of books of account or accounting practices or in any material method of
Tax accounting of Seller or any of its Subsidiaries unless required (i) by a
concurrent change in GAAP or applicable Law or (ii) upon prior written notice to
Buyer, in order to comply with any GAAP requirements or FASB interpretations or
in order to comply with the view of Seller's independent auditors;
(n) except for capital expenditures, which shall be governed by
Section 5.2(s), not Acquire any Assets or any business (including Equity
Securities) in one or a series of related transactions, other than (i) pursuant
to agreements in effect as of the date hereof that were disclosed to Buyer prior
to the date hereof, (ii) Assets used by Seller in the Ordinary Course of
Business (which Assets do not constitute a System, a business unit, division or
all or substantially all of the Assets of the transferor), (iii) any interest in
or Assets of any entity which nominally owns any interest in any MCE System and
(iv) any Equity Securities in any Tele-Media Entity;
(o) use commercially reasonable efforts to continue normal
marketing, advertising and promotional expenditures with respect to each
Specified Business;
(p) use commercially reasonable efforts to (i) maintain or cause to
be maintained (A) the Transferred Assets in adequate condition and repair for
their current use in the Ordinary Course, ordinary wear and tear excepted, and
(B) in full force and effect the Insurance Policies (with the same amounts and
scopes of coverage) with respect to the Transferred Assets and the operation of
each Specified Business and (ii) enforce in good faith the rights under the
Insurance Policies;
(q) use commercially reasonable efforts to perform all post-petition
obligations under all of the Franchises, other material Governmental
Authorizations and
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Assigned Contracts without material breach or default and pay all post-Petition
Date Liabilities arising thereunder in the Ordinary Course of Business;
(r) use commercially reasonable efforts to renew any material
Governmental Authorizations which expire prior to the Closing Date;
(s) use commercially reasonable efforts to make capital expenditures
and operate in accordance with the capital and operating budget set forth on
Schedule 5.2(s) of the Seller Disclosure Schedule (the "Budget") and, in the
case of capital expenditures, on a line item basis;
(t) maintain inventory sufficient for the operation of each
Specified Business in the Ordinary Course of Business;
(u) not engage in any marketing, Subscriber installation or
collection practices other than in the Ordinary Course of Business;
(v) not convert any billing systems used by any Specified Business;
(w) use commercially reasonable efforts to implement all rate
changes provided for in the Budget and except for rate increases provided for in
the Budget not change the rate charged for any level of cable television,
telephony or high speed data services;
(x) except as required by applicable Law (including applicable
must-carry laws), not add or voluntarily delete any channels from any Cable
System, or change the channel lineup in any Cable System or commit to do any of
the foregoing in the future; except for (i) pending channel additions and
deletions or changes in channel lineups to the extent customer notifications
have, as of the date hereof, been mailed or otherwise made in a manner permitted
by each applicable Franchise; (ii) channel additions or changes in lineups as
required in order to fulfill distribution commitments or broadcast station
retransmission consent obligations (in either case, existing as of the date
hereof) pursuant to existing Contracts, and solely to the extent the commitment
and/or obligation must, pursuant to such Contract, be satisfied prior to the
Closing Date; (iii) channel additions, migrations or changes in channel lineups
in connection with headend consolidations (provided, however, that no new
channels may be added to a system unless immediately prior to the headend
consolidation, the channel was so carried on one headend or the other, provided,
further, that if such channel is carried on both headends and the channel is not
carried on the same tier or level of service on the two headends, then after
such consolidation, the channel shall be carried on the tier or level of service
of the dominant headend); (iv) the addition of one or more of the channels
listed on Schedule 5.2(x)(iv) of the Seller Disclosure Schedule in connection
with a system upgrade; (v) the roll-out of any video on demand service listed on
Schedule 5.2(x)(v) of the Seller Disclosure Schedule or any free video on demand
services for which Seller is not required to pay any fee or consideration; (vi)
the addition of one or more of the high definition services listed on Schedule
5.2(x)(vi) of the Seller Disclosure Schedule, which additions shall not, except
as otherwise noted on Schedule 5.2(x)(vi) of the Seller
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Disclosure Schedule, require Seller to pay any fee or consideration for such
services; or (vii) the addition of the high definition signal of a NBC, ABC,
CBS, or Fox station that is licensed to the same designated market area as the
system on which such signal is being launched, so long as such signal is a
simulcast of such station's analog signal, to the extent Seller is not required
to pay any fee or consideration for such high definition signal;
(y) not file a cost-of-service rate justification;
(z) use commercially reasonable efforts to launch telephony and
video on demand services in the Cable Systems identified on Schedule 5.2(z) of
the Seller Disclosure Schedule substantially in accordance with the timetable
set forth on such Schedule 5.2(z), and provide Buyer with written notice
promptly following any such launch;
(aa) continue to conduct the Business in accordance with, and not
make any change to, the Seller Subscriber Accounting Policy, including as to
disconnects;
(bb) not transfer the employment duties of any Applicable Employee
from any Cable System to a different Cable System or business unit other than in
the Ordinary Course of Business;
(cc) use commercially reasonable efforts to maintain or cause to be
maintained its Books and Records and accounts with respect to each Specified
Business in the usual, regular and ordinary manner on a basis consistent with
past practice;
(dd) give or cause to be given to Buyer, and its counsel,
accountants and other representatives, (i) as soon as reasonably possible, but
in any event prior to the date of submission to the appropriate Government
Entity, copies of all FCC rate Forms 1205, 1210, 1235, and 1240, and
simultaneous with, or as soon as reasonably possible after submission to the
appropriate Government Entity, any other FCC Forms required under the
regulations of the FCC promulgated under the Cable Act that are prepared with
respect to any of the Cable Systems and (ii) as soon as reasonably possible
after filing copies of all copyright returns filed in connection with any Cable
System; provided, that, in the case of clause (i), before any such FCC Forms
1205, 1210, 1235, or 1240 are filed, Seller and Buyer shall consult in good
faith concerning the contents of such forms; and
(ee) not announce an intention, authorize or enter into any
agreement or commitment with respect to any of the foregoing.
Section 5.3 Conduct of Parent Business. During the period from the
date hereof to the Closing, except as otherwise expressly contemplated by this
Agreement, the Parent Redemption Agreement, the TWE Redemption Agreement, the
Exchange Agreement, as set forth on Schedule 5.3 of the Buyer Disclosure
Schedule or as Seller otherwise agrees in writing in advance, Buyer shall, and
shall cause Parent and its Subsidiaries to, use commercially reasonable efforts
to preserve intact the Parent Business and its relationship with its material
customers, suppliers, creditors and key
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employees (it being understood that no increases in any compensation or any
incentive compensation or similar compensation shall be required in respect
thereof except to the extent such increase is required in the Ordinary Course of
Business). Without limiting the generality of the foregoing, during the period
from the date hereof to the Closing, except as otherwise contemplated by this
Agreement or any Ancillary Agreement or as Seller shall otherwise consent (which
consent shall not be unreasonably withheld and, provided, that Seller shall
respond as soon as reasonably practicable but in no event later than five
Business Days following receipt of Buyer's written request for such response) or
as set forth in the applicable sections of Schedule 5.3 of the Buyer Disclosure
Schedule, Buyer shall not, and shall cause Parent and each its Subsidiaries not
to:
(a) sell, lease, license, transfer or dispose of any Assets (it
being understood that for purposes of this Section 5.3(a), Assets do not include
Equity Securities of Parent or cash or cash equivalents) for consideration not
consisting primarily of Systems other than (i) in the Ordinary Course of
Business, (ii) pursuant to the Friendco Transaction or (iii) Assets which, in
the aggregate, the fair market value of the total consideration therefor would
not exceed the amount specified on Schedule 5.3(a)(iii) of the Buyer Disclosure
Schedule;
(b) declare, set aside or pay any dividend or distribution on any
shares of Parent Capital Stock or other Equity Security in Parent or any of its
Subsidiaries other than dividends or distributions by any Subsidiary of Parent
to Parent or another Subsidiary of Parent;
(c) enter into any transaction (other than pursuant to any Contract
in effect as of the date hereof) having the intended effect of benefiting any
Affiliate of Parent (other than any Subsidiary of Parent) at the expense of
Parent or any Subsidiary of Parent in a manner that would deprive Parent or any
such Subsidiary of the benefit they would otherwise have obtained if the
transaction were to have been effected on terms that were on an arm's length
basis or any transaction that does not satisfy the requirements of Article VI of
Parent's bylaws, as in effect as of the date hereof;
(d) except pursuant to Section 5.4, amend the certificate of
incorporation, bylaws or other organizational documents of Parent in a manner
adverse to Seller or its stakeholders;
(e) issue any shares of Parent Capital Stock or other Equity
Securities of Parent other than (i) Equity Securities issued following the date
hereof on arm's-length terms for consideration determined in good faith by
Parent's board of directors or any committee thereof to be fair, including,
subject to Section 5.3(c), Equity Securities issued to TWX or any of its
Affiliates (other than Parent or its wholly owned Subsidiaries), and (ii) Equity
Securities issued following the date hereof pursuant to employee option or
restricted stock programs approved by Parent's board of directors or the
compensation committee thereof; provided, however, that Equity Securities issued
pursuant to clause (ii) of this sentence shall not exceed the Permitted Parent
Incentive Awards; provided, however, that such limitation shall not apply to any
Equity Securities issued as contemplated by clause (ii)(B) of the definition of
"Fully Diluted Basis";
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(f) settle any claims, actions, arbitrations, disputes or other
proceedings not involving a Government Entity that would result in Parent or any
of its Affiliates being enjoined in any respect material to the Transaction; or
(g) authorize or enter into any agreement or commitment with respect
to any of the foregoing;
provided, however, that, except in respect of Sections 5.3(c) and 5.3(d), the
foregoing limitations shall not restrict transactions solely among or between
Parent and any of its direct or indirect Subsidiaries.
Section 5.4 Amended and Restated Charter and Amended and Restated
By-laws. On or prior to the Closing, Buyer will cause Parent to (a) file the
Amended and Restated Charter with the Secretary of State of the State of
Delaware and (b) adopt the Amended and Restated By-laws. Buyer will cause Parent
(i) for a period of two years following the Closing, not to enter into any
merger pursuant to Section 253 of the Delaware General Corporation Law and (ii)
for a period of eighteen months following the Closing, not to issue any Equity
Securities to any Person (other than, subject to Section 5.3(c) and, following
the Closing, the Amended and Restated By-laws, TWX and its Affiliates (other
than Parent or its wholly owned Subsidiaries)) that have a higher vote per share
than the Parent Class A Common Stock.
Section 5.5 Listing of Purchase Shares(a) . Subject to there being a
SEC/DOJ Settlement and Seller having satisfied the covenant in Section 5.19(a),
Buyer shall, and shall cause Parent and its Subsidiaries to, use commercially
reasonable efforts to cause, (a) effective as of the Closing, the Purchase
Shares to be either registered under the Securities Act or exempt from any such
registration under section 1145 of the Bankruptcy Code and to be listed for
trading on the NYSE and (b) effective as of the MCE Closing, the MCE Purchase
Shares to be either registered under the Securities Act or exempt from any such
registration and to be listed for trading on the NYSE.
Section 5.6 Commercially Reasonable Efforts.
(a) Subject to the Bankruptcy Code and any orders of the Bankruptcy
Court, Seller and Buyer shall, and Buyer shall cause Parent to, cooperate and
use their respective commercially reasonable efforts to fulfill as promptly as
practicable the conditions precedent to the other party's obligations hereunder
and shall use their respective commercially reasonable efforts to fulfill as
promptly as practicable the conditions precedent to their obligations hereunder
to the extent they have the ability to control the satisfaction of such
obligations. Without limiting the generality of the foregoing, Seller and Buyer
shall, and Buyer shall cause Parent to, (i) make all filings and submissions
required by the U.S. Antitrust Laws and any other Laws, and promptly file any
additional information requested as soon as practicable after receipt of such
request therefor and promptly file any other information that is necessary,
proper or advisable to permit consummation of the Transaction and the Exchange
and (ii) use commercially reasonable efforts to obtain and maintain all Seller
Required Approvals and Buyer Required Approvals in form and substance reasonably
satisfactory to Buyer and Seller.
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In connection with the foregoing, Seller and Buyer will, and Buyer will cause
Parent to, endeavor to consummate the Transaction without (or with minimal)
costs, conditions, limitations or restrictions associated with the grant of such
Seller Required Approvals and Buyer Required Approvals.
(b) Notwithstanding anything to the contrary herein, nothing in this
Agreement shall require Buyer or Parent to agree to or to effect any divesture,
hold separate or similar agreement with respect to any business or Assets or
agree to enter into, or amend, or agree to amend, any Contracts or governmental
authorizations or take or refrain from taking any other action or conduct any
business in any manner if doing so would reasonably be expected, individually or
in the aggregate, to have (i) an adverse impact (other than a de minimis adverse
impact) on TWX or any of its Affiliates (excluding Parent and its Subsidiaries)
or any of their respective businesses or Assets (excluding businesses and Assets
of Parent and its Subsidiaries) or (ii) an adverse impact that is material to
the Parent Business or the Transferred Assets or would materially constrain the
operations of Parent and its Subsidiaries or of the Transferred Assets; it being
understood that the incurrence of legal, accounting, investment banking and
other customary forms of transaction expenses and the commitment of reasonable
management time and effort shall not be considered an adverse impact for the
purpose of this clause (ii).
(c) No later than 45 days following the date hereof, Buyer and
Seller shall, and Buyer shall cause Parent to, provide each other (or shall
cause their respective Subsidiaries to provide) with all necessary documentation
to allow filing of FCC Forms 394 with respect to the Franchises with respect to
which a LFA Approval is or may be required. Buyer and Seller shall, and Buyer
shall cause Parent to, use commercially reasonable efforts to cooperate with one
another and, no later than 60 days following the date hereof, file with the
applicable Government Entity FCC Forms 394 for each of the Franchises with
respect to which a LFA Approval is or may be required. Buyer and Seller shall,
and Buyer shall cause Parent to, cooperate and use their commercially reasonable
efforts to have Buyer enter into a substitute performance bond arrangement with
respect to those Assets of each Specified Business the transfer of which to
Buyer would require Buyer to enter into such a substitute bond arrangement, on
substantially the same terms as the substitute bond arrangement with respect to
such Assets in effect as of the date hereof. Notwithstanding anything to the
contrary herein, Seller shall not accept, agree to or accede to any
modifications or amendments to, or in connection with, or any conditions to the
transfer of, any Franchises that are not approved by Buyer in writing, such
approval not to be unreasonably withheld; provided, however, that if Seller
affords Buyer reasonable notice of, and opportunity to attend and participate
in, meetings or other discussions relating to LFA Approvals where modifications,
amendments or conditions are expected to be discussed or negotiated, Buyer shall
approve any such modifications, amendments or conditions that are approved by
Seller so long as such modifications, amendments or conditions are commercially
reasonable and are similar in nature, extent and impact (giving due
consideration to such factors as the relative size of the Franchise involved,
the proximity of other Franchises, the financial and operational impact of the
change and the precedential impact thereof) to modifications, amendments or
conditions agreed to by Parent or Buyer or Friendco in connection with material
99
acquisitions of cable assets effected since 2001. In addition, if Buyer seeks
any LFA Approval pursuant to this Transaction, Buyer shall agree to any
modifications, amendments or conditions that are commercially reasonable and are
similar in nature, extent and impact (giving due consideration to such factors
as the relative size of the Franchise involved, the proximity of other
Franchises, the financial and operational impact of the change and the
precedential impact thereof) to modifications, amendments or conditions agreed
to by Parent or Buyer or Friendco in connection with material acquisitions of
cable assets effected since 2001.
(d) Each of the parties hereto agrees to execute and deliver such
other documents, certificates, agreements and other writings and to take such
other commercially reasonable actions as may be necessary or desirable in order
to evidence, consummate or implement expeditiously the transactions contemplated
by this Agreement and to vest in Buyer good and marketable title to the
Transferred Assets to the same extent as held by Seller and its Affiliates, free
and clear of all Encumbrances other than, in the case of Transferred Assets,
Permitted Encumbrances, and in the case of the Transferred Investments,
Encumbrances under the Investment Documents.
(e) Seller and Buyer shall, and Buyer shall cause Parent to,
cooperate with each other and shall furnish to the other party all information
reasonably necessary or desirable in connection with making any filing under the
HSR Act, and in connection with resolving any investigation or other inquiry by
any Government Antitrust Entity with respect to the Transaction and the
Exchange; provided, however, that Buyer shall reimburse Seller for the
reasonable out-of-pocket costs, if any, incurred by Seller as a result of such
cooperation solely to the extent it relates to the consummation of the Exchange.
Each of the parties shall promptly inform the other party of any communication
with, and any proposed understanding, undertaking or agreement with, any
Government Entity regarding any such filings or any such transaction. Seller and
Buyer shall not, and Buyer shall cause Parent not to, participate in any meeting
with any Government Antitrust Entity in respect of any such filings,
investigation or other inquiry without giving the other party prior notice of,
and the opportunity to participate in, such meeting. The parties hereto will
consult and cooperate with one another in connection with any analyses,
appearances, presentations, memoranda, briefs, arguments, opinions and proposals
made or submitted by or on behalf of any party hereto in connection with all
meetings, actions and proceedings under or relating to the HSR Act (including,
with respect to making a particular filing, by providing copies of all such
documents (other than those that will not be publicly available) to the
non-filing party and their advisors prior to filing and, if requested, giving
due consideration to all reasonable additions, deletions or changes suggested in
connection therewith); provided, however, that in no event shall Buyer or Seller
be required to furnish, or Buyer be required to cause Parent to furnish, any
information that, based on advice of such party's counsel, would reasonably be
expected to create any potential Liability under applicable Laws, including U.S.
Antitrust Laws, or would constitute a waiver of any material legal privilege
(provided, that in such latter event Buyer and Seller shall use commercially
reasonable efforts to cooperate to permit disclosure of such information in a
manner consistent with the preservation of such legal privilege).
100
(f) In furtherance and not in limitation of the foregoing, each of
Buyer and Seller agrees to make, and Buyer agrees to cause Parent to make, as
promptly as practicable, (i) an appropriate filing of a Notification and Report
Form pursuant to the HSR Act with respect to the Transaction and the Exchange
(which filing shall be made in any event within 20 Business Days of the date
hereof), (ii) appropriate filings with the FCC, and any state public service
commissions having jurisdiction over any Transferred Assets or any services
provided by any Specified Business or the Assets of or services provided by the
Parent Business with respect to the Transaction and the Exchange, and (iii) all
other necessary filings with other Government Entities relating to the
Transaction and the Exchange, and to use commercially reasonable efforts to
cause the expiration or termination of the applicable waiting periods under the
HSR Act and the receipt of the Seller Required Approvals and the Buyer Required
Approvals under such other Laws or from such authorities or third parties as
soon as practicable; provided, however, that Buyer shall reimburse Seller for
the reasonable out-of-pocket costs, if any, incurred by Seller as a result of
such cooperation solely to the extent it relates to the consummation of the
Exchange.
(g) Each of Seller and Buyer shall, and Buyer shall cause Parent to,
give (or shall cause their respective Subsidiaries to give) any notices to third
parties, and use, and cause their respective Subsidiaries to use, commercially
reasonable efforts to obtain any third party (excluding Government Entities)
consents related to or required in connection with the Transaction and the
Exchange that are Seller Required Approvals or Buyer Required Approvals;
provided, however, that Buyer shall reimburse Seller for the reasonable
out-of-pocket costs, if any, incurred by Seller as a result of such cooperation
solely to the extent it relates to the consummation of the Exchange.
(h) Seller shall, and shall cause its Affiliates to, take all
actions as may be necessary or desirable in order that, as of the Closing, all
of the Assets (other than any Equity Securities or other Excluded Assets) of the
Tele-Media Entities and each of their respective Subsidiaries shall constitute
Transferred Assets.
(i) Notwithstanding anything in this Agreement to the contrary,
Buyer shall have the sole responsibility for any filing, submission or other
action (including, for the avoidance of doubt, obtaining any required LFA
Approval) that is necessary, proper or advisable to permit the consummation of
the Exchange (it being understood that Seller shall use its commercially
reasonable efforts to cooperate with Buyer with respect to any action required
to be taken by Buyer pursuant to this sentence; provided, however, that Buyer
shall reimburse Seller for the reasonable out-of-pocket costs, if any, incurred
by Seller as a result of such cooperation solely to the extent it relates to the
consummation of the Exchange.
(j) After the Closing, Buyer shall, in the Ordinary Course of
Business of Parent, use its commercially reasonable efforts to xxxx and collect
from each Basic Subscriber that is potentially a Qualified Customer any amounts
due and payable in respect of services delivered to such Basic Subscriber prior
to the Closing.
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Section 5.7 Tax Matters.
(a) Proration of Taxes. To the extent necessary to determine the
liability for Taxes for a portion of a taxable year or period that begins before
and ends after the Closing, the determination of the Taxes for the portion of
the year or period ending on, and the portion of the year or period beginning
after, the Closing shall be determined by assuming that the taxable year or
period ended as of the close of business on the Closing, except that those
annual property taxes and exemptions, allowances or deductions that are
calculated on an annual basis shall be prorated on a time basis. For the
avoidance of doubt, (i) any Taxes that are apportioned to the portion of a
taxable period that ends on the Closing pursuant to this Section 5.7(a) shall be
Excluded Taxes and (ii) any Taxes that are apportioned to the portion of a
taxable period beginning after the Closing pursuant to this Section 5.7(a) shall
be Assumed Taxes.
(b) Tax Returns. Buyer shall not file any amended Tax Returns with
respect to the Transferred Assets that include periods ending on or prior to the
Closing without Seller's written consent, which shall not be unreasonably
withheld or delayed.
(c) Transfer Taxes.
(i) To the extent not otherwise exempt to the fullest extent
permitted by section 1146(c) of the Bankruptcy Code and except as otherwise
provided in this Section 5.7(c)(i), all federal, state, local or foreign or
other excise, sales, use, value added, transfer (including real property
transfer or gains), stamp, documentary, filing, recordation and other similar
taxes and fees that may be imposed or assessed as a result of the Transaction,
together with any interest, additions or penalties with respect thereto and any
interest in respect of such additions or penalties ("Transfer Taxes"), shall,
subject to the provisos to Sections 5.7(c)(iii) and 5.7(c)(v), be borne by
Buyer.
(ii) Any Tax Returns that must be filed in connection with
Transfer Taxes ("Transfer Tax Returns") shall be prepared by Buyer and Buyer
shall prepare such Transfer Tax Returns in a manner consistent with the
allocation of the Aggregate Consideration pursuant to Section 5.7(d); provided,
however, that if Buyer and Seller do not jointly agree to a Purchase Price
Allocation Schedule as provided in Section 5.7(d) and except as provided in
Section 5.7(c)(iii), any such Transfer Tax Return shall be prepared by Buyer in
good faith in a manner consistent with the purchase price allocation of Buyer or
Seller that Buyer and Seller, as the case may be, use for Tax purposes, that
results in the higher aggregate Transfer Tax liability with respect to each
applicable jurisdiction. The party filing any Transfer Tax Return (or similar
form claiming an applicable exemption from Transfer Taxes) pursuant to this
Section 5.7 shall furnish a copy of such Transfer Tax Return (or similar form)
to the other party.
(iii) Except as provided in the following proviso, all
Transfer Tax Returns shall be filed by Buyer, and Buyer shall be responsible for
remitting all amounts shown as due on such Transfer Tax Returns to the
appropriate Government Entity; provided, however, that, in the case of any
Transfer Tax Return in which Seller's purchase price allocation would result in
a higher aggregate Transfer Tax liability than
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Buyer's purchase price allocation (w) Buyer shall prepare such Transfer Tax
Return unless Seller reasonably determines that the positions taken on such
Transfer Tax Return as prepared by Buyer would reasonably be expected to give
rise to a material risk of civil and/or criminal penalties (other than interest)
if challenged by the applicable Government Entity, in which case, Seller may
prepare such Transfer Tax Return, (x) Seller shall be responsible for filing
such Transfer Tax Return and for remitting all amounts shown as due thereon to
the appropriate Government Entity, (y) notwithstanding any other provision of
this Section 5.7(c) to the contrary, Buyer shall pay to Seller an amount equal
to the Transfer Tax liability that would have resulted if such return had been
prepared by Buyer (it being understood that, for purposes of this clause (y),
the Transfer Tax Return that would have been prepared by Buyer shall be
determined by using (1) the Buyer's purchase price allocation, and (2) Buyer's
interpretation of applicable Tax Law as reflected in the Transfer Tax Return
prepared by Buyer pursuant to clause (x) hereof), and (z) Seller shall have sole
responsibility for the balance of the Transfer Tax liability with respect to
such Transfer Tax Return. Buyer and Seller shall (and shall cause each of their
respective Affiliates to) cooperate in the timely completion and filing of all
such Tax Returns, and Buyer and Seller shall (and shall cause each of their
respective Affiliates to) execute such documents in connection with such filings
as shall have been required by Law or reasonably requested by the other party.
(iv) Buyer shall control the conduct of any audit, claim,
contest or administrative or judicial proceeding relating to such Transfer
Taxes, subject to Seller's right to make any statement or report to any tax
authority reflecting the purchase price allocation prepared by Seller; provided,
however, that Seller shall be entitled to make any such statement and/or report
only (A) to the extent Seller reasonably determines is reasonably necessary to
rebut any presumption under applicable Tax Law that would otherwise deem Seller
to have agreed to and adopted the purchase price allocation prepared by Buyer in
the absence of such statement or report and (B) if such presumption could
reasonably be expected to result in an adverse effect on Seller other than a de
minimis adverse effect. If Buyer or Seller receives any written notice of
assessment or other claim from any Government Entity with respect to Transfer
Taxes for which the other party may be liable pursuant to this Section 5.7(c),
the notified party shall notify the other party in writing of the receipt of
such notice of assessment or other claim promptly after the receipt thereof.
(v) Any additional Transfer Taxes resulting from an adverse
determination by a Government Entity shall be borne by Buyer; provided, however,
that, so long as the adverse determination by the applicable Government Entity
does not relate directly to purchase price allocation, Seller shall be
responsible for any such additional Transfer Taxes to the extent that such
additional Transfer Taxes are attributable to the use of Seller's purchase price
allocation rather than Buyer's purchase price allocation.
(vi) Any Transfer Taxes resulting from any subsequent increase
in the Purchase Price pursuant to this Agreement shall be borne in accordance
with the provisions of this Section 5.7(c).
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(vii) Buyer and Seller shall cooperate in good faith to
minimize the amount of Transfer Taxes that may be imposed or assessed as a
result of the Transaction, including pursuant to one or more restructuring
transactions consummated pursuant to the Plan prior to the Closing; provided,
that Buyer and Seller conclude in good faith that such restructuring would have
a more likely than not probability of prevailing if challenged by the applicable
Government Entity.
(d) Determination and Allocation of Purchase Price. Seller and Buyer
undertake to act in good faith to jointly agree to a schedule setting forth the
allocation of the Aggregate Consideration among the Transferred Assets (the
"Purchase Price Allocation Schedule") for Tax purposes. If Seller and Buyer so
agree within 180 days of the Closing Date, Seller and Buyer shall, and Seller
and Buyer shall cause each of their respective Affiliates, (i) to report the
federal, state, and local income and other Tax consequences of the Transaction
contemplated herein in a manner consistent with such Purchase Price Allocation
Schedule and (ii) not to take any position inconsistent therewith for any Tax
purposes (unless required by a change in applicable Tax Law or as a result of a
good faith resolution of a contest). If Seller and Buyer do not so agree within
180 days of the Closing Date, each of Seller and Buyer may prepare their own
purchase price allocation and, for the avoidance of doubt and except as provided
in Sections 5.7(c)(iii) and 5.7(c)(v), each of Buyer and Seller will have no
liability to the other for any additional Taxes that may be imposed by any
Government Entity as a result of inconsistencies between the respective
allocations of Buyer and Seller.
(e) Employee Withholding and Reporting Matters. With respect to
those Transferred Employees who are employed by Buyer within the same calendar
year as the Closing, Buyer shall, in accordance with and to the extent permitted
pursuant to Revenue Procedure 2004-53, 2004-34 I.R.B. 320, assume all
responsibility for preparing and filing Form W-2, Wage and Tax Statement, Form
941, Employer's Quarterly Federal Tax Return, Form W-4, Employee's Withholding
Allowance Certificate and Form W-5, Earned Income Credit Advance Payment
Certificate. Seller and Buyer agree to comply with the procedures described in
Section 5 of the Revenue Procedure 2004-53. Notwithstanding any provision of
this Agreement, all Taxes required to have been withheld by Seller and its
Subsidiaries from their respective employees and independent contractors with
respect to any taxable periods, or portions thereof, ending on or before the
Closing shall be Excluded Liabilities and shall not be treated as Assumed
Liabilities.
(f) Consistent Treatment. The parties intend that the Transaction
shall constitute a taxable transaction and, for the avoidance of doubt, the
Transaction shall not be governed by Sections 351 or 368(a) of the Code (or
similar provisions of state, local or foreign Tax law, as applicable). The
parties agree to, and to cause their respective Affiliates to, treat the
Transaction in the foregoing manner for all income Tax purposes (unless
otherwise required by a change in applicable income Tax law or as a result of a
good faith resolution of a contest).
(g) Notice of Buyer Adverse Tax Event. If any change in Tax Law or
Proposed Change in Tax Law occurs and Buyer or Xxxx, Weiss, Rifkind, Xxxxxxx &
Xxxxxxxx LLP (or such other counsel that Buyer selects to represent Buyer with
respect to
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the Transaction) believes that such change in Tax Law or such Proposed Change in
Tax Law has a reasonable possibility of constituting a Buyer Adverse Tax Event
as of the Closing Date, Buyer shall within ten Business Days of such
determination provide written notice to Seller describing the change in Tax Law
or the Proposed Change in Tax Law and a statement that such change in Tax Law or
Proposed Change in Tax Law may constitute a Buyer Adverse Tax Event as of the
Closing Date (a "Buyer Adverse Tax Event Notice"). Upon reasonable request by
Seller, Buyer will make its counsel reasonably available to Seller to discuss
why Buyer believes the described change in Tax Law or Proposed Change in Tax Law
has a possibility of constituting a Buyer Adverse Tax Event.
Section 5.8 Post-Closing Obligations of each Specified Business to
Certain Employees.
(a) Seller shall provide to Buyer no later than 14 Business Days
following the date hereof, a copy of each employment agreement or other
individual agreement governing the terms and conditions of any Applicable
Employee's employment entered into with any Applicable Employee and a schedule
of each Applicable Employee with his or her title, job location, employer,
primary place of residence, salary or wage rate, commission status, bonus
opportunity, date of hire, level or other job classification, full or part time
status, "exempt" or "non-exempt" status, whether such Applicable Employee is
part of a collective bargaining unit and regularly scheduled work shift, as
applicable, and shall supplement such schedule no later than 60 Business Days
following the date hereof, indicating for each Applicable Employee, such
Applicable Employee's direct supervisor and most recent performance rating or
evaluation. In addition, no later than 55 Business Days prior to the Closing
Date, Seller shall update such schedule, including with respect to each
Applicable Employee's direct supervisor and most recent performance rating or
evaluation. No later than 40 Business Days prior to the Closing Date, Buyer
shall make offers of employment commencing on the Closing Date to all Applicable
Employees, and such offers shall be contingent upon (i) the Closing, (ii) such
Employee being an Applicable Employee on the Closing Date and (iii) such
Applicable Employee's satisfaction of customary employment conditions applicable
to all Parent employees which customary employment conditions are set forth on
Schedule 5.8(a)(i) of the Buyer Disclosure Schedule (it being understood that
such conditions will not include the evaluation of prior performance) (the
"Background Check"); provided, however, that Buyer shall have no obligation to
extend an offer of employment to any Employee who as of the date hereof or as of
the Closing Date is identified by job function, description or title or
otherwise noted on Schedule 5.8(a)(ii) of the Seller Disclosure Schedule. Buyer
shall, and shall cause Parent to, cooperate with Seller from and after the date
hereof to communicate with Applicable Employees other than those set forth on
Schedule 5.8(a)(ii) of the Seller Disclosure Schedule regarding the anticipated
offers of employment to be made by Buyer to such Applicable Employees hereunder.
Offers of employment required by this Section 5.8(a) shall be for a position of
similar or greater status, authority, duties and aggregate compensation
(excluding any equity-based compensation, severance, retention, sale, stay,
special bonus, emergence or other change in control payments or awards or any
similar compensation or award) as such Employee enjoys with Seller and/or its
Affiliates immediately prior to the Closing
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Date, that is within a 50-mile radius from such Employee's primary place of
residence as of the Closing Date, and with any such additional rights and
benefits as are prescribed by this Section 5.8. Consistent with and subject to
the foregoing and the other terms of this Agreement, Buyer shall have the right
to establish the terms and conditions under which such offers will be made. No
later than two Business Days following the date offers are required to be made
hereunder, Buyer shall provide to Seller a list of the Applicable Employees who
do not satisfy the Background Check, by job position or name and region, and as
to whom Buyer as a result of such Background Check failure has not made offers
of employment pursuant to this Section 5.8(a). The parties hereto shall
cooperate with each other to give effect to this Section 5.8(a) and neither
Seller nor its Affiliates shall take any actions that would interfere with the
Applicable Employees so offered employment from becoming employed by Buyer as of
the Closing Date. If any Employee, other than a Transferred Employee, becomes
entitled to any payments or benefits under any severance policy, plan,
agreement, arrangement or program which exists or arises or may be deemed to
exist or arise, under any applicable Law or otherwise, as a result of the
consummation of the Transaction or otherwise, Seller shall be liable for such
amounts, which Liability shall constitute an Excluded Liability except to the
extent Buyer does not comply with the requirement to offer employment on the
terms set forth in this Section 5.8(a).
(b) Beginning on the Closing Date and ending no earlier than the
first anniversary of the Closing Date, Buyer shall, or shall cause Parent to,
provide each Transferred Employee, other than any Transferred Employee included
in a collective bargaining unit covered by the Collective Bargaining Agreements
as in effect on the Closing Date (each, a "Union Employee") with, at Buyer's
sole discretion, either compensation and employee benefits that are (i) no less
favorable in the aggregate (excluding any equity-based compensation, severance,
retention, sale, stay, special bonus, emergence or other change in control
payments or awards or any similar compensation or award) than the compensation
and employee benefits provided to each such Transferred Employee immediately
prior to the Closing Date or (ii) substantially comparable in the aggregate
(excluding any severance) to the compensation and employee benefits provided to
similarly situated employees of Parent; provided, that for purposes of any
equity-based compensation, such employees shall be deemed newly hired employees
of Parent. In addition, to the extent Parent maintains a tax-qualified defined
benefit pension plan, from and after the date each Transferred Employee
satisfies the applicable eligibility and service requirements of any such plan
as in effect on any date of determination, such Transferred Employee shall
participate in such plan to the same extent as similarly situated employees of
Parent. With respect to Union Employees, Buyer will retain any and all of the
rights and obligations it may have pursuant to applicable labor Law.
(c) Notwithstanding Section 5.8(b), beginning on the Closing Date,
Buyer shall, or shall cause Parent to, for a period ending no earlier than the
first anniversary of the Closing Date, maintain a severance plan for the benefit
of each Transferred Employee, other than any Union Employee, that is no less
favorable to Transferred Employees than the Amended and Restated Adelphia
Communications Corporation Severance Plan effective September 21, 2004 (the
"Seller Severance Plan") and which includes the same general terms and
conditions regarding eligibility and
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exclusion from eligibility for severance pay and benefits as the Seller
Severance Plan. It is intended that this Section 5.8(c) shall not result in any
duplication of benefits to any Transferred Employee.
(d) To the extent (and only to the extent) set forth on Schedule
5.8(d) of the Seller Disclosure Schedule, Buyer shall assume all Liabilities and
obligations to provide any severance pay and benefits to any Transferred
Employee whose employment is terminated following the Closing. Buyer shall
reimburse Seller for any severance costs incurred with respect to any Employee
who is not offered employment by Buyer pursuant to this Transaction in the event
Parent or any of its Subsidiaries hires such Employee within three months after
the Closing.
(e) For purposes of this Agreement, (i) "Applicable Employees" means
all of the following:
(A) All persons who are active Employees on the Closing Date,
including Employees on vacation and Employees on a regularly scheduled day
off from work. Employees on temporary leave for purposes of jury or annual
two-week national service/military duty shall be deemed to be active
Employees;
(B) Employees who on the Closing Date are on nonmedical leave
of absence; provided, however, that no such Employee shall be guaranteed
reinstatement to active service if his return to employment is contrary to
the terms of his leave, unless otherwise required by applicable Law (for
purposes of the foregoing, nonmedical leave of absence shall include
maternity or paternity leave, leave under the Family and Medical Leave Act
of 1993, educational leave, military leave with veteran's reemployment
rights under federal Law, or personal leave, unless any of such is
determined to be a medical leave); and
(C) Employees who on the Closing Date are on disability or
medical leave and for whom it has been 180 calendar days or less since
their last day of active employment; provided, however, that no such
Employee shall be guaranteed reinstatement to active service if he is
incapable of working in accordance with the policies, practices and
procedures of Buyer; and
(ii) "Transferred Employees" means those Applicable Employees
who accept offers of employment with Buyer.
(f) Seller shall retain responsibility for and continue to pay all
medical, life insurance, disability and other welfare plan expenses and benefits
for each Transferred Employee with respect to claims incurred by such
Transferred Employee or his or her covered dependents prior to the Closing Date
except to the extent (and only to the extent) such liabilities are reflected in
the determination of the Closing Net Liabilities used in the determination of
the Final Adjustment Amount for the Specified Business in which such Transferred
Employee is employed. Buyer shall be responsible for all expenses and benefits
with respect to claims incurred by Transferred Employees or their covered
dependents on or after the Closing Date. For purposes of this paragraph, a claim
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is deemed incurred: (i) in the case of medical or dental benefits, when the
services that are the subject of the claim are performed, (ii) in the case of
life insurance, when the death occurs, (iii) in the case of long-term disability
benefits, when the Employee becomes disabled, and (iv) in the case of workers
compensation benefits, when the event giving rise to the benefits occurs.
(g) With respect to any plan that is a "welfare benefit plan" (as
defined in Section 3(1) of ERISA), or any plan that would be a "welfare benefit
plan" (as defined in Section 3(1) of ERISA) if it were subject to ERISA,
maintained by Parent, Buyer shall (i) provide coverage for Transferred Employees
under its medical, dental and health plans as of the Closing Date in accordance
with the terms of such plans, (ii) cause there to be waived any pre-existing
conditions, actively at work requirements and waiting periods or other
eligibility requirements to the extent such conditions, requirements or waiting
periods were satisfied by a Transferred Employee under a corresponding Benefit
Plan, and (iii) cause such plans to honor any expenses incurred by the
Transferred Employees and their dependents or beneficiaries under similar plans
of Seller and its Affiliates during the portion of the calendar year in which
the Closing Date occurs for purposes of satisfying applicable deductible,
co-insurance and maximum out-of-pocket expenses.
(h) Transferred Employees shall be given credit for purposes of
eligibility and vesting and other entitlement to benefits or rights, under each
employee benefit plan of Parent (each, a "Buyer Plan") in which such Transferred
Employees are or become eligible to participate, for all service (including
service with Seller or any of its Affiliates) for which such Transferred
Employees were credited for such purposes under a corresponding Benefit Plan of
Seller prior to the Closing Date; provided, however, that nothing in this
Section 5.8(h) shall result in any duplication of benefits.
(i) Except as required by applicable Law, as of the Closing Date,
the Transferred Employees shall cease to accrue further benefits under the
employee benefit plans and arrangements maintained by Seller and its Affiliates.
From and after the Closing, Seller shall remain solely responsible for any and
all Liabilities in respect of the Employees, including the Transferred
Employees, related to the Benefit Plans, except as otherwise provided in this
Section 5.8. None of Buyer or any of its Affiliates shall assume or have
transferred to them the sponsorship of any of the Benefit Plans or any other
benefit plans or arrangements maintained by Seller or any of its Affiliates,
including any non-qualified deferred compensation or rabbi trust plans or
arrangements, pursuant to or in connection with the Transaction.
(j) Seller shall take all actions necessary to fully vest the
Transferred Employees in their account balances under Seller's tax-qualified
401(k) plan ("Seller's 401(k) Plan") effective as of the Closing Date. In
accordance with the terms of the applicable plan, each Transferred Employee
shall be eligible to participate in a Parent-sponsored defined contribution plan
intended to qualify under Sections 401(a) and 401(k) of the Code ("Buyer's
401(k) Plan"). Buyer shall take all actions reasonably necessary to permit
beginning as soon as reasonably practical following the Closing Date each
Transferred Employee who has received an eligible rollover distribution (as
defined in
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Section 402(c)(4) of the Code) from Seller's 401(k) Plan to roll over the
distribution, to an account in Buyer's 401(k) Plan.
(k) With respect to any accrued but unused vacation time (including
flexible time-off and sick pay) to which any Transferred Employee is entitled
pursuant to the vacation policy applicable to such Transferred Employee
immediately prior to the Closing Date, Buyer shall, to the extent permitted by
applicable Law, assume the liability for such accrued vacation and allow such
Transferred Employee to use such accrued vacation to the extent such Transferred
Employee would have been entitled to such accrued vacation based on his level
and years of service under the vacation policy of Parent in effect as of the
Closing Date as if such Transferred Employee had been employed by Buyer during
such Transferred Employee's employment with Seller; provided, however, that if
the Transferred Employee's accrued vacation is greater than the amount of
vacation to which such Transferred Employee would have been entitled under
Parent's vacation policy, Buyer shall pay to such Transferred Employee within 90
days of the Closing Date an amount in cash equal to the difference but only to
the extent of the amount reflected in the Closing Net Liabilities Amount used in
calculating the Final Adjustment Amount for the Specified Business in which such
Transferred Employee is employed. With respect to any sale bonuses under the
Sale Bonus Program, Seller shall be responsible for the payment to all Employees
of that portion of the bonus that is to be paid on the "First Sale Bonus Payment
Date" (as defined in the Sale Bonus Program), which bonuses shall be paid prior
to or on the Closing. Buyer shall be responsible for the payment to Transferred
Employees on a timely basis of any sale bonuses under the Sale Bonus Program to
be paid after the "First Sale Bonus Payment Date" but only to the extent of the
amount reflected in the Closing Net Liabilities Amount used in calculating the
Final Adjustment Amount for the Specified Business in which such Transferred
Employee is employed.
(l) Buyer shall be responsible for providing or discharging any and
all notifications, benefits and liabilities to Transferred Employees and
governmental authorities required by WARN or by any other applicable Law
relating to plant closings or employee separations that are required (i) to be
provided after the Closing or (ii) with respect to any plant closing or mass
layoff that occurs within the 60-day period immediately following the Closing.
Seller agrees to cooperate in preparing and distributing any notices that Buyer
may desire to provide prior to the Closing. No later than five Business Days
prior to the Closing Date, Seller shall provide Buyer with a schedule setting
forth each Employee whose employment was terminated or is anticipated to be
terminated during the six month period prior to the Closing Date and the work
location of such Employee.
(m) Buyer shall assume any liability under COBRA arising from the
actions (or inactions) of Buyer or its Affiliates with respect to the
Transferred Employees after the Closing Date. Seller shall retain all
obligations with respect to continued coverage under COBRA (and any similar
state Law), Section 4980B of the Code and Part 6 of Subtitle B of Title I of
ERISA and the regulations thereunder for all Employees, including Applicable
Employees, who do not become Transferred Employees. Notwithstanding the
immediately preceding sentence, to the extent required by Treasury
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Regulation Section 54.4980B-9, Q&A-8(c), Buyer shall perform all obligations
under COBRA and the foregoing provisions of the Code and ERISA with respect to
each employee of Seller who is an "M&A qualified beneficiary" with respect to
the Transaction, as such term is defined by Treasury Regulation section
54.4980B-9, Q&A-4.
(n) For Employees who participate in Seller's short term incentive
bonus program, including the Short-Term Incentive Plan, Sales Incentive Plan and
Marketing Incentive Plan, Seller shall be responsible for paying their
respective annual bonuses for the period from the January 1 immediately
preceding the Closing Date through the Closing (pro-rated for the partial year)
and shall pay such bonuses to such Employees no later than the Closing; and,
solely with respect to Transferred Employees who participated immediately prior
to the Closing Date in such Seller's short term incentive bonus programs, Buyer
shall be responsible for paying respective annual bonuses for the period from
the Closing Date through the December 31 immediately following the Closing Date
pro-rated for the partial year.
(o) With respect to any Transferred Employee who becomes employed by
Friendco or any of its Affiliates pursuant to the Exchange Agreement, references
to any benefit plans maintained by Buyer or Parent shall be deemed to be
references to benefit plans maintained by Friendco or its Affiliates and
references to similarly situated employees of Buyer shall be deemed to be
references to similarly situated employees of Friendco or its Affiliates.
(p) The parties hereto hereby acknowledge and agree that no
provision of this Agreement shall be construed to create any right to any
compensation or benefits whatsoever on the part of any Employee or other future,
present or former employee of Seller or any of its Affiliates. Nothing in this
Section 5.8 or elsewhere in this Agreement shall be deemed to make any employee
of the parties or their respective Affiliates a third party beneficiary of this
Section 5.8 or any rights relating hereto.
(q) The parties hereto hereby acknowledge and agree that Buyer shall
have no Liability in respect of any award to any Employee, director, consultant,
independent contractor or other service provider of Seller or its Affiliates
with respect to any shares of Seller's Equity Securities, whether existing on
the date hereof or arising in the future ("Stock Awards"), and that all
Liabilities related to such Stock Awards shall be Excluded Liabilities.
(r) Seller agrees that, notwithstanding anything in this Agreement
to the contrary, the payments of awards under the Amended and Restated Adelphia
Communications Corporation Performance Retention Plan shall in no event be made
in Equity Securities of Buyer, Parent or any Affiliate of Parent and shall be
satisfied in full by Seller prior to or on the Closing.
Section 5.9 Ancillary Agreements. At the Closing, Seller shall and
shall cause each of its Affiliates party to an unexecuted Ancillary Agreement
to, execute and deliver each unexecuted Ancillary Agreement to which it is a
party, and Buyer shall execute and deliver each of the unexecuted Ancillary
Agreements to be executed by it.
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Section 5.10 Acquisition Proposals. Except as otherwise provided in
this Section 5.10, Seller agrees that neither it nor any of its Subsidiaries nor
any of their respective directors, officers or employees shall, and that it
shall direct its Subsidiaries and its and its Subsidiaries' agents and
representatives and use its best efforts to cause its and its Subsidiaries'
agents and representatives (including any investment banker, attorney or
accountant retained by it or any of its Subsidiaries) not to, directly or
indirectly, initiate, solicit or encourage any inquiries or the making of any
proposal or offer with respect to a merger, reorganization (including an
Alternate Plan), share exchange, consolidation or similar transaction involving
(directly or indirectly), or any purchase (directly or though a proposed
investment in Equity Securities, debt securities or claims of creditors) of 10%
or more of the Transferred Assets Related to the Business or of the outstanding
Equity Securities of Seller or any of its Affiliates directly or indirectly
owning Assets Related to the Business (any such proposal or offer being
hereinafter referred to as an "Acquisition Proposal" and any such transaction,
an "Acquisition"); provided, however, that the foregoing shall not restrict
Seller from renewing the "exit financing" of the Debtors on substantially the
same terms as in effect as of March 31, 2005. Seller further agrees that neither
it nor any of its Subsidiaries nor any of their respective directors, officers
or employees shall, and that it shall direct its Subsidiaries and its and its
Subsidiaries' agents and representatives and use its best efforts to cause its
and its Subsidiaries' agents and representatives (including any investment
banker, attorney or accountant retained by it or any of its Subsidiaries) not
to, directly or indirectly, engage in any negotiations concerning, or provide
any confidential information or data to or have any discussions with any Person
relating to, an Acquisition Proposal, or otherwise facilitate any effort or
attempt to make or implement an Acquisition Proposal. Seller agrees that it will
take the necessary steps to promptly inform the Persons referred to in the first
sentence of this Section 5.10 of the obligations undertaken in this Section 5.10
and to cause them to cease immediately any current activities that are
inconsistent with this Section 5.10. Notwithstanding the foregoing, nothing
contained in this Agreement shall prevent Seller or its board of directors (the
"Board") from:
(a) (i) complying with its disclosure obligations under Law or the
Bankruptcy Code with regard to an Acquisition Proposal, or (ii) prior to the
commencement of the Confirmation Hearing, in response to an unsolicited bona
fide Acquisition Proposal, (A) (1) providing information to (including
discussing any due diligence issues, requests or clarifications with) a Person
with whom Seller executes a confidentiality agreement on terms no less favorable
to Seller than those contained in the Seller Confidentiality Agreement (as in
effect prior to amendment on the date hereof), other than any restrictions on
such Person's ability to make or amend an Acquisition Proposal and (2) following
receipt of a bona fide unsolicited Acquisition Proposal from such a Person,
engaging in discussions with such Person to the extent such discussions are
confined to clarifying any term of such Acquisition Proposal or (B) engaging in
any negotiations or discussions with any Person who has made such an Acquisition
Proposal if and only to the extent that in each such case referred to in clauses
(A) and (B) above, (1) the Board determines in good faith after consultation
with outside legal counsel that the directors of Seller should take such action
in order to comply with their fiduciary duties under applicable Law, (2) such
Acquisition Proposal involves the direct or indirect
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acquisition by one or more third parties of at least 66-2/3% of (x) all Assets
Related to the Business or (y) the outstanding Equity Securities of Seller and
(3) in each such case referred to in clause (B) above, the Board determines in
good faith (after consultation with its financial and legal advisors) that such
Acquisition Proposal, if accepted, is reasonably likely to be consummated,
taking into account all legal, financial and regulatory aspects of the proposal
and the Person making the proposal, and if consummated, would result in a
transaction more favorable (taking into account, without limitation, financial
terms of any termination fee that may be payable pursuant to Section 8.5(b)) to
Seller's stakeholders from a financial point of view than the Transaction (any
such more favorable Acquisition Proposal being referred to in this Agreement as
a "Superior Proposal"). Seller or any of its Subsidiaries shall notify Buyer
promptly (but in no event later than 24 hours) after receipt by Seller or any of
its Subsidiaries (or any of their respective directors, officers, employees or
advisors) of any Acquisition Proposal, any indication that a third party is
considering making an Acquisition Proposal or any request for information
relating to the Transferred Assets, any Specified Business, Seller or any of its
Subsidiaries or for access to any Specified Business or any of the Transferred
Assets by any third party that may be considering making, or has made, an
Acquisition Proposal. Seller shall provide such notice orally and in writing and
shall identify the third party making, and the terms and conditions of, any such
Acquisition Proposal, indication or request. Seller shall keep Buyer fully
informed, on a current basis, of the status and details of any such Acquisition
Proposal, indication or request. Seller shall promptly provide Buyer with any
non-public information concerning Seller's business, present or future
performance, financial condition or results of operations, provided to any third
party that was not previously provided to Buyer; and
(b) (i) prior to the commencement of the Confirmation Hearing,
engaging in any negotiations or discussions concerning an Alternate Plan with
the Committees, the stakeholders of Seller or its Affiliates or their respective
advisors (in each case (other than in the case of Committees) with whom Seller
enters into, or has entered into, a confidentiality agreement on customary terms
under the circumstances that restricts such stakeholder (other than with respect
to any other stakeholder who is subject to a substantially similar
confidentiality agreement or to the Committees) from (x) disclosing any
confidential information regarding Seller and its Affiliates, Buyer and its
Affiliates, or information regarding an Alternate Plan, including the status
thereof, and (y) making public statements regarding any of the foregoing), but
only to the extent that (A) the Board determines in good faith after
consultation with outside legal counsel that the directors of Seller should take
such action in order to comply with their fiduciary duties under applicable Law
and (B) the Board determines in good faith (after consultation with its
financial and legal advisors) that such Alternate Plan, if pursued and assuming
(for purposes of determining the right to engage in negotiations or discussions
pursuant to this Section 5.10(b), but not for purposes of the definition of
"Superior Alternate Plan") the support of Seller's stakeholders therefor, is
reasonably likely to be consummated, taking into account all legal, financial
and regulatory aspects of the proposed Alternate Plan and, if consummated, would
result in a transaction more favorable (taking into account, without limitation,
the financial terms of any termination fee that may be paid pursuant to Section
8.5(b)) to the stakeholders of Seller and its
112
Affiliates from a financial point of view than the Transaction (any such more
favorable Alternate Plan being referred to in this Agreement as a "Superior
Alternate Plan") or (ii) after entry of a Confirmation Order satisfying the
condition set forth in Section 6.2(g) (but only for so long as such Confirmation
Order is in effect), planning for an Alternate Plan that involves the emergence
of Debtors as standalone entities with no greater than a 10% additional equity
contribution (other than existing Claims), including engaging in any
negotiations or discussions concerning an Alternate Plan with stakeholders of
Seller or its Affiliates or their advisors, preparing (but not filing) a
disclosure statement with respect to such Alternate Plan and preparing and
negotiating any intercreditor agreements; provided, however, that such Alternate
Plan provides that it can only be confirmed and effective if this Agreement is
terminated in accordance with its terms and such planning does not involve any
action or omission that could reasonably be expected to materially impair or
materially delay the Transaction; provided, further, that nothing in this
Section 5.10(b) shall permit any public statements or filings with the
Bankruptcy Court or any other court by or on behalf of Seller or its Affiliates.
Seller shall notify Buyer of its engagement in discussions concerning an
Alternate Plan and shall keep Buyer reasonably informed, on a current basis, of
material developments that could reasonably be expected to result in an
Alternate Plan. For purposes of this Agreement, an "Alternate Plan" is any plan
under chapter 11 of the Bankruptcy Code (other than the Plan) or any liquidation
under chapter 7 of the Bankruptcy Code. Without limiting any other obligation
set forth in this Agreement, Seller shall, in connection with the activities
permitted under this Section 5.10(b), use commercially reasonable efforts to
enforce any confidentiality obligations of the Committees and any obligations
under the confidentiality agreements described in this Section 5.10(b).
Section 5.11 Additional Financial Information.
(a) Seller shall use commercially reasonable efforts, and shall
cause its Affiliates to use commercially reasonable efforts, to provide Buyer
with financial statements and related information (collectively, "Financial
Information") sufficient to permit Parent or its Affiliates to fulfill its
obligations to include financial disclosure relating to each Specified Business
and, if required, the Friendco Business and the MCE Systems, on a timely basis
under the Exchange Act and, if Buyer, Parent or any of Parent's Affiliates
undertakes an offering of securities prior to the Closing, the Securities Act
(it being understood that the foregoing shall not require Seller to file or
furnish any periodic or current reports that are required to be filed prior to
the date hereof under the Exchange Act with the SEC (which reports are addressed
by Section 5.19)). If some or all of the Financial Information is included in or
incorporated by reference into a prospectus for an offering of securities by
Parent or any of Parent's Subsidiaries prior to the Closing, Seller shall, and
shall cause its Affiliates to, use commercially reasonable efforts to cause the
independent auditors of Seller to provide customary assistance to Buyer, Parent
or such Subsidiary and its underwriters in connection with such financing,
including the provision of consent and comfort letters addressed to the SEC,
comfort letters addressed to the underwriters, participation in due diligence
matters with respect to such offering and assistance in responding to comments
or questions from the SEC with respect to the Financial Information. Buyer shall
reimburse Seller for the reasonable costs and expenses incurred by Seller
pursuant to this Section 5.11(a), including
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reasonable out-of-pocket costs and any incremental costs and expenses necessary
to comply with this Section 5.11(a) (including all necessary incentive
compensation) (unless and to the extent compliance with this Section 5.11(a) is
waived by Buyer prior to the incurrence of such costs and expenses). Seller
shall give Buyer reasonable advance notice of the type and the amount of such
costs and expenses prior to the incurrence thereof.
(b) As soon as reasonably practicable (and, in any event, prior to
the Closing), Seller shall, and shall cause its Affiliates to, use commercially
reasonable efforts, to provide Buyer with a copy of (i) the consolidated audited
balance sheets and audited statements of income, stockholders equity and cash
flows for each Specified Business reflecting the allocation of Shared Assets and
Liabilities pursuant to the Designated Allocation and Section 2.3 (assuming,
with respect to any period prior to January 1, 2004, the exclusion of the MCE
Systems and the MCE Systems (as defined in the Friendco Purchase Agreement) from
each such Specified Business), at and for the fiscal years ended December 31,
2002 (unless statements at and for the fiscal year ended December 31, 2005 are
provided as set forth below), December 31, 2003, December 31, 2004, and, if the
Closing shall not have occurred on or prior to March 31, 2006 (or if such
statements are otherwise available) December 31, 2005 (the "Derivative Audited
Financial Statements"), (ii) the consolidated audited balance sheets and audited
statements of income, stockholders' equity and cash flows for Seller and its
Affiliates for the fiscal years ended December 31, 2004, and, if the Closing
shall not have occurred on or prior to March 31, 2006 (or if such statements are
otherwise available), December 31, 2005 (the "Seller Audited Financial
Statements"), and (iii) the unaudited balance sheets and unaudited statements of
income, stockholders' equity and cash flows for each MCE System for the fiscal
years ended December 31, 2002 (unless the Derivative Audited Financial
Statements include consolidated audited balance sheets and audited statements of
income, stockholders equity and cash flows for each Specified Business for the
fiscal year ended December 31, 2005 are provided as set forth above), and
December 31, 2003 (the "MCE Financial Statements" and, together with the
Derivative Audited Financial Statements and the Seller Audited Financial
Statements, the "Additional Financial Statements"); provided, that Buyer shall
reimburse Seller for the reasonable costs and expenses incurred by Seller in
connection with the preparation of the Derivative Audited Financial Statements
and the MCE Financial Statements, including reasonable out-of-pocket costs and
any incremental costs and expenses necessary to comply with this Section 5.11(b)
(including all necessary incentive compensation). Seller shall give Buyer
reasonable advance notice of the type and the amount of such costs and expenses
prior to the incurrence thereof.
(c) Buyer shall use its commercially reasonable efforts to obtain
relief from the staff of the SEC from Parent's obligations to include financial
statements with respect to periods ending on or prior to December 31, 2002
required by Section 5.11(a) or Section 5.11(b) in Parent's filings under the
Securities Act or Exchange Act. Seller shall cooperate with Buyer in respect of
the obtaining of any such relief.
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Section 5.12 Post-Closing Consents.
(a) Subsequent to the Closing, and subject to Section 2.11, Seller
shall and shall cause its Affiliates to continue to use commercially reasonable
efforts to obtain in writing as promptly as possible any consent, authorization
or approval necessary or commercially advisable in connection with the
Transaction which was not obtained on or before the Closing in form and
substance reasonably satisfactory to Buyer.
(b) Without limiting Section 5.12(a), in the event that a Closing
under this Agreement occurs without the receipt of all LFA Approvals, Buyer and
Seller shall, and Buyer shall cause Parent to, act in good faith to obtain any
remaining LFA Approvals following the Closing. Until such time as all LFA
Approvals have been obtained, Buyer covenants and agrees to use commercially
reasonable efforts to satisfy all obligations of Seller or any of its Affiliates
arising after the Closing under each Franchise agreement corresponding to a LFA
Approval that has not been obtained. Buyer and Seller agree to enter into such
arrangements as are reasonably necessary to cause Seller not to be in breach
under each such Franchise agreement and to permit Buyer to receive the economic
benefits of each such Franchise agreement.
(c) Buyer and Seller agree, assuming as set forth in Section 5.12(b)
that all or substantially all of the economic benefits relating to a remaining
Franchise inure to Buyer, (i) that any remaining Franchises described in Section
5.12(b) shall be treated for all income Tax purposes as Assets of Buyer as of
the Closing and (ii) not to take, and to prevent any of their respective
Affiliates from taking, any position inconsistent with such treatment for any
income Tax purposes (unless required by a change in applicable income Tax Law or
a good faith resolution of a contest).
Section 5.13 Bankruptcy Proceedings.
(a) Seller shall, as soon as reasonably practicable after the date
hereof, but no later than 45 days hereafter, file with the Bankruptcy Court (i)
a Disclosure Statement with respect to the Plan intended to meet the
requirements of section 1125(b) of the Bankruptcy Code and this Section 5.13 (as
amended from time to time in accordance with this Agreement, the "Disclosure
Statement"), (ii) a motion to approve, among other things, the Disclosure
Statement (the "Disclosure Statement Motion") and (iii) the Plan. Seller shall,
and shall cause each of its Affiliates to, commence appropriate proceedings
before the Bankruptcy Court and otherwise use commercially reasonable efforts to
obtain approval of the Disclosure Statement and the Plan as expeditiously as
possible. Seller shall, and shall cause its Affiliates to, provide in the
Disclosure Statement a range of values determined by Seller after consultation
with Buyer; provided, that the midpoint of such range shall equal the Aggregate
Value of the Purchase Shares; provided, however, that, based on changes, events
or circumstances first arising or occurring following the date hereof, Seller
may, after consultation with Buyer and its counsel, change the midpoint and the
range in order that the statements contained in the Disclosure Statement in
respect of the value of the Purchase Shares would not be misleading or result in
a violation of any applicable Law by Seller; provided, further, that any such
change shall be disregarded for purposes of this Agreement, including the
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amount of the Aggregate Value of the Purchase Shares or Per Share Value of the
Purchase Shares. The Plan, any and all exhibits and attachments to the Plan, the
Disclosure Statement, and the Disclosure Statement Motion and the orders
approving the same (including the Confirmation Order), and any amendment or
supplement to any of the foregoing, (A) to the extent affecting the terms of the
Transaction, the Transferred Assets, the Assumed Liabilities, Parent or its
Affiliates (in the case of Parent or its Affiliates, only to the extent related
to the Transaction or an interest in the Transferred Joint Venture Parents
(other than with respect to Plan distribution matters) and not in their capacity
as creditors or, with respect to Plan distribution matters, equityholders),
shall be in all material respects reasonably acceptable in form and substance
to, and shall not be filed until consented to by, Buyer, which consent shall not
be unreasonably withheld, (B) shall not otherwise contain any provision
(including any provision relating to the allocation of distributable proceeds
among Seller's stakeholders), or otherwise have an effect, that would,
individually or in the aggregate, reasonably be expected to materially impair or
materially delay the Transaction; it being understood that any allocation of
distributable proceeds that does not violate the absolute priority rule or any
proposed waiver of the absolute priority rule as may be contemplated by the Plan
that is reasonably expected to be consented to by the affected classes shall not
be deemed to materially impair or materially delay the Transaction, (C) shall
not contain any provision providing for an Alternate Plan, including the
so-called "toggle plan", (D) shall not treat Buyer or its Affiliates, in their
capacities as creditors or equityholders, in a discriminatory manner as compared
to similarly classified stakeholders and (E) without limiting the generality of
the foregoing, in the case of the Confirmation Order, shall contain the finding
that Buyer is a good faith purchaser of the Transferred Assets pursuant to
section 363(m) of the Bankruptcy Code unless Buyer's actions which have been
determined by the Bankruptcy Court to have not been in good faith preclude such
a finding. Buyer shall refrain from taking any actions in connection herewith
that are not in good faith (as determined by the Bankruptcy Court) and that
would preclude a finding that Buyer is a good faith purchaser of the Transferred
Assets pursuant to section 363(m) of the Bankruptcy Code. Seller shall provide
Buyer and its counsel with copies of all material motions, applications,
supporting papers and notices prepared by Seller (including forms of orders and
notices to interested parties) relating in any way to the Disclosure Statement,
the Plan or the Transaction prior to the filing of such documents and shall
provide Buyer, to the extent practicable, with a reasonable opportunity to
review and comment on same. Seller shall consult with Buyer prior to taking any
action in or with respect to the Reorganization Case that could reasonably be
expected, individually or in the aggregate, to (x) be inconsistent with this
Agreement or the Transaction, (y) materially impair or materially delay the
Transaction or (z) relate to any material information provided by Buyer for
inclusion in the Disclosure Statement or have an adverse effect on the
Transaction, the Transferred Assets, the Assumed Liabilities, Parent or its
Affiliates (in the case of Parent or its Affiliates, only to the extent related
to the Transaction or an interest in the Transferred Joint Venture Parents
(other than with respect to Plan distribution matters) and not in their capacity
as creditors or, with respect to Plan distribution matters, equityholders).
Buyer shall provide Seller with all information concerning Buyer, Parent and its
Controlled Affiliates as is required or reasonably advisable to be included in
the Disclosure Statement, including (to the extent
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so reasonably advisable) all information that would be required to be set forth
in a registration statement on Form S-1 under the Securities Act. Any
information delivered by Buyer or Seller for inclusion in the Disclosure
Statement will be intended to satisfy the requirements of section 1125(a) of the
Bankruptcy Code.
(b) No later than 70 days prior to the Confirmation Hearing, Seller
shall deliver to Buyer a true and complete list of all Contracts Related to each
Specified Business (other than Programming Agreements but including
retransmission consent agreements) entered into prior to such seventieth day
(provided, that between such seventieth day and the Confirmation Hearing, Seller
shall promptly update such list to reflect Contracts Related to each Specified
Business (other than Programming Agreements but including retransmission consent
agreements) entered into during such period) which shall include the following,
each of which must be satisfactory in form and substance to Buyer in its
reasonable discretion: (i) a list of Contracts (other than Programming
Agreements but including retransmission consent agreements) which Seller or any
Affiliate has rejected pursuant to an order of the Bankruptcy Court (the
"Rejected Contracts"); (ii) a list of Contracts (other than Programming
Agreements but including retransmission consent agreements) which Seller or any
Affiliate has assumed pursuant to an order of the Bankruptcy Court; (iii) with
respect to each such Contract that is not a Rejected Contract, (A) Seller's good
faith estimate of the Cure Costs in respect of such Contract, (B) Seller's good
faith estimate of the Rejection Claims in respect of such Contract and (C)
whether such Contract was entered into on or following the Petition Date. No
later than 40 days prior to the Confirmation Hearing, Buyer shall provide Seller
with a list of Contracts to be assumed, if applicable, by Seller or any of its
Affiliates and assigned by Seller or any of its Affiliates to Buyer with respect
to each Specified Business (as further identified by Buyer pursuant to the
provisions of this Section 5.13(b), the "Assigned Contracts"). As promptly as
practicable following the determination of the Assigned Contracts by Buyer and
in any event no later than 20 days prior to the Confirmation Hearing, Seller or
its Affiliates, as the case may be, shall commence appropriate proceedings
before the Bankruptcy Court and otherwise take all necessary actions in order to
determine Cure Costs with respect to any Assigned Contract entered into prior to
the Petition Date. Notwithstanding the foregoing, prior to the Closing, Buyer
may identify (x) any Assigned Contract as one that Buyer no longer desires to
have assigned to it and such Contract shall for all purposes of this Agreement,
including Section 5.13(c), and any Ancillary Agreement be deemed not to be an
Assigned Contract and (y) any Contract entered into by Seller of any of its
Affiliates following entry of the Confirmation Order that is Related to any
Specified Business as an Assigned Contract and such Contract shall for all
purposes of this Agreement be deemed to be an Assigned Contract. At the
direction of Buyer, Seller shall, or shall cause its Affiliates to, as the case
may be, take all necessary actions and, if necessary, promptly commence
appropriate proceedings before the Bankruptcy Court in order to effect the
assumption of any Assigned Contract by Seller or any of its Affiliates and the
assignment of such Contract to Buyer at the Closing pursuant to the Plan.
Following the Closing, Seller shall not, and shall cause each of its Affiliates
not to, amend, modify, terminate or abrogate any Assigned Contract. Seller
shall, and shall cause each of its Affiliates to, take all actions such that
each OCB Contract that is not an Assigned Contract shall be terminated or
rejected as of the Closing.
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(c) Seller shall use its commercially reasonable efforts to make
available to Buyer as promptly as practicable after the date hereof (or, in the
case of Contracts entered into after the date hereof, as promptly thereafter as
practicable) true and complete copies of each of the Contracts Related to each
Specified Business (other than Programming Agreements but including
retransmission consent agreements) and of each of the Contracts listed, or
required to be listed, in Schedule 3.15(b) of the Seller Disclosure Schedule,
and true and complete summaries of the terms of any such oral Contracts; it
being understood that, in any event, such copies and summaries shall be made
available in respect of the Contracts listed on the list delivered pursuant to
the first sentence of Section 5.13(b) no later than 70 days prior to the
Confirmation Hearing.
(d) Other than the Assumed Cure Costs, Seller shall be liable for
all Cure Costs, and Buyer shall have no Liability to any Seller Indemnified
Party, the estate of Seller or any of its Affiliates or to any non-debtor party
to any Contract in connection therewith; provided, however, that if the amount
of the Cure Costs in respect of any Assigned Contract that is not an OCB
Contract is greater than the amount that would be paid to the non-debtor party
to such Contract on account of a Rejection Claim in respect of such Contract,
taking into consideration the likely recovery on account of such Rejection Claim
under the Plan (as Seller and Buyer mutually agree, or, in the absence of such
agreement, as may be determined by the Bankruptcy Court), then such excess, but
only such excess, shall be deemed to constitute an Assumed Cure Cost. Seller
shall also be liable for all Claims, including Rejection Claims, in respect of
any Contract that is not an Assigned Contract, and Buyer shall have no Liability
to any Seller Indemnified Party, the estate of Seller or any of its Affiliates
or to any non-debtor party to any such Contract in connection therewith;
provided, however, that if the amount that would be paid to the non-debtor party
to an OCB Contract that is not an Assigned Contract on account of a Rejection
Claim in respect of such OCB Contract, taking into consideration the likely
recovery on account of such Rejection Claim under the Plan, is greater than the
Cure Costs with respect to such OCB Contract (in either case as Seller and Buyer
mutually agree, or, in the absence of such agreement, as may be determined by
the Bankruptcy Court), then, subject to such OCB Contract having been made
available to Buyer for at least 70 days prior to the Confirmation Hearing (or,
in the case of Contracts entered into after such seventieth day, as promptly
thereafter as practicable), such excess, but only such excess, shall constitute
an Assumed Liability. Subject to approval of the Bankruptcy Court (which
approval Seller shall use commercially reasonable efforts to obtain), Buyer (or
its designee) shall be entitled to assume and maintain control, on behalf of
Seller and any of its Affiliates, of the litigation and settlement of any
dispute over any Assumed Cure Costs with respect to any Franchise or, in respect
of any OCB Contract, any Rejection Claim that is an Assumed Liability. Seller
shall not, and shall cause each of its Affiliates not to, without the prior
written consent of Buyer (not to be unreasonably withheld), settle, compromise
or offer to settle or compromise any Liability in respect of (i) Cure Costs
under such Assigned Contract that is not an OCB Contract or under any Franchise
unless Seller shall have assumed all Liabilities in respect thereof and shall
have agreed to release Buyer from all Liabilities in respect of any and all Cure
Costs under such Assigned Contract or such Franchise or (ii) any Rejection Claim
in respect of any OCB Contract unless Seller shall have assumed all Liabilities
in respect thereof and shall have agreed to release Buyer from all Liabilities
in respect of any and all Rejection
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Claims caused by or arising out of any such settlement or compromise and Seller
shall consult with and, in each case, provide Buyer a meaningful opportunity to
participate in any such litigation or settlement.
(e) Any motion, application or other court document filed with, and
the proposed orders submitted to, the Bankruptcy Court seeking authorization to
assume and assign or reject or terminate any Contracts Relating to any Specified
Business or the Business shall be provided to Buyer in advance of filing (with a
reasonable opportunity to review and comment on same) and shall be in form and
substance reasonably satisfactory to Buyer in all material respects. On or prior
to the Closing, Seller shall, and shall cause its Affiliates to, cure any and
all defaults and breaches under and satisfy (or with respect to any Assumed
Liability or obligation that cannot be rendered non-contingent and liquidated
prior to the Closing Date, make effective provision satisfactory to Buyer and
the Bankruptcy Court for satisfaction from funds of Seller) any Liability (other
than as to Assumed Cure Costs) arising from or relating to pre-Closing periods
under the Assigned Contracts so that such Contracts may be assumed by Seller or
its Affiliates and assigned to Buyer in accordance with the provisions of
section 365 of the Bankruptcy Code and this Agreement. On or prior to the
Closing, Seller shall, and shall cause its Affiliates to, pay or make adequate
reserve for all Cure Costs other than the Assumed Cure Costs.
(f) Seller shall, and shall cause its Affiliates to, and Buyer
shall, and shall cause Parent to, each use commercially reasonable efforts, and
cooperate, assist and consult with each other, as promptly as practicable, to
secure approval of the Disclosure Statement, confirmation of the Plan and
consummation of the transactions contemplated by the Plan and this Agreement.
Neither the Plan nor the Disclosure Statement nor any other material document
relating to the transactions contemplated hereby shall be amended, modified,
supplemented, withdrawn or revoked (i) if such amendment, modification,
supplement, withdrawal or revocation affects the terms of the Transaction, the
Transferred Assets, the Assumed Liabilities, Parent or its Affiliates (in the
case of Parent or its Affiliates, only to the extent related to the Transaction
or an interest in the Transferred Joint Venture Parents (other than with respect
to Plan distribution matters) and not in their capacity as creditors or, with
respect to Plan distribution matters, equityholders) without the consent of
Buyer (provided, that such consent shall not be unreasonably withheld) or (ii)
if such amendment, modification, supplement, withdrawal or revocation would
contain or alter any provision (including as to the allocation of distributable
proceeds among Seller's stakeholders), that would, individually or in the
aggregate, reasonably be expected to materially impair or materially delay the
Transaction. For the avoidance of doubt, the parties hereto acknowledge and
agree that it would not be unreasonable for Buyer to decline to consent to any
Plan modification which would require the payment of additional consideration by
Buyer under the Plan or which would reduce or impair the Transferred Assets or
increase the Assumed Liabilities.
(g) If an order, judgment or ruling of a court of competent
jurisdiction in the Reorganization Case is entered denying entry of (or
vacating), or that is inconsistent with the entry of, a Confirmation Order
satisfying the condition set forth in Section 6.2(g), Seller and Buyer will
cooperate and otherwise use commercially reasonable efforts to prosecute
diligently the entry of a Confirmation Order satisfying the
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condition set forth in Section 6.2(g). If the Confirmation Order or any other
orders of the Bankruptcy Court relating to this Agreement, the Disclosure
Statement, the solicitation of acceptances of the Plan or confirmation of the
Plan shall be appealed by any party (or a petition for certiorari or motion for
reconsideration, amendment, clarification, modification, vacation, stay,
rehearing or reargument shall be filed with respect to any such order), Seller
and Buyer will cooperate in taking such steps to prosecute diligently such
appeal, petition or motion, each of Seller and Buyer shall use commercially
reasonable efforts to obtain an expedited resolution of any such appeal,
petition or motion and any expenses incurred by Seller in connection therewith
shall be borne by Seller.
(h) Seller shall either (i) (A) cause the Subsidiaries of Seller
listed on Schedule 5.13(h) of the Seller Disclosure Schedule or any other
non-debtor Subsidiary of Seller that acquires Assets Related to the Acquired
Business (the "Non-Debtor Subsidiaries") to file a petition for relief under
chapter 11 of the Bankruptcy Code (the "Additional Reorganization Case"), (B)
take all steps reasonably necessary to obtain approval by the Bankruptcy Court
of the Transaction as it relates to the Non-Debtor Subsidiaries and (C) obtain
an Additional Discharge for the Non-Debtor Subsidiaries, in each case as
expeditiously as possible under the Bankruptcy Code and the Bankruptcy Rules,
and in any event prior to the Closing, or (ii) subject to the prior approval of
the Bankruptcy Court, cause each Non-Debtor Subsidiary to transfer any Assets of
such Non-Debtor Subsidiary to a Debtor in exchange for payment of adequate
consideration (provided, that such transfer shall be reasonably satisfactory to
Buyer in all material respects and shall render such Assets subject to the
Discharge) (such transfer, a "Non-Debtor Transfer"). Seller shall, and shall
cause each Non-Debtor Subsidiary to, (x) provide Buyer and its counsel with
copies of all material motions, applications, supporting papers and notices
prepared by Seller or such Non-Debtor Subsidiary (including forms of orders and
notices to interested parties) relating in any way to an Additional
Reorganization Case or Non-Debtor Transfer prior to the filing of such documents
and (y) provide Buyer, to the extent practicable, with a reasonable opportunity
to review and comment on same. Seller shall, and shall cause each Non-Debtor
Subsidiary to, consult with Buyer prior to taking any action in or with respect
to any Additional Reorganization Case or Non-Debtor Transfer. For purposes of
Sections 2.1 and 2.3 (including any related definitions), unless otherwise
directed in writing by Buyer (and only to the extent set forth in such writing),
each Non-Debtor Subsidiary shall only be considered an Affiliate of Seller if
and only to the extent such Non-Debtor Subsidiary shall have performed the
actions and satisfied the requirements set forth in clause (i) or (ii) of this
Section 5.13(h).
(i) Seller shall, and shall cause each of its Affiliates to, use
commercially reasonable efforts to maintain the exclusive periods pursuant to
section 1121(d) of the Bankruptcy Code during which the Debtors may file a plan
or plans of reorganization and solicit acceptances thereof.
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Section 5.14 Equipment Leases. Seller shall, and shall cause its
Affiliates to, pay the remaining balances on any Equipment Leases and shall
deliver title to all vehicles and Fixtures and Equipment covered by such
Equipment Leases free and clear of all Encumbrances to Buyer at the Closing.
Section 5.15 Expanded Transaction. In the event that the Friendco
Purchase Agreement is terminated prior to the Closing as a result of actions by,
or failure to obtain Governmental Authorizations from, any Government Antitrust
Entity or the FCC, then:
(a) the following provisions shall become effective upon notice to
Buyer by Seller of such termination:
(i) at the Closing, an aggregate amount of consideration equal
to the Purchase Price (as defined in the Friendco Purchase Agreement) minus the
Aggregate Buyer Discharge Amount (as defined in the agreement attached hereto as
Exhibit 5.15(a)(i), the "Expanded Agreement"), subject to adjustments pursuant
to Section 2.6(a), 2.6(f) and 2.7, shall be added to the Purchase Price in
Section 2.5 hereunder; provided, that any such consideration to be delivered by
Buyer pursuant to this Section 5.15 shall be satisfied, at Buyer's election,
with any combination of cash, which shall be deemed to constitute part of the
Cash Consideration, or shares of Parent Class A Common Stock (valued at the Per
Share Value of the Purchase Shares), which shall be deemed to constitute
additional Purchase Shares for purposes of this Agreement;
(ii) each of the Group 1 Business and the Group 2 Business as
defined in the Friendco Purchase Agreement shall be deemed to be a Specified
Business hereunder, each referred to herein as the "Group 1 Friendco Business"
and "Group 2 Friendco Business," respectively, applying references herein to
such Specified Businesses as would have been applied under the Friendco Purchase
Agreement; provided, that, the preamble in Sections 6.1 and 6.2 of the Friendco
Purchase Agreement shall be incorporated into Sections 6.1 and 6.2,
respectively, with respect to the Group 2 Friendco Business;
(iii) the JV Interests and Transferred Investments to have
been acquired by Friendco or its Affiliates under the Friendco Purchase
Agreement shall be added to Section 2.1(x) and the Transferred Assets and
Specified Systems to have been acquired directly by Friendco or its Affiliates
under the Friendco Purchase Agreement shall be deemed to be included in
Transferred Assets and Specified Systems hereunder (provided, that Books and
Records (as defined in the Friendco Purchase Agreement) shall be deemed to
include Excluded Books and Records (as defined in the Friendco Purchase
Agreement), and at the Closing, Seller shall deliver the Excluded Books and
Records (as defined in the Friendco Purchase Agreement) to Buyer);
(iv) the Assumed Liabilities to have been assumed by Friendco
or its Affiliates under the Friendco Purchase Agreement shall be deemed to be
included in Assumed Liabilities hereunder;
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(v) all representations, warranties, covenants and agreements
made by Seller or any of its Affiliates pursuant to the Friendco Purchase
Agreement (or any Ancillary Agreements, as defined therein) shall be deemed to
have been made to Buyer hereunder (and under the corresponding provisions hereof
to the extent applicable), including under all escrow arrangements, all
conditions to Friendco's obligations thereunder (including Section 6.2(j)
thereof, but without regard to the application of clause (x) thereof) shall be
deemed to be included in Section 6.2 hereof, and the Seller Disclosure Schedules
delivered thereunder (a true and complete copy of which Seller has provided to
Buyer as of the date hereof) shall be deemed to have been delivered with the
Seller Disclosure Schedules hereunder;
(vi) Section 6.1(i) shall be deleted;
(vii) the following shall be added at the end of Section 6.2:
"(m) Buyer shall have received satisfactory evidence of the consummation of the
Joint Venture Transactions (as defined in the Expanded Agreement)."; and
(viii) each of the Outside Date and the Extended Outside Date
shall be extended for six months.
(b) Seller shall, and shall cause each of its Affiliates to, assign
all of its rights under the Friendco Purchase Agreement to Buyer.
Section 5.16 Environmental Matters.
(a) Environmental Self-Audit. Seller shall provide copies of all
correspondence, audits, assessments, agreements, proposals and other
documentation relating to the Environmental Self-Audit to Buyer. Prior to the
Closing Date, Seller shall cooperate and consult with Buyer in the (i)
negotiation of any agreement with the United States Environmental Protection
Agency or any other relevant Government Entity relating to the Environmental
Self-Audit, (ii) development and negotiation of the scope of the Environmental
Self-Audit and (iii) development and negotiation of corrective action and
remedies with respect to the Environmental Self-Audit Deficiencies. In any
agreement with the United States Environmental Protection Agency or any other
relevant Government Entity entered into prior to the Closing Date with respect
to the Environmental Self-Audit, Seller shall not agree to any remedies that
impose obligations to act or refrain from acting after the Closing Date except
to the extent that such remedies (A) can be satisfied solely through the payment
of monetary damages or (B) are reasonably acceptable to Buyer; provided, that
Buyer shall not be required to agree to non-monetary obligations that could
reasonably be expected to involve more than de minimis expenditures by Buyer or
its Affiliates after the Closing.
(b) Property Transfer Laws. Seller shall take all actions required
by the Connecticut Transfer Act and the New Jersey Industrial Site Recovery Act,
to the extent such actions are required as a result of this Transaction,
provided that Seller shall not take any actions or enter into any agreement
relating to the Connecticut Transfer Act or the New Jersey Industrial Site
Recovery Act that will impose binding obligations to act
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or refrain from acting after the Closing Date except to the extent that such
remedies (i) can be satisfied solely through the payment of monetary damages or
(ii) are reasonably acceptable to Buyer; provided, that Buyer shall not be
required to agree to non-monetary obligations that could reasonably be expected
to involve more than de minimis expenditures by Buyer or its Affiliates after
the Closing.
(c) Notice and Information. If at any time prior to the Closing, any
material environmental investigation, study, audit, test, review or other
analysis in relation to any Owned Real Property or Transferred Asset is
conducted, Seller shall (i) promptly notify Buyer thereof and (ii) subject to
applicable Law, keep Buyer informed as to the progress of any such proceeding.
Section 5.17 SOA Compliance. Prior to the Closing, Seller shall use
reasonable efforts, and shall cause its Affiliates and its and their respective
representatives to use reasonable efforts, to take all actions that Buyer may
reasonably request, and to cooperate and to cause the representatives of Seller
and its Affiliates to cooperate in the taking of such actions, to enable each
Specified Business, immediately following the Closing, to satisfy the applicable
obligations under Sections 302, 404 and 906 of the SOA and the other
requirements of the SOA with respect to the Cable Systems, including
establishing and maintaining adequate disclosure controls and procedures and
internal controls over financial reporting as such terms are defined in the SOA;
it being understood that, Seller has material weakness in its internal controls.
Section 5.18 Franchise Expirations. From and after the date hereof
until the Closing, Seller shall, and shall cause its Affiliates to, use
commercially reasonable efforts to obtain renewals or valid extensions of any
Franchises which expire on or before December 31, 2007, in the Ordinary Course
of Business. Seller shall not, and shall cause its Affiliates not to, agree or
accede to any material modifications or amendments to or in connection with, or
the imposition of any material condition to the renewal or extension of, any of
the Franchises that are not reasonably acceptable to Buyer determined in a
manner consistent with the proviso to Section 5.6(c); provided, however, that if
the LFA Approval in respect of such Franchise is not obtained in connection with
any such renewal or extension (after Buyer has complied with its obligations
under Section 5.6(c)) Seller shall only agree or accede to any such
modifications or amendments that are reasonably acceptable to Buyer (without
regard to the proviso to Section 5.6(c)). Upon reasonable prior notice, Seller
shall, and shall cause its Affiliates to, allow representatives of Buyer to
attend meetings and hearings before applicable Government Entities in connection
with the renewal or extension of any Franchise or Governmental Authorization.
Nothing in this Section 5.18 shall limit the obligations of Buyer or Seller
pursuant to Section 5.6(c).
Section 5.19 Exchange Act Filings. Prior to the Closing, Seller
shall use commercially reasonable efforts to file (a) all reports and other
materials required to be filed by Seller with the SEC pursuant to and in
compliance with the Exchange Act (other than with respect to timing), including
Section 12 thereof, with respect to any period ending on or prior to the Closing
Date, and (b) the Disclosure Statement as an exhibit to a Current Report on Form
8-K. Notwithstanding the foregoing, Seller shall not be required
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to file quarterly reports for fiscal quarters ended in 2001, 2002 or 2003 or
annual reports for the fiscal years ending on or before December 31, 2002 if
(and only to the extent), (a) the staff of the SEC shall have provided Buyer
with adequate assurance that such reports are not required to be filed in order
for Parent to be deemed current in its filings under the Exchange Act following
the Closing or (b) Seller shall have previously used such commercially
reasonable effort to the reasonable satisfaction of Buyer. Buyer shall reimburse
Seller for all reasonable costs and expenses incurred by Seller pursuant to this
Section 5.19 with respect to the preparation of quarterly reports required to be
filed for fiscal quarters ended in 2001, 2002 or 2003 or annual reports for the
fiscal years ending on December 31, 2001 and December 31, 2002, including
reasonable out-of-pocket costs and any incremental costs and expenses incurred
in respect of the individuals preparing such reports necessary to comply with
this Section 5.19, including all necessary incentive compensation, unless and to
the extent compliance with the requirement to file such reports is waived by
Buyer prior to the incurrence of such costs and expenses. Seller shall give
Buyer reasonable advance notice of the type and the amount of such costs and
expenses prior to the incurrence thereof. Buyer shall use its commercially
reasonable efforts to obtain relief from the staff of the SEC with respect to
Parent being deemed current in its filings under the Exchange Act following the
Closing without the reports required by this Section 5.19. Seller shall
cooperate with Buyer in respect of the obtaining of any such relief.
Section 5.20 Cooperation upon Inquiries as to Rates. If at any time
prior to Closing, any Government Entity commences a Rate Regulatory Matter with
respect to a Cable System, Seller shall (a) promptly notify Buyer and (b)
subject to applicable Law, keep Buyer informed as to the progress of any such
proceeding. Without the prior consent of Buyer, which consent shall not be
unreasonably withheld or delayed, Seller shall not, and shall cause its
Affiliates not to, settle any such Rate Regulatory Matter, either before or
after Closing, if (i) Buyer or any of its Affiliates would have any Liability
under such settlement other than an obligation to pay money in an amount not
greater than $50,000, which obligation is fully reflected in the Closing Net
Liabilities Amount used in calculating the Final Adjustment Amount, or (ii) such
settlement would reduce the rates permitted to be charged by Buyer after the
Closing below the rates set forth on Schedule 3.18 of the Seller Disclosure
Schedule or otherwise then in effect.
Section 5.21 Third Party Confidentiality Agreements. After the
Closing and for so long as reasonably necessary, Seller shall use reasonable
efforts to, and shall cause its applicable Affiliates to use reasonable efforts
to, enforce each confidentiality agreement entered into by Seller or any such
Affiliate with any third party in connection with the Sale Process or otherwise
in connection with the Reorganization Case (each, a "Third Party Confidentiality
Agreement"), on behalf of Buyer and its Affiliates to the extent such
confidentiality agreement relates to the Acquired Business.
Section 5.22 Enforcement. Buyer will take all necessary action to
enforce and perform on a timely basis its rights and obligations, respectively,
set forth in the Parent Agreement. Buyer will take all necessary action to cause
Parent to enforce and perform on a timely basis Parent's rights and obligations,
respectively, set forth in the
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TWX Agreement. Seller shall, and shall cause each of its Affiliates to, timely
enforce all of its rights and perform all of its obligations, under the Friendco
Purchase Agreement.
Section 5.23 Subscriber Reports. Within 30 days following the end of
each calendar month commencing August 2005 through the Closing, Seller shall
provide Buyer with a written report setting forth the following information with
respect to each Specified Business as of the end of such calendar month: (a) the
number of Basic Subscribers served by such Specified Business, (b) the number of
Basic Subscribers in such Specified Business whose rate of service is subject to
any discount or promotion (or rebates or similar programs) as of the subscriber
cut-off date for such calendar month and (c) the discounts or promotions (or
rebates or similar programs) offered by such Specified Business during such
calendar month, and the geographic areas in which each such discount or
promotion (or rebate or similar program) is offered. Seller shall, in
consultation with Buyer commencing as promptly as practicable following the date
hereof, develop and, no later than 90 days prior to the Closing, implement, an
accounting system reasonably acceptable to Buyer, (i) which would reasonably be
expected to accurately track the number of Eligible Basic Subscribers (in
accordance with the definition thereof) and (ii) the results of which are
traceable to Seller's billing system and capable of being verified, using
commercially reasonable efforts, as part of the computation of and resolution of
disputes regarding the Subscriber Adjustment Amount pursuant to Section 2.6
(such accounting system, the "Subscriber Accounting System").
Section 5.24 Transitional Services. Seller shall provide to Buyer,
with respect to each Specified Business, upon written request from Buyer
received by Seller no later than 30 days prior to the Closing Date, such
services as may be reasonably requested by Buyer in connection with the
operation of such Specified Business for a commercially reasonable transition
period following the Closing to allow for conversion of existing or replacement
services, in each case to the extent and only to the extent Seller or its
Affiliates retains the Assets and employees necessary to allow the provision of
such services ("Transitional Services"). In addition, between the date hereof
and the Closing, Seller shall use commercially reasonable efforts to cooperate
with Buyer to assist Buyer in developing and implementing a plan of transition.
Buyer shall promptly reimburse Seller for the reasonable out-of-pocket costs and
any incremental costs and expenses necessary to provide Transitional Services.
All other terms and conditions for the provision of Transitional Services shall
be reasonably satisfactory to both Buyer and Seller and subject to applicable
Law.
ARTICLE VI
CONDITIONS TO CLOSING
Section 6.1 Conditions to the Obligations of Buyer and Seller. The
obligations of the parties hereto to effect the Closing are subject to the
satisfaction (or waiver by both parties) prior to the Closing of the following
conditions:
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(a) Bankruptcy Court Approval. The Confirmation Order shall have
been entered by the Bankruptcy Court, shall be a Final Order and shall be in
full force and effect, and the Plan shall be effective in accordance with its
terms.
(b) Consummation of the Plan. All conditions precedent to
consummation of the Plan shall have been satisfied or waived in accordance with
the terms of the Plan and the Plan shall be consummated substantially
contemporaneously with the Closing.
(c) SEC/DOJ Matters. There shall have been a SEC/DOJ Settlement.
(d) HSR. The waiting periods applicable to the consummation of the
Transaction under the HSR Act shall have expired or been terminated.
(e) No Prohibition. No Law shall be in effect prohibiting the
Transaction.
(f) Consents and Approvals. All Seller Required Approvals and all
Buyer Required Approvals shall have been obtained, in each case in form and
substance reasonably satisfactory to both parties.
(g) Registration of Purchase Shares. Unless the issuance of the
Purchase Shares pursuant to the Plan and the terms of this Agreement is exempted
from any registration under the Securities Act pursuant to the Confirmation
Order or a no-action letter from the staff of the SEC, a registration statement
in respect of the Purchase Shares shall have been declared effective by the SEC
and no stop order suspending the effectiveness of such registration shall have
been issued and no proceedings for that purpose shall have been initiated or
threatened by the SEC. The Purchase Shares shall be freely tradable and not
subject to any resale restrictions except to the extent that the holder thereof
is an Affiliate of Parent or an underwriter (as defined in section 1145(b) of
the Bankruptcy Code).
(h) Listing of Purchase Shares. The Purchase Shares shall have been
approved for listing on the NYSE, subject only to official notice of issuance.
(i) Cross-Conditionality. Subject to Section 5.15, the closing under
the Friendco Purchase Agreement shall have occurred contemporaneously with the
Closing.
Section 6.2 Conditions to the Obligation of Buyer. The obligation of
Buyer to effect the Closing is subject to the satisfaction (or waiver by Buyer)
prior to the Closing of the following conditions:
(a) Representations and Warranties. The representations and
warranties in Section 3.1, Section 3.2(a) (other than the first sentence
thereof), Sections 3.3 through 3.6 and Sections 3.24 through 3.26 (the "Class 1
Representations and Warranties"; all other representations and warranties
contained in Article III, the "Class 2 Representations and Warranties") that are
qualified as to materiality or Material
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Adverse Effect shall be true and correct, and the Class 1 Representations and
Warranties that are not so qualified shall be true and correct in all material
respects, in each case, at the time made and as of the Closing Date as if made
at and as of such time (except, in each case, to the extent expressly made as of
an earlier date, in which case as of such earlier date). The Class 2
Representations and Warranties (other than Section 3.19 (but only to the extent
related to any event, occurrence, condition or circumstance first occurring
after the date hereof), Section 3.20(b) or the first two sentences of Section
3.20(c), assuming, as to Sections 3.20(b) and 3.20(c), the information delivered
pursuant to such Sections was prepared by Seller in good faith) shall be true
and correct (without giving effect to any materiality or Material Adverse Effect
qualifiers set forth therein) at the time made and as of the Closing Date as if
made at and as of such time (except to the extent expressly made as of an
earlier date, in which case as of such earlier date), except where the failure
of such Class 2 Representations and Warranties to be true and correct has not
and would not, individually or in the aggregate, reasonably be expected to
result in a Material Adverse Effect.
(b) Covenants. Each of the covenants and agreements of Seller to be
performed on or prior to the Closing shall have been duly performed in all
material respects.
(c) Ancillary Agreements. Seller and its Affiliates shall have
executed and delivered the Ancillary Agreements to which they are a party except
(i) those Ancillary Agreements the failure of which to have been executed and
delivered would not reasonably be expected, individually or in the aggregate, to
impair the benefit of the Transaction to Buyer (other than in a de minimis
manner), taking into account Section 2.11, (ii) in respect of LFA Approvals not
obtained as of the Closing and (iii) those Ancillary Agreements required to be
delivered pursuant to Section 2.10(s) the failure of which to have been
delivered would not reasonably be expected, individually or in the aggregate, to
materially impair the benefit of the Transaction to Buyer.
(d) Certificate. Buyer shall have received a certificate, signed on
behalf of Seller by the Chief Executive Officer or Chief Financial Officer of
Seller, dated the Closing Date, to the effect that the conditions set forth in
Sections 6.2(a), 6.2(b) and 6.2(f) have been satisfied.
(e) Franchises. Except as would not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect, all LFA
Approvals shall have been obtained, and all Purchase Rights (other than in
connection with the Exchange) shall have been waived, in respect of each
Specified Business on or prior to the Closing; provided, that this condition
shall be deemed not to have been satisfied until the earliest of (i) the date
upon which this condition would be satisfied if the foregoing Material Adverse
Effect exception were omitted, (ii) 30 days following the date the condition
would have been satisfied but for this proviso and (iii) six Business Days prior
to the Outside Date.
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(f) No Material Adverse Change. Since the date of this Agreement, no
event or condition has occurred that, individually or in the aggregate, has had
or would reasonably be expected to have a Material Adverse Effect.
(g) Bankruptcy Plan and Confirmation Order. The Confirmation Order
and the Plan confirmed by the Bankruptcy Court shall, to the extent relating to
or affecting the Transaction, the Transferred Assets, the Assumed Liabilities,
Parent or its Affiliates (in the case of Parent or its Affiliates, only to the
extent related to the Transaction or an interest in the Transferred Joint
Venture Parents (other than with respect to Plan distribution matters) and not
in their capacity as creditors or, with respect to Plan distribution matters,
equityholders), be in all material respects satisfactory to Buyer in its
reasonable discretion and, without limiting the generality of the foregoing, the
Confirmation Order shall contain the finding that Buyer is a good faith
purchaser of the Transferred Assets pursuant to section 363(m) of the Bankruptcy
Code unless Buyer's actions have been determined by the Bankruptcy Court to have
not been in good faith preclude such a finding.
(h) Subscribers. At least 60 days prior to the Closing, Seller shall
have implemented the Subscriber Accounting System. The number of Eligible Basic
Subscribers served by each Specified Business shall be at least equal to (i) the
Base Subscriber Number for such Specified Business minus (ii) the Subscriber
Basket for such Specified Business minus (iii) the Subscriber Cap for such
Specified Business.
(i) Intentionally Omitted.
(j) No Buyer Adverse Tax Event. There shall not have been a Buyer
Adverse Tax Event that is in existence as of the Closing.
(k) Financial Information. Seller shall have provided Buyer with all
Financial Information and the Additional Financial Statements contemplated by
Section 5.11 (disregarding for this purpose all references therein to
"commercially reasonable efforts") except to the extent Buyer has obtained
relief from the SEC with respect thereto or has failed to comply with its
obligations under Section 5.11(d).
Section 6.3 Conditions to the Obligation of Seller. The obligation
of Seller to effect the Closing is subject to the satisfaction (or waiver by
Seller) prior to the Closing of the following conditions:
(a) Representations and Warranties. The representations and
warranties in Sections 4.1 through 4.8 and 4.24 (the "Buyer Class 1
Representations and Warranties"; all other representations and warranties
contained in Article IV, the "Buyer Class 2 Representations and Warranties")
that are qualified as to materiality or Parent Material Adverse Effect shall be
true and correct, and the Buyer Class 1 Representations and Warranties that are
not so qualified shall be true and correct in all material respects, in each
case, at the time made and as of the Closing Date as if made at and as of such
time (except, in each case, to the extent expressly made as of an earlier date,
in which case as of such earlier date). The Buyer Class 2 Representations and
Warranties shall be
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true and correct (without giving effect to any materiality or Parent Material
Adverse Effect qualifiers set forth therein) at the time made and as of the
Closing Date as if made at and as of such time (except to the extent expressly
made as of an earlier date, in which case as of such earlier date), except where
the failure of such Buyer Class 2 Representations and Warranties to be true and
correct has not and would not, individually or in the aggregate, reasonably be
expected to result in a Parent Material Adverse Effect.
(b) Covenants. Each of the covenants and agreements of Buyer to be
performed on or prior to the Closing shall have been duly performed in all
material respects.
(c) Ancillary Agreements. Buyer shall have, and shall have caused
Parent to have, executed and delivered the Ancillary Agreements to which it is a
party except (i) those Ancillary Agreements the failure of which to have been
executed and delivered would not reasonably be expected, individually or in the
aggregate, to impair the benefit of the Transaction to Seller (other than in a
de minimis manner), (ii) in respect of LFA Approvals not obtained as of the
Closing and (iii) the Ancillary Agreements required to be delivered pursuant to
Section 2.9(d)(xi) the failure of which to have been delivered would not
reasonably be expected, individually or in the aggregate, to materially impair
the benefit of the Transaction to Seller.
(d) Certificate. Seller shall have received a certificate, signed on
behalf of Buyer by the Chief Executive Officer or Chief Financial Officer of
Buyer, dated the Closing Date, to the effect that the conditions set forth in
Sections 6.3(a), 6.3(b) and 6.3(e) have been satisfied.
(e) No Material Adverse Change. Since the date of this Agreement, no
event or condition has occurred that, individually or in the aggregate, has had
or would reasonably be expected to have a Parent Material Adverse Effect.
(f) Legal Opinion. Seller shall have received an opinion of counsel
that the Purchase Shares have been validly issued in accordance with the laws of
the State of Delaware.
(g) Bankruptcy Plan and Confirmation Order. The Confirmation Order
and the final Plan shall not differ in a manner that would be materially adverse
to Seller and its Affiliates from the confirmation order and the Plan,
respectively, proposed by Seller to the Bankruptcy Court in accordance with
Section 5.13.
(h) Amended and Restated Charter and Amended and Restated By-laws.
The Amended and Restated Charter shall have been filed with the Secretary of
State of the State of Delaware and shall be effective as of immediately
following the Closing. The Amended and Restated By-laws shall have been duly
adopted by Parent and shall be effective as of immediately following the
Closing.
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ARTICLE VII
SURVIVAL; INDEMNIFICATION; CERTAIN REMEDIES
Section 7.1 Survival. The representations and warranties of Buyer
contained in this Agreement shall expire upon the Closing. The representations
and warranties of Seller contained in this Agreement shall survive the Closing
for the period set forth in this Section 7.1. Subject to Section 2.7(d), all
representations and warranties made by Seller contained in this Agreement and
all claims with respect thereto shall terminate upon the expiration of twelve
months after the Closing Date (the "Buyer Indemnification Deadline"); it being
understood that in the event notice of any claim for indemnification under this
Article VII has been given (within the meaning of Section 9.1) prior to the
Buyer Indemnification Deadline, the representations and warranties that are the
subject of such indemnification claim shall survive with respect to such claim
until such time as such claim is finally resolved.
Section 7.2 Indemnification by Seller.
(a) Seller hereby agrees that from and after the Closing it shall
indemnify, defend and hold harmless Buyer, its Affiliates, and their respective
directors, officers, shareholders, partners, members, attorneys, accountants,
agents, representatives and employees (other than the Transferred Employees) and
their heirs, successors and permitted assigns, each in their capacity as such
(the "Buyer Indemnified Parties" and, together with the Seller Indemnified
Parties, the "Indemnified Parties") from, against and in respect of any damages,
losses, charges, Liabilities, claims, demands, actions, suits, proceedings,
payments, judgments, settlements, assessments, deficiencies, taxes, interest,
penalties, and costs and expenses (including removal costs, remediation costs,
closure costs, fines, penalties and expenses of investigation and ongoing
monitoring, reasonable attorneys' fees, and reasonable out of pocket
disbursements) (collectively, "Losses") imposed on, sustained, incurred or
suffered by, or asserted against, any of the Buyer Indemnified Parties, whether
in respect of third party claims, claims between the parties hereto, or
otherwise, directly or indirectly relating to, arising out of or resulting from
(i) subject to Section 7.2(b), any breach of any representation or warranty made
by Seller contained in this Agreement for the period such representation or
warranty survives, (ii) any breach of any covenant or agreement of Seller
contained in this Agreement and (iii) any Excluded Asset or Excluded Liability.
(b) Seller shall not be liable to the Buyer Indemnified Parties for
any Losses with respect to the matters contained in Section 7.2(a)(i):
(i) until any such Losses in respect of the Group 1 Business
exceed an aggregate amount equal to the Group 1 Threshold Amount, and then for
all such Losses in excess of $42,000,000, up to an aggregate amount not to
exceed the Group 1 Cap Amount; provided, however, that the limitations herein
regarding the Group 1 Threshold Amount shall not apply to the Class 1
Representations and Warranties; and
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(ii) until any such Losses in respect of the Group 2 Business
exceed an aggregate amount equal to the Group 2 Threshold Amount, and then for
all such Losses in excess of $38,000,000, up to an aggregate amount not to
exceed the Group 2 Cap Amount; provided, however, that the limitations herein
regarding the Group 2 Threshold Amount shall not apply to the Class 1
Representations and Warranties.
(c) Subject to Section 7.8, the Buyer Indemnified Parties shall be
entitled to receive payment only from the Escrow Account with respect to any
Liability of Seller for any Losses under Section 7.2(a) and, with respect to
each Specified Business, only up to an aggregate amount not to exceed the Cap
Amount applicable to such Specified Business. Notwithstanding anything to the
contrary in this Agreement, Seller shall not be liable for any Losses that (i)
are reflected in the Closing Net Liabilities Amount used in calculating the
Final Adjustment Amount to the extent and only to the extent so reflected or
(ii) have been actually discharged (or the functional equivalent thereof in
terms of its effect on Buyer, each Specified Business, the Transferred Assets
and the Assumed Liabilities) pursuant to the Discharge (or, as applicable, the
MCE Discharge or an Additional Discharge) to the extent and only to the extent
so discharged (or such functional equivalent).
Section 7.3 Indemnification by Buyer. Buyer hereby agrees that from
and after the Closing it shall indemnify, defend and hold harmless Seller and
its Affiliates and their respective directors, officers, stakeholders, partners,
members, attorneys, accountants, agents, representatives and employees and their
heirs, successors and permitted assigns, each in their capacity as such (the
"Seller Indemnified Parties") from, against and in respect of any Losses imposed
on, sustained, incurred or suffered by, or asserted against, any of the Seller
Indemnified Parties, whether in respect of third party claims, claims between
the parties hereto, or otherwise, directly or indirectly relating to, arising
out of or resulting from (a) the Assumed Liabilities Related to each Specified
Business, (b) any breach of a covenant or agreement of Buyer contained in this
Agreement or (c) the Transferred Assets Related to each Specified Business, each
Specified Business or the Transferred Employees to the extent attributable to
the operation or ownership of the Transferred Assets Related to such Specified
Business or such Specified Business, or the employment of the Transferred
Employees following the Closing. Notwithstanding anything to the contrary set
forth in this Agreement, to the extent that any Seller Indemnified Party is or
becomes a shareholder or other equity holder of Parent or any of its Affiliates,
indemnification hereunder shall not include Losses suffered by such Seller
Indemnified Party (or its Affiliates) in such shareholder or other equity holder
capacity by reason of (i) the indemnities being provided by Buyer hereunder or
(ii) Losses suffered in such capacity in respect of any Transferred Assets or
Assumed Liabilities.
Section 7.4 Third Party Claim Indemnification Procedures.
(a) In the event that any written claim or demand for which an
indemnifying party (an "Indemnifying Party") may have liability to any
Indemnified Party hereunder is asserted against or sought to be collected from
any Indemnified Party by a third party (a "Third Party Claim"), such Indemnified
Party shall promptly, but in no
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event more than thirty days following such Indemnified Party's receipt of a
Third Party Claim, notify the Indemnifying Party in writing of such Third Party
Claim, the amount or the estimated amount of damages sought thereunder to the
extent then ascertainable (which estimate shall not be conclusive of the final
amount of such Third Party Claim), any other remedy sought thereunder, any
relevant time constraints relating thereto and, to the extent practicable, any
other material details pertaining thereto (a "Claim Notice"); provided, however,
that the failure timely to give a Claim Notice shall not affect the rights of an
Indemnified Party hereunder except to the extent that such failure has a
material prejudicial effect on the defenses or other rights available to the
Indemnifying Party with respect to such Third Party Claim. The Indemnifying
Party shall have 15 days (or such lesser number of days set forth in the Claim
Notice as may be required by court proceeding in the event of a litigated
matter) after receipt of the Claim Notice (the "Notice Period") to notify the
Indemnified Party that it desires to defend the Indemnified Party against such
Third Party Claim; provided, however, that the Indemnifying Party shall not be
entitled to assume or maintain control of the defense of any Third Party Claim
and shall pay the fees and expenses of counsel retained by the Indemnified Party
if (i) the Third Party Claim relates to or arises in connection with any
criminal proceeding, action, indictment, allegation or investigation, (ii) the
Third Party Claim seeks injunctive or equitable relief against the Indemnified
Party, (iii) the Indemnifying Party has failed to defend or is failing to defend
in good faith the Third Party Claim, (iv) the Indemnifying Party and the
Indemnified Party are both named parties to the proceedings and the Indemnified
Party shall have reasonably concluded that representation of both parties by the
same counsel would be inappropriate due to actual or potential differing
interests between them or (v) in the case of a Buyer Indemnified Party, it is
reasonably likely that the Losses arising from such Third Party Claim will
exceed the amount such Buyer Indemnified Party will be entitled to recover as a
result of the limitations set forth in Section 7.2(b); provided, further, that
prior to assuming control of such defense, the Indemnifying Party must
acknowledge that it would have an indemnity obligation for any Losses resulting
from such Third Party Claim.
(b) In the event that the Indemnifying Party notifies the
Indemnified Party within the Notice Period that it desires to defend the
Indemnified Party against a Third Party Claim and subject to Section 7.4(a), the
Indemnifying Party shall have the right to defend the Indemnified Party by
appropriate proceedings and shall have the sole power to direct and control such
defense at its expense. Once the Indemnifying Party has duly assumed the defense
of a Third Party Claim, the Indemnified Party shall have the right, but not the
obligation, to participate in any such defense and to employ separate counsel of
its choosing. Subject to Section 7.4(a), the Indemnified Party shall participate
in any such defense at its expense. The Indemnifying Party shall not, without
the prior written consent of the Indemnified Party, settle, compromise or offer
to settle or compromise any Third Party Claim unless (i) the Indemnifying Party
shall have agreed to indemnify and hold the Indemnified Party harmless from and
against any and all Losses caused by or arising out of any such settlement or
compromise, (ii) such settlement or compromise shall include as an unconditional
term thereof the giving by the claimant of a release of the Indemnified Party,
reasonably satisfactory to the Indemnified Party, from all Liability with
respect to such Third Party Claim and (iii) such settlement or compromise would
not result in (A) the imposition of a consent order, injunction or
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decree that would restrict the future activity or conduct of the Indemnified
Party or any of its Affiliates, (B) a finding or admission of a violation of Law
or violation of the rights of any Person by the Indemnified Party or any of its
Affiliates, (C) a finding or admission that would have an adverse effect on
other claims made or threatened against the Indemnified Party or any of its
Affiliates, or (D) any monetary liability of the Indemnified Party that will not
be promptly paid or reimbursed by the Indemnifying Party.
(c) If the Indemnifying Party (i) is not entitled to defend a Third
Party Claim, (ii) elects not to defend the Indemnified Party against a Third
Party Claim, whether by not giving the Indemnified Party timely notice of its
desire to so defend or otherwise or (iii) after assuming the defense of a Third
Party Claim, fails to take reasonable steps necessary to defend diligently such
Third Party Claim within ten days after receiving written notice from the
Indemnified Party to the effect that the Indemnifying Party has so failed, the
Indemnified Party shall have the right but not the obligation to assume its own
defense; it being understood that the Indemnified Party's right to
indemnification for a Third Party Claim shall not be adversely affected by
assuming the defense of such Third Party Claim. The Indemnified Party shall not
settle a Third Party Claim for which the Indemnifying Party shall have monetary
liability hereunder without the consent of the Indemnifying Party, which consent
shall not be unreasonably withheld.
Section 7.5 Consequential Damages; Materiality; Interest.
Notwithstanding anything to the contrary contained in this Agreement, no Person
shall be liable under this Article VII for any consequential, punitive, special,
incidental or indirect damages, including lost profits, except to the extent
awarded by a court of competent jurisdiction in connection with a Third Party
Claim, except to the extent the Loss arises out of an intentional or willful
breach by the non-claiming party and the Loss was reasonably foreseeable. Any
computation of Losses hereunder in respect of a breach of representation or
warranty shall measure such Losses without giving effect to any qualifier for
materiality or Material Adverse Effect set forth therein. Amounts payable in
respect of any Losses under Section 7.3 shall bear interest at LIBOR calculated
on a 365-day basis from the date notice of the Losses for which indemnification
is sought was delivered until the date of payment of indemnification by the
Indemnifying Party. Amounts payable in respect of any Losses under Section 7.2
shall bear interest as set forth in the definition of "Escrow Payment."
Section 7.6 Payments. The Indemnifying Party shall pay all amounts
payable pursuant to this Article VII, promptly following receipt from an
Indemnified Party of a xxxx, together with all accompanying reasonably detailed
back up documentation, by (a) in the case of a payment by Seller, making an
Escrow Payment from the Escrow Account, subject to the proviso to the last
sentence in Section 2.6(f) with respect to the matters set forth in Section
2.6(f) (including as applied to any MCE System in accordance with Section
2.7(c)), and (b) in the case of a payment by Buyer, wire transfer of immediately
available funds, in an amount equal to the Loss that is the subject of
indemnification hereunder, unless the Indemnifying Party in good faith disputes
the Loss, in which event it shall so notify the Indemnified Party. In any event,
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the Indemnifying Party shall pay to the Indemnified Party (i) in the case of a
payment by Seller, an Escrow Payment from the Escrow Account, subject to the
proviso to the last sentence in Section 2.6(f) with respect to the matters set
forth in Section 2.6(f) (including as applied to any MCE System in accordance
with Section 2.7(c)), and (ii) in the case of a payment by Buyer, by wire
transfer of immediately available funds, in each case in an amount equal to the
amount of any Loss (and any interest thereon) for which it is liable hereunder
no later than three days following any final determination of such Loss and the
Indemnifying Party's liability therefor. A "final determination" shall exist
when (A) the parties to the dispute have reached an agreement in writing, (B) a
court of competent jurisdiction shall have entered a final and non appealable
order or judgment, or (C) an arbitration or like panel shall have rendered a
final non appealable determination with respect to disputes the parties have
agreed to submit thereto.
Section 7.7 Characterization of Indemnification Payments. All
payments made by an Indemnifying Party to an Indemnified Party in respect of any
claim pursuant to this Article VII shall be treated as adjustments to the
Purchase Price for all income Tax purposes but shall not affect the Escrow
Amount (other than to the extent of any payment hereunder); provided, however,
that any payments pursuant to this Article VII that represent interest payable
under Section 7.5 shall be treated as (a) deductible to the Indemnifying Party
and (b) taxable to the Indemnified Party. The parties agree to treat, and to
cause their respective Affiliates to treat, any such payments in the foregoing
manner, for all income Tax purposes (unless otherwise required by a change in
applicable income Tax Law or as a result of a good faith resolution of a
contest).
Section 7.8 Remedies. From and after the Closing, the rights and
remedies of Seller and Buyer under this Article VII shall be exclusive and in
lieu of any and all other rights and remedies which Seller and Buyer may have
under this Agreement or otherwise against each other with respect to the
Transaction for monetary relief with respect to (a) any breach of any
representation or warranty or any failure to perform any covenant or agreement
set forth in this Agreement, other than those which are intentional or willful
and other than those in the proviso to the last sentence in Section 2.6(f)
(including as applied to any MCE System in accordance with Section 2.7(c)), and
(b) the Assumed Liabilities or the Excluded Liabilities, and Buyer and Seller
each expressly waives any and all other rights or causes of action it or its
Affiliates may have against the other party or its Affiliates for monetary
relief now or in the future under any Law with respect to the Transaction.
ARTICLE VIII
TERMINATION
Section 8.1 Termination by Mutual Consent. This Agreement may be
terminated at any time prior to the Closing by mutual written agreement of
Seller and Buyer.
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Section 8.2 Termination by Either Buyer or Seller. This Agreement
may be terminated at any time prior to the Closing by Buyer or Seller, by giving
written notice of termination to the other party, if (a) subject to Section
2.8(b), the Closing shall not have occurred on or before July 31, 2006 (the
"Outside Date") so long as the party proposing to terminate has not breached in
any material respect any of its representations, warranties, covenants or other
agreements under this Agreement in any manner that shall have proximately
contributed to the failure of the Closing to so occur (such breaching party, a
"Proximate Cause Party"); provided, however, that if any Government Antitrust
Entity has not completed its review of the Transaction or the transactions
contemplated by the Friendco Purchase Agreement by such time, or either party
determines in good faith at such time that additional time is necessary in order
to forestall any action to restrain, enjoin or prohibit the Transaction or the
transactions contemplated by the Friendco Purchase Agreement by any Government
Antitrust Entity, and, in either such case, all conditions set forth in Article
VI (other than Section 6.1(d)) have been satisfied or waived in writing by the
party entitled to the benefit thereof or are immediately capable of being
satisfied, then in either such case, such date may be extended by either party
to a date not beyond October 31, 2006 (the "Extended Outside Date"); provided,
further, that if the Closing has not occurred by such date as a result of the
failure to satisfy Section 6.1(i) by reason of actions by, or failure to obtain
Governmental Authorizations from, any Governmental Antitrust Entity or the FCC,
then such date shall be extended for an additional six months following the date
that the Extended Outside Date would otherwise occur or (b) any Law (other than
an order, judgment or ruling contemplated by Section 8.3(d)(ii) or 8.4(c)(ii))
permanently restraining, enjoining or otherwise prohibiting consummation of the
Transaction shall become final and non-appealable.
Section 8.3 Termination by Seller. This Agreement may be terminated
at any time prior to the Closing by Seller, by written notice to Buyer:
(a) prior to the commencement of the Confirmation Hearing, if (i) as
of the date of such termination, Seller is not in breach of Section 5.10, (ii)
the Board authorizes Seller, subject to complying with the terms of this
Agreement, to enter into a binding written agreement concerning a transaction
that constitutes a Superior Proposal and Seller notifies Buyer in writing that
it intends to enter into such an agreement, attaching the most current version
of such agreement (and all related agreements) to such notice (provided, that if
such intention changes Seller shall promptly notify Buyer of that fact) and
(iii) Buyer does not make, within five Business Days of receipt of Seller's
written notification of its intention to enter into a binding agreement for a
Superior Proposal, an offer which, thereafter, the Board determines, in good
faith after consultation with its financial advisors, is at least as favorable
to the stakeholders of Seller as is the Superior Proposal (taking into account,
without limitation, financial terms of any termination fee that may be payable
pursuant to Section 8.5(b) and the likelihood of consummation);
(b) if there has been a breach of any representation, warranty,
covenant or agreement made by Buyer in this Agreement such that an executive
officer of Buyer would be unable to deliver the closing certificate to Seller
regarding Buyer's
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representations and warranties and Buyer's performance of its obligations as
required pursuant to Section 6.3(a) and Section 6.3(b), respectively, and such
breach or condition is not curable or, if curable, is not cured within 60 days
after written notice thereof is given by Seller to Buyer; provided, however,
that if, with respect to any such breach or condition that cannot reasonably be
expected to be cured within 60 days, Buyer is diligently proceeding to cure such
breach, this Agreement may not be terminated pursuant to this Section 8.3(b) for
so long as (i) such breach is reasonably likely to be cured prior to the date on
which this Agreement would otherwise be terminated under Section 8.2 and (ii)
Buyer continues such efforts to cure; provided, further, that the right to
terminate this Agreement pursuant to this Section 8.3(b) shall not be available
to Seller if as of such time it is a Proximate Cause Party;
(c) prior to the commencement of the Confirmation Hearing, if (i) as
of the date of such termination, Seller is not in breach of Section 5.10, (ii)
the Board authorizes Seller to file a Superior Alternate Plan with the
Bankruptcy Court and Seller notifies Buyer in writing that it intends to file
such Superior Alternate Plan, attaching the most current version of such
Superior Alternate Plan (and all related agreements and supporting
documentation) to such notice (provided, that if such intention changes Seller
shall promptly notify Buyer of that fact) and (iii) Buyer does not make, within
ten Business Days of receipt of Seller's written notification of its intention
to file a Superior Alternate Plan, an offer which, thereafter, the Board
determines, in good faith after consultation with its financial advisors, is at
least as favorable to the stakeholders of Seller as is the Superior Alternate
Plan (taking into account, without limitation, financial terms of any
termination fee that may be payable pursuant to Section 8.5(b) and the
likelihood of consummation); or
(d) if (i) at any time after the conclusion of voting on the Plan as
established by the Bankruptcy Court, Seller's stakeholders who are entitled to
vote on the Plan vote in sufficient number and amount against the Plan such that
the Plan is not otherwise capable of being confirmed by the Bankruptcy Court or
(ii) subject to compliance by Seller with the first sentence of Section 5.13(g),
at any time after the expiration of 150 days following the entry of an order,
judgment or ruling by a court of competent jurisdiction in the Reorganization
Case denying entry of (or vacating), or that is inconsistent with the entry of,
a Confirmation Order satisfying the condition set forth in Section 6.2(g), the
Bankruptcy Court shall not have thereafter entered a Confirmation Order
satisfying the condition set forth in Section 6.2(g); provided, however, that
Seller may only terminate this Agreement pursuant to this Section 8.3(d)(ii) if
at such time it would not reasonably be expected that a Confirmation Order
satisfying the condition set forth in Section 6.2(g) shall be entered prior to
the Outside Date.
Section 8.4 Termination by Buyer. This Agreement may be terminated
at any time prior to the Closing by Buyer, by written notice to Seller:
(a) if there has been a breach of any representation, warranty,
covenant or agreement made by Seller in this Agreement (assuming entry of the
Confirmation Order) such that an executive officer of Seller would be unable to
deliver the closing certificate to Buyer regarding Seller's representations and
warranties and
136
Seller's performance of its obligations as required pursuant to Section 6.2(a)
and Section 6.2(b), respectively, and such breach is not curable or, if curable,
is not cured within 60 days after written notice thereof is given by Buyer to
Seller; provided, however, that if, with respect to any such breach or condition
that cannot reasonably be expected to be cured within 60 days, Seller is
diligently proceeding to cure such breach, this Agreement may not be terminated
pursuant to this Section 8.4(a) for so long as (i) such breach is reasonably
likely to be cured prior to the date on which this Agreement would otherwise be
terminated under Section 8.2 and (ii) Seller continues such efforts to cure;
(b) if (i) Seller has not, by October 15, 2005, filed all motions
reasonably necessary to obtain the Confirmation Order or (ii) if the Protections
Order is vacated or modified in any material respect following the date hereof;
(c) if (i) at any time after the conclusion of voting on the Plan as
established by the Bankruptcy Court, Seller's stakeholders who are entitled to
vote on the Plan vote in sufficient number and amount against the Plan such that
the Plan is not otherwise capable of being confirmed by the Bankruptcy Court or
(ii) subject to compliance by Buyer with the first sentence of Section 5.13(g),
at any time after the expiration of 150 days following the entry of an order,
judgment or ruling by a court of competent jurisdiction in the Reorganization
Case denying entry of (or vacating), or that is inconsistent with the entry of,
a Confirmation Order satisfying the condition set forth in Section 6.2(g), the
Bankruptcy Court shall not have thereafter entered a Confirmation Order
satisfying the condition set forth in Section 6.2(g); provided, however, that
Buyer may only terminate this Agreement pursuant to this Section 8.3(c)(ii) if
at such time it would not reasonably be expected that a Confirmation Order
satisfying the condition set forth in Section 6.2(g) shall be entered prior to
the Outside Date; or
(d) following (i) the conversion of the Reorganization Case into one
or more cases under chapter 7 of the Bankruptcy Code or (ii) the appointment of
a chapter 11 trustee in the Reorganization Case; provided, however, that the
right to terminate this Agreement pursuant to Section 8.4(a), (b) or (c) shall
not be available to Buyer if as of such time it is a Proximate Cause Party.
Section 8.5 Effect of Termination.
(a) In the event of the termination of this Agreement in accordance
with Article VIII, this Agreement shall thereafter become void and have no
effect, and no party hereto shall have any Liability to the other party hereto
or their respective Affiliates, or their respective directors, officers or
employees, except for the obligations of the parties hereto contained in this
Section 8.5 and in Sections 9.1, 9.4, 9.6, 9.7, 9.10, 9.11 and 9.13 (and any
related definitional provisions set forth in Article I), and except that nothing
in this Section 8.5 shall relieve any party from liability for any willful
breach of this Agreement that arose prior to such termination.
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(b) In the event that (i) this Agreement is terminated by Seller
pursuant to Section 8.2(a) prior to the entry of a Confirmation Order satisfying
the condition set forth in Section 6.2(g) which has not been vacated by a court
of competent jurisdiction and Buyer is not a Proximate Cause Party as of the
date of such termination, or (ii) this Agreement is terminated (A) by Seller
pursuant to Section 8.3(a), 8.3(c) or 8.3(d) or (B) by Buyer pursuant to Section
8.4(a) (but, with respect to the representations and warranties of Seller, only
in the case of a willful breach by Seller), 8.4(b) or 8.4(c) except, in the case
of this clause (ii)(B), in the event that Buyer is a Proximate Cause Party as of
the date of such termination, then Seller shall pay Buyer, by wire transfer of
immediately available funds, a termination fee of $352,850,000 payable upon the
earlier of consummation of an Acquisition or the effective date of a chapter 11
plan of Seller and/or one or more of its Affiliates approved by the Bankruptcy
Court, which plan involves a substantial portion of the Assets of Seller and its
Affiliates.
(c) The obligation of Seller to pay the amount payable under Section
8.5(b) (and the payment thereof) shall be absolute and unconditional; such
payment shall be an administrative expense under section 507(a)(1) of the
Bankruptcy Code and shall be payable as specified herein and not subject to any
defense, claim, counterclaim, offset, recoupment, or reduction of any kind
whatsoever.
ARTICLE IX
MISCELLANEOUS
Section 9.1 Notices. All notices, requests, demands, approvals,
consents and other communications hereunder shall be in writing and shall be
deemed to have been duly given and made if served by personal delivery upon the
party for whom it is intended or delivered by registered or certified mail,
return receipt requested, or if sent by telecopier or email, provided that the
telecopy or email is promptly confirmed by telephone confirmation thereof, to
the Person at the address set forth below, or such other address as may be
designated in writing hereafter, in the same manner, by such Person:
To Buyer:
c/o Time Warner Cable Inc.
000 Xxxxxx Xxxxx
Xxxxxxxx, XX 00000-0000
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
Email: xxxxx.xxxxx@xxxxxxx.xxx
Attention: Chief Executive Officer
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With a copy to:
Legal Department
Time Warner Cable Inc.
000 Xxxxxx Xxxxx
Xxxxxxxx, XX 00000-0000
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
Email: xxxx.xxxxxxxx-xxxxxxxxx@xxxxxxx.xxx
Attention: General Counsel
-and-
Time Warner Inc.
Xxx Xxxx Xxxxxx Xxxxxx
Xxx Xxxx, XX 00000
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
Email: Xxxx.Xxxxxxxxx@xxxxxxxxxx.xxx
Attention: General Counsel
-and-
Xxxx, Weiss, Rifkind, Xxxxxxx & Xxxxxxxx LLP
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, XX 00000-0000
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
Email: xxxxxxx@xxxxxxxxx.xxx
xxxxxxxx@xxxxxxxxx.xxx
Attention: Xxxxxx X. Xxxxxx
Xxxxxx X. Xxxxxxx
To Seller:
Adelphia Communications Corporation
0000 XXX Xxxxxxx
Xxxxxxxxx Xxxxxxx, XX 00000
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
Email: xxxx.xxxxxxxxxx@xxxxxxxx.xxx
Attention: Xxxx Xxxxxxxxxx
139
With a copy to:
Xxxxxxxx & Xxxxxxxx LLP
000 Xxxxx Xxxxxx
Xxx Xxxx, XX 00000
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
Email: xxxxxx@xxxxxxxx.xxx
Attention: Xxxxxxxxx X. Xxxxx
Section 9.2 Amendment; Waiver. Any provision of this Agreement may
be amended or waived if, and only if, such amendment or waiver is in writing and
signed, in the case of an amendment, by Buyer and Seller, or in the case of a
waiver, by the party against whom the waiver is to be effective. No failure or
delay by any party in exercising any right, power or privilege hereunder shall
operate as a waiver thereof nor shall any single or partial exercise thereof
preclude any other or further exercise thereof or the exercise of any other
right, power or privilege. The rights and remedies herein provided shall be
cumulative and not exclusive of any rights or remedies provided by Law except as
otherwise specifically provided in Article VII.
Section 9.3 No Assignment or Benefit to Third Parties. This
Agreement shall be binding upon and inure to the benefit of the parties hereto
and their respective successors, legal representatives and permitted assigns. No
party to this Agreement may assign any of its rights or transfer or delegate any
of its obligations under this Agreement, by operation of Law or otherwise,
without the prior written consent of the other party hereto, except, in whole or
in part, (a) as provided in Section 9.5, (b) with respect to Seller's rights and
obligations, following the Closing to any entity acting on behalf of Seller's
estate (provided, that no such assignment by Seller under this clause (b) will
relieve Seller of its Liabilities hereunder), (c) to Friendco under the Exchange
Agreement and (d) by Buyer to one or more direct or indirect wholly owned
Subsidiaries of Buyer (provided, that Buyer identifies such Subsidiary and the
rights and obligations to be assigned on or before Closing; provided, further,
that no such assignment by Buyer to a wholly owned Subsidiary under this clause
(d) will relieve Buyer of its Liabilities hereunder). Any assignment or transfer
permitted hereunder shall be evidenced in writing signed by the assignor and
assignee, a copy of which shall be delivered to the other party hereto. In
connection with any assignment, transfer or delegation by Buyer to Friendco as
permitted above, Buyer shall be relieved of any Liability so assigned,
transferred or delegated to the extent Seller has the right to enforce in full
against Friendco any such Liability. Nothing in this Agreement, express or
implied, is intended to confer upon any Person other than Buyer, Seller, the
Indemnified Parties and their respective successors, legal representatives and
permitted assigns, any rights or remedies under or by reason of this Agreement.
Section 9.4 Entire Agreement. This Agreement (including all
Schedules and Exhibits) and the Ancillary Agreements executed as of the date
hereof contain the entire agreement between the parties hereto with respect to
the subject matter hereof and thereof and supersede all prior agreements and
understandings, oral or written,
140
with respect to such matters, except for the TWX Confidentiality Agreement and
the Seller Confidentiality Agreement, which shall remain in full force and
effect except as otherwise provided herein.
Section 9.5 Debtor Obligations Joint and Several; Fulfillment of
Obligations. Seller shall, and shall cause each of its Affiliates to, cause each
and every Debtor, including each that is an Asset Transferring Subsidiary
hereunder, to agree for the benefit of Buyer, except to the extent any Liability
is limited to the Escrow Account as a result of the limitations set forth in
Article VII, to be jointly and severally liable for any breach or violation of
Seller's representations, warranties or covenants hereunder and to execute and
deliver such Contracts and take such further action as may be reasonably
requested by Buyer to evidence the intent and effect of the foregoing
(including, for the avoidance of doubt, the inclusion, except to the extent any
Liability is limited to the Escrow Account as a result of the limitations set
forth in Article VII, of an express undertaking of such joint and several
liability in the Plan). Any obligation of any party to any other party under
this Agreement, or any of the Ancillary Agreements, which obligation is
performed, satisfied or fulfilled completely and without any adverse legal
implications to the obligee, by an Affiliate of such party, shall be deemed to
have been performed, satisfied or fulfilled by such party.
Section 9.6 Public Disclosure. Notwithstanding anything to the
contrary contained herein, no press release or similar public announcement or
communication shall be made or caused to be made relating to this Agreement and
the Transaction unless specifically approved in advance by both parties hereto,
except that a party hereto may issue any press release or make any public
announcement or communication relating to this Agreement and the Transaction
that may be required by any applicable Law (including any listing requirement)
without such approval if, to the extent practicable, such party has used
commercially reasonable efforts to obtain the approval of the other party before
issuing such press release or making such public announcement or communication.
Section 9.7 Expenses. Except as otherwise expressly provided in this
Agreement, whether or not the Closing occurs, all costs and expenses incurred in
connection with this Agreement and the transactions contemplated hereby shall be
borne by the party incurring such costs and expenses.
Section 9.8 Schedules.
(a) The disclosure of any matter in any Section relating to
representations of the Seller Disclosure Schedule or the Buyer Disclosure
Schedule shall not be deemed to constitute an admission by Seller or Buyer or to
otherwise imply that any such matter is material for the purposes of this
Agreement, unless the inclusion of such matter in such Schedule is required to
make the representation true. A matter set forth in one Schedule of the Seller
Disclosure Schedule or Buyer Disclosure Schedule pertaining to Article III or
IV, as applicable, need not be set forth in any other Schedule of such
disclosure schedule pertaining to Article III or IV, as applicable, or on a
Schedule corresponding to any other Section of Article III or IV, as applicable,
so long as
141
its relevance to such other Schedule or Section is readily apparent on the face
of the information so disclosed. A matter set forth in one Schedule of the
Seller Disclosure Schedule or Buyer Disclosure Schedule pertaining to Article V
(which shall in no event address matters occurring prior to the date hereof)
need not be set forth on a Schedule corresponding to any Section of Article III
or IV, as applicable, so long as (a) its relevance to such other Schedule or
Section is readily apparent on the face of the information so disclosed and (b)
such matter does not qualify the representations and warranties set forth in
Articles III or IV, as applicable, to the extent such representations and
warranties are made as of the date hereof or as of another specific date prior
to the date hereof.
(b) No later than ten Business Days prior to the Closing, Seller may
deliver to Buyer an update to Schedule 3.8(a) and Schedule 3.8(b) of the Seller
Disclosure Schedule but only in respect of matters that will be discharged (or
the functional equivalent thereof in terms of its effect on Buyer, each
Specified Business, the Transferred Assets and the Assumed Liabilities) pursuant
to the Discharge (or, as applicable, the MCE Discharge or an Additional
Discharge) but arise from actions, omissions or circumstances continuing as of
the Closing. No matter added to Schedule 3.8(a) or Schedule 3.8(b) of the Seller
Disclosure Schedule pursuant to the preceding sentence will be treated as set
forth on any other Schedule as a result of the second sentence of Section
9.8(a).
(c) When an area is set forth on one Schedule A Part as a primary
Cost Center and another Schedule A Part as a non-primary Cost Center, the
following shall apply in determining the Systems and System Group to which it
relates: (i) for the Schedule A Part with respect to which such area is the
primary Cost Center, such Schedule will be deemed to exclude the Subscribers,
and Assets primarily related to those Subscribers, included in the applicable
non-primary Cost Center(s) and (ii) for any given Schedule A Part with respect
to which such area is a non-primary Cost Center, such Schedule A Part will be
deemed to include only the Subscribers, and Assets primarily related to those
Subscribers, included in the applicable non-primary Cost Center.
Section 9.9 Bulk Sales. Seller and Buyer agree to waive compliance
with Article 6 of the Uniform Commercial Code as adopted in each of the
jurisdictions in which any of the Transferred Assets are located to the extent
that such Article is applicable to the transactions contemplated hereby.
Section 9.10 Governing Law; Submission to Jurisdiction; Selection of
Forum; Waiver of Trial by Jury. THE AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO
PRINCIPLES OF CONFLICTS OF LAW. Each party hereto agrees that it shall bring any
action or proceeding in respect of any claim arising out of or related to this
Agreement or the transactions contained in or contemplated by this Agreement and
the Ancillary Agreements, exclusively in (a) the Bankruptcy Court so long as the
Reorganization Case remains open and (b) after the completion of the
Reorganization Case or in the event that the Bankruptcy Court determines that it
does not have jurisdiction, the United States District Court for the
000
Xxxxxxxx Xxxxxxxx xx Xxx Xxxx or any New York State court sitting in New York
City (together with the Bankruptcy Court, the "Chosen Courts"), and solely in
connection with claims arising under this Agreement or the transactions that are
the subject of this Agreement or any of the Ancillary Agreements (i) irrevocably
submits to the exclusive jurisdiction of the Chosen Courts, (ii) waives any
objection to laying venue in any such action or proceeding in the Chosen Courts,
(iii) waives any objection that the Chosen Courts are an inconvenient forum or
do not have jurisdiction over any party hereto and (iv) agrees that service of
process upon such party in any such action or proceeding shall be effective if
notice is given in accordance with Section 9.1. Seller irrevocably designates
The Corporation Trust Company as its agent and attorney-in-fact for the
acceptance of service of process and making an appearance on its behalf in any
such claim or proceeding and for the taking of all such acts as may be necessary
or appropriate in order to confer jurisdiction over it before the Chosen Courts
and Seller stipulates that such consent and appointment is irrevocable and
coupled with an interest. Each party hereto irrevocably waives any and all right
to trial by jury in any legal proceeding arising out of or relating to this
Agreement or the transactions contemplated hereby.
Section 9.11 Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall be deemed an original, and all of which
shall constitute one and the same Agreement.
Section 9.12 Headings. The heading references herein and the table
of contents hereof are for convenience purposes only, and shall not be deemed to
limit or affect any of the provisions hereof.
Section 9.13 Severability. The provisions of this Agreement shall be
deemed severable and the invalidity or unenforceability of any provision shall
not affect the validity or enforceability of the other provisions hereof. If any
provision of this Agreement, or the application thereof to any Person or any
circumstance, is invalid or unenforceable, (a) a suitable and equitable
provision shall be substituted therefor in order to carry out, so far as may be
valid and enforceable, the intent and purpose of such invalid or unenforceable
provision and (b) the remainder of this Agreement and the application of such
provision to other Persons or circumstances shall not be affected by such
invalidity or unenforceability, nor shall such invalidity or unenforceability
affect the validity or enforceability of such provision, or the application
thereof, in any other jurisdiction.
Section 9.14 Specific Enforcement. The parties agree that
irreparable damage would occur and that the parties would not have any adequate
remedy at Law in the event that 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 the parties shall be entitled to an injunction or
injunctions to prevent breaches of Section 5.10 or Article VIII and to enforce
specifically the terms and provisions of such Sections and, following entry of
the Confirmation Order, the parties shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions of this Agreement, such rights being in addition to any
other remedy to which the parties are entitled at Law or in equity. The parties
waive any requirement for
143
security or the posting of any bond or other surety in connection with any
temporary or permanent award or injunctive, mandatory or other equitable relief.
[Remainder of page intentionally left blank.]
144
IN WITNESS WHEREOF, the parties have executed or caused this
Agreement to be executed as of the date first written above.
ADELPHIA COMMUNICATIONS CORPORATION
By: /s/ Xxxxxxx Xxxxxxxx
-----------------------------------
Name: Xxxxxxx Xxxxxxxx
Title: Chief Executive Officer and
Chairman
TIME WARNER NY CABLE LLC
By: /s/ Xxxxx X. X'Xxxxx
-----------------------------------
Name: Xxxxx X. X'Xxxxx
Title: Executive Vice President,
Investments
Asset Purchase Agreement
