Exhibit 2.1
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
XXX COMMUNICATIONS, INC.,
XXX COMMUNICATIONS LAS VEGAS, INC.,
PRIME SOUTH DIVERSIFIED, INC.
AND
THE GREENSPUN SHAREHOLDERS
DATED MAY 4, 1998
TABLE OF CONTENTS
Page
ARTICLE ONE
DEFINITIONS.........................................................1
ARTICLE TWO
THE MERGER..........................................................2
Section 2.1 Merger...................................2
Section 2.2 Merger Consideration.....................2
Section 2.3 Conversion of Shares.....................4
Section 2.4 Fractional Shares........................5
Section 2.5 Determination of Merger Consideration....5
Section 2.6 Funding of True-Up Fund..................7
Section 2.7 Funding of the Indemnity Escrow Deposit..7
ARTICLE THREE
REPRESENTATIONS AND WARRANTIES OF PSD...............................9
Section 3.1 In General...............................9
Section 3.2 Organization and Authority; Capitalization
and Ownership of Shares..................9
Section 3.3 No Conflicts or Breach..................13
Section 3.4 Financial Statements....................13
Section 3.5 Material Adverse Changes................14
Section 3.6 Information Regarding the Business......15
Section 3.7 Title to, and Condition of Operating
Assets..................................18
Section 3.8 Litigation; Judgments, etc..............18
Section 3.9 Labor Contracts.........................18
Section 3.10 Finders and Brokers.....................19
Section 3.11 Compliance with Laws....................19
Section 3.12 Tax Matters.............................20
Section 3.13 Bonds...................................21
Section 3.14 Real Property...........................21
Section 3.15 Insurance...............................23
Section 3.16 Sufficiency of the Operating Assets.....23
Section 3.17 Competitors and Overbuilds..............23
Section 3.18 1997 Operating Cash Flow................23
Section 3.19 Year End 1997 Basic Subscriber Count....24
Section 3.20 HN Hotel Rooms..........................24
Section 3.21 Reorganization..........................24
Section 3.22 Intellectual Property...................25
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Section 3.23 Accounts Receivable.....................25
Section 3.24 Bank Accounts; Powers of Attorney.......26
Section 3.25 Employees, Officers and Directors.......26
Section 3.26 Employee Benefits.......................26
Section 3.27 Exchange Act; Investment Company Act....28
Section 3.28 DGCL Section 203........................29
Section 3.29 Investments.............................29
Section 3.30 No Omissions............................30
Section 3.31 Tax Opinion.............................30
ARTICLE FOUR
REPRESENTATIONS AND WARRANTIES OF
GREENSPUN SHAREHOLDERS.............................................31
Section 4.1 In General..............................31
Section 4.2 Organization and Authority..............31
Section 4.3 Securities Representations..............31
Section 4.4 Tax Opinion.............................32
ARTICLE FIVE
REPRESENTATIONS AND WARRANTIES OF CCI AND MERGER SUB...............32
Section 5.1 In General..............................32
Section 5.2 Organization and Authority..............32
Section 5.3 No Conflicts or Breach..................33
Section 5.4 Litigation..............................34
Section 5.5 Finders and Brokers.....................34
Section 5.6 Capital Stock...........................34
Section 5.7 Transaction Shares......................35
Section 5.8 Reports and Financial Statements........35
Section 5.9 Reorganization..........................35
Section 5.10 Tax Opinion.............................36
ARTICLE SIX
COVENANTS AND CONDUCT OF BUSINESS AND
TRANSACTIONS PRIOR TO CLOSING......................................37
Section 6.1 Covenants of CCI........................37
Section 6.2 Covenants of PSD........................37
Section 6.3 Compliance with HSR Act and Rules.......39
Section 6.4 Risk of Loss............................40
Section 6.5 Use of Names and Logos..................41
Section 6.6 No Solicitation.........................42
Section 6.7 Consents................................42
Section 6.8 Franchise Consents Not Obtained.........44
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Section 6.9 Distribution of PVI Excluded Assets.....45
Section 6.10 Redemption or Repurchase of PVI Shares
Owned by Coditel........................46
Section 6.11 Interim Financial Statements............46
Section 6.12 Capital Expenditures....................46
Section 6.13 Stockholder Approval....................47
Section 6.14 Affiliates of CCI and PSD...............47
Section 6.15 Environmental Investigations............48
Section 6.16 Employee Benefits.......................50
Section 6.17 Reasonable Efforts......................52
Section 6.18 True-Up Fund............................52
ARTICLE SEVEN
CONDITIONS OF CCI'S AND MERGER SUB'S OBLIGATIONS...................52
Section 7.1 In General..............................52
Section 7.2 Consents................................52
Section 7.3 Performance by PSD......................53
Section 7.4 Truth of Representations and Warranties.53
Section 7.5 Absence of Proceedings..................53
Section 7.6 Opinion of FCC Counsel..................53
Section 7.7 Opinion of PSD's Counsel................54
Section 7.8 Tax Opinion.............................54
Section 7.9 Stockholder Approval....................54
Section 7.10 Voting Agreement........................54
Section 7.11 Cable System Upgrade....................54
Section 7.12 Pre-Closing Cash Flow...................55
Section 7.13 Relationship between CCI's Conditions
to Closing and CCI's Right to
Indemnification.. ......................55
ARTICLE EIGHT
CONDITIONS OF PSD'S OBLIGATIONS....................................56
Section 8.1 In General..............................56
Section 8.2 Receipt of Consents.....................56
Section 8.3 Performance by CCI and Merger Sub.......57
Section 8.4 Truth Of Representations and Warranties.57
Section 8.5 Absence of Proceedings..................57
Section 8.6 Opinion of CCI's Counsel................57
Section 8.7 Tax Opinion.............................57
Section 8.8 Stockholder Approval....................58
Section 8.9 Relationship between PSD's Conditions
to Closing and PSD's Right to
Indemnification.........................58
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ARTICLE NINE
CLOSING............................................................58
Section 9.1 Closing.................................58
Section 9.2 Deliveries and Actions by PSD...........59
Section 9.3 Deliveries by CCI.......................62
Section 9.4 Waiver of Conditions....................64
ARTICLE TEN
TERMINATION........................................................65
Section 10.1 Termination.............................65
ARTICLE ELEVEN
CONFIDENTIALITY AND PUBLIC STATEMENTS..............................66
Section 11.1 Confidential Information................66
Section 11.2 Public Statement and Press Releases.....67
Section 11.3 Injunctive Relief.......................67
Section 11.4 Survival................................68
ARTICLE TWELVE
SURVIVAL OF REPRESENTATIONS
AND WARRANTIES; INDEMNIFICATION....................................68
Section 12.1 Survival of Representations
and Warranties..........................68
Section 12.2 Indemnity by PSD of CCI and Merger Sub..68
Section 12.3 Indemnity by CCI of PSD.................68
Section 12.4 Indemnification Procedures..............69
Section 12.5 Indemnification Procedures for Third
Party Claims............................69
Section 12.6 Survival of Claims......................70
Section 12.7 Litigation Expenses.....................71
Section 12.8 Right to Settle Tax Claims for
Pre-Closing Periods.....................71
Section 12.9 Indemnification Threshold...............71
Section 12.10 Maximum Indemnification Liability.......71
Section 12.11 Indemnity Escrow........................72
Section 12.12 Exclusive Nature of Indemnification
Remedy..................................72
ARTICLE THIRTEEN
MISCELLANEOUS......................................................73
Section 13.1 Amendments; Waivers.....................73
Section 13.2 Entire Agreement........................73
Section 13.3 Binding Effect: Assignment..............73
Section 13.4 Construction: Counterparts..............73
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Section 13.5 Notices.................................74
Section 13.6 Expenses of the Parties.................74
Section 13.7 Governing Law and Venue.................74
Section 13.8 Further Actions.........................74
Section 13.9 Gender, Tense, Etc......................75
Section 13.10 Severability............................75
Section 13.11 No Third-Party Rights...................75
Section 13.12 Agreement Regarding "Next Day Rule".....75
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AGREEMENT AND PLAN OF MERGER
This AGREEMENT AND PLAN OF MERGER (this "Agreement") is dated May 4,
1998, by and among Xxx Communications, Inc., a Delaware corporation ("CCI"), Xxx
Communications Las Vegas, Inc., a Delaware corporation and wholly-owned
Subsidiary of CCI ("Merger Sub"), Prime South Diversified, Inc., a Delaware
corporation ("PSD") and each of the Greenspun Shareholders (as defined herein).
BACKGROUND
A. The Boards of Directors of CCI, Merger Sub and PSD each have determined
that it is in the best interests of their respective stockholders for
PSD to merge with and into Merger Sub, upon the terms and subject to
the conditions of this Agreement (the "Merger").
B. The parties intend the Merger to be carried out in accordance with the
provisions of Section 368(a) of the Code (as defined herein), in order
to qualify the Merger as a reorganization within the meaning thereof.
C. CCI, Merger Sub, PSD and the Greenspun Shareholders desire to make
certain representations, warranties, covenants and agreements in
connection with the Merger.
D. CCI and Merger Sub have required, as a condition to their willingness
to enter into this Agreement, that the stockholders of PSD holding a
majority of the shares of common stock of PSD contemporaneously enter
into the Voting Agreement (as defined herein) and execute and deliver
the Stockholders Consent (as defined herein) immediately following the
execution and delivery of this Agreement.
Now, THEREFORE, in consideration of the mutual representations,
warranties, covenants and agreements set forth herein, CCI, Merger Sub, PSD and
the Greenspun Shareholders hereby agree as follows:
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ARTICLE ONE
DEFINITIONS
Exhibit A to this Agreement sets forth the definitions of certain
capitalized terms used in this Agreement and an index to capitalized terms
defined elsewhere in this Agreement. All such capitalized terms shall have such
meanings as so defined when used in this Agreement.
ARTICLE TWO
THE MERGER
Section 2.1 Merger. Subject to the terms and conditions of this
Agreement, PSD shall be merged with and into Merger Sub in accordance with the
DGCL, the separate existence of PSD shall cease, and Merger Sub shall be the
Surviving Corporation. Upon the consummation of the Merger on the terms and
conditions of this Agreement, the Surviving Corporation shall succeed to all the
rights, assets, liabilities and obligations of PSD and Merger Sub in accordance
with the provisions of the DGCL.
(a) Consummation of Merger. At the Closing, the parties shall
cause the Merger to be consummated by duly filing with the Secretary of State of
Delaware a properly executed Certificate of Merger (the "Certificate of Merger")
in substantially the form attached as Exhibit B in accordance with the
provisions of the DGCL. In accordance with the DGCL and the terms of the
Certificate of Merger, the Merger shall be effective at 11:59 p.m. on the
Closing Date as specified in the Certificate of Merger (such time and date being
hereinafter referred to respectively as the "Effective Time" and the "Effective
Date").
(b) Certificate of Incorporation and Bylaws. The certificate
of incorporation of Merger Sub, as amended and in existence immediately prior to
the Effective Time, shall be the certificate of incorporation of the Surviving
Corporation from and after the Effective Time unless and until amended in
accordance with its terms and as provided by law. The bylaws of Merger Sub as in
effect immediately prior to the Effective Time shall be the bylaws of the
Surviving Corporation from and after the Effective Time unless and until amended
in accordance with their terms and the terms of the certificate of incorporation
of the Surviving Corporation and as provided by law.
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(c) Directors and Officers. The initial directors of the
Surviving Corporation shall be as set forth on Schedule 2.1(c) from and after
the Effective Time, and the officers of Merger Sub immediately prior to the
Effective Time shall be the initial officers of the Surviving Corporation from
and after the Effective Time, all such persons to serve as directors or hold
office in accordance with the certificate of incorporation and bylaws of the
Surviving Corporation until their respective successors are duly elected and
qualified.
Section 2.2 Merger Consideration. (a) Merger Consideration. The "Merger
Consideration" is the amount, adjusted pursuant to Section 2.2(b) below equal to
the result obtained by (1) subtracting from $1,325,000,000, regardless of when
the Closing occurs and without duplication, (r) 50% of the aggregate amounts
payable by the PSD Entities as of Closing, if any, to local franchising
authorities in connection with the transfer of the Franchises to CCI and in
obtaining the renewal of such Franchises in accordance with the terms of this
Agreement, including consultants' and attorneys' fees, but excluding any amounts
payable by the PSD Entities as a result of any such entity's failure to comply
with the terms of any Franchise or to otherwise satisfy its obligations
thereunder, (s) the BellSouth Indebtedness, (t) the CCTV Bank Debt, (u) any
other Indebtedness for Borrowed Money owed by the PSD Entities (after
eliminating all intercompany indebtedness among the PSD Entities), (v) the
Closing Fees and the expenses to be borne by PSD as provided in Section 13.6 and
which CCI is obligated to pay as provided in Section 9.3(e), (w) an amount equal
to the extraordinary payments or bonuses payable pursuant to agreements with
Harris Bass, Xxxxx Xxxxx and Xxx Xxxxx calculated according to the agreements
disclosed to CCI prior to date of this Agreement, (x) an amount equal to any
other "stay" bonuses payable solely by reason of the closing of the transaction
contemplated by this Agreement, all of which "stay" bonuses are not in excess of
10% of the aggregate amount disclosed to CCI prior to the date of this Agreement
and provided that the amount of the bonus actually paid to any individual will
not be in excess of 150% of the amount with respect to such individual as so
disclosed, unless otherwise agreed to by CCI prior to the Closing (the amounts
referenced in (w) and (x) above being referred to as the "Closing Bonuses"), (y)
the 1998 Capital Expenditures Amount, and (z) the aggregate consideration paid
to Preferred Shareholders pursuant to Section 2.3(d) as the consideration for
the PSD Preferred Stock, (2) adding to the amount determined in the immediately
preceding clause (1) 50% of the aggregate amounts paid by the PSD Entities prior
to the Closing, if any, to local franchising authorities in connection with the
transfer of the Franchises to CCI and in obtaining the renewal of such
Franchises in accordance with this Agreement (except as may be required to cure
any default by such PSD Entity), (3) if the Closing occurs on or after January
1, 1999, adding the 1999 Capital Expenditures Amount to the amount determined in
the clause (1) above.
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(b) Working Capital Adjustment. The Merger Consideration shall
be (i) increased by the amount by which the Working Capital (as defined below)
as of the Effective Time exceeds the Target Working Capital (as defined below);
or (ii) decreased by the amount by which the Working Capital as of the Effective
Time is less than the Target Working Capital. "Working Capital" as of any date
shall mean on a consolidated basis, current assets less current liabilities of
the PSD Entities determined in accordance with GAAP applied on a basis
consistent with the Unaudited Balance Sheet. "Target Working Capital" shall mean
negative $11,000,000 (i.e., a working capital deficit of $11,000,000). (For
illustration purposes only, in the event the Working Capital as of the Effective
Time is equal to negative $12,000,000 (i.e., a working capital deficit of
$12,000,000), then the Merger Consideration shall be decreased by $1,000,000,
and in the event the Working Capital as of the Effective Time is equal to
negative $10,000,000 (i.e., a working capital deficit of $10,000,000), then the
Merger Consideration shall be increased by $1,000,000.) Current assets shall
include cash and cash equivalents, accounts receivable, notes receivable,
prepaid expenses, and other current assets consistently reported in accordance
with the Unaudited Balance Sheet and in each case in accordance with GAAP.
Current liabilities shall include accounts payable, accrued expenses, accrued
interest, Taxes payable (including any amounts attributable to the distribution
of the PVI Non-CCTV Assets pursuant to Section 6.9 and Section 6.10 but
excluding amounts attributable to a deemed sale of assets by PSD arising from
the failure of the Merger to qualify as a reorganization within the meaning of
Section 368(a) of the Code), subscriber deposits and unearned income
consistently reported in accordance with the Unaudited Balance Sheet and in each
case in accordance with GAAP, but excluding liabilities already deducted from
the Merger Consideration under Section 2.2(a), such as accrued interest and fees
payable under the CCTV Bank Debt and also excluding that amount paid by CCTV to
the Manager at or prior to the Closing for the amount of run-out claims under
the CCTV health insurance plan (which amount represents claims incurred prior to
Closing but which have not been paid as of Closing). PSD shall cause CCTV to pay
the amount of such run-out claims to the Manager at or prior to the Closing.
Section 2.3 Conversion of Shares. As of the Effective Time, by virtue
of the Merger and without any further action on the part of CCI, Merger Sub,
PSD, Surviving Corporation or any holder of any of the following securities:
(a) Each share of common stock and preferred stock of Merger
Sub issued and outstanding immediately prior to the Effective Time shall remain
outstanding as one share of common stock or preferred stock, as applicable, of
the Surviving Corporation.
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(b) Each share of PSD Class A Common Stock and PSD Class B
Common Stock issued and outstanding and held by the Minority Shareholders
immediately prior to the Effective Time (the "Minority Common Stock") shall be
converted into the right to receive cash in an amount equal to the Minority
Shareholder Consideration divided by the number of shares of Minority Common
Stock.
(c) Each share of PSD Class A Common Stock and PSD Class B
Common Stock issued and outstanding and held by the Greenspun Shareholders
immediately prior to the Effective Time (the "Greenspun Common Stock") shall be
converted into (i) the right to receive cash in an amount equal to $50,000,000
(the "Greenspun Cash Consideration") divided by the number of shares of
Greenspun Common Stock, (ii) the right to receive a number of fully paid and
nonassessable shares of CCI Preferred Stock equal to the CCI Preferred Share
Number (as defined below) divided by the number of shares of Greenspun Common
Stock, and (iii) the right to receive a number of fully paid and nonassessable
shares of CCI Common Stock equal to the CCI Common Share Number (as defined
below) divided by the number of shares of Greenspun Common Stock. The "CCI
Preferred Share Number" shall equal that number determined by dividing the CCI
Preferred Stock Value by the Average Closing Price. The "CCI Common Share
Number" shall equal that number determined by dividing (x) the dollar amount
that results from subtracting from the Greenspun Consideration both the CCI
Preferred Stock Value and the Greenspun Cash Consideration, by (y) the Average
Closing Price.
(d) Each share of PSD Preferred Stock issued and outstanding
immediately prior to the Effective Time held by any Preferred Shareholder shall
be converted into cash in the amount prescribed in PSD's certificate of
incorporation.
(e) All shares of the PSD Class A Common Stock, PSD Class B
Common Stock and PSD Preferred Stock, that are held in the treasury of PSD shall
be canceled, and no capital stock of the Surviving Corporation, cash or other
consideration shall be paid or delivered in exchange therefor.
Section 2.4 Fractional Shares. No fractional shares of CCI Class A
Common Stock or CCI Preferred Stock and no scrip or certificates therefor will
be issued in connection with the deliveries contemplated by this Agreement. Any
PSD Shareholder otherwise entitled to a fractional share of CCI Class A Common
Stock or CCI Preferred Stock as a result of Section 2.3 above, shall receive in
place of any such fractional interest a cash amount equal to such fractional
interest based on the Average Closing Price.
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Section 2.5 Determination of Merger Consideration. (a) Preliminary
Report. The Merger Consideration will, insofar as feasible, be estimated in good
faith by the parties on the date of Closing. No later than five Business Days
prior to the date of Closing, PSD shall prepare and deliver to CCI a report (the
"Preliminary Report"), certified as to completeness and accuracy by an executive
officer of PSD, showing in detail the preliminary determination of the amount of
the Merger Consideration, calculated in accordance with Section 2.2 as of the
Closing Date, together with any documents substantiating the determination of
the Merger Consideration proposed in the Preliminary Report. The parties shall
negotiate in good faith to resolve any dispute and to reach an agreement on the
amount of the Merger Consideration prior to the Closing Date. The determination
of the Merger Consideration in the Preliminary Report shall be conclusive for
purposes of Closing, provided CCI has not given notice to PSD that, in CCI's
reasonable opinion, the calculation of the Merger Consideration is incorrect. If
CCI gives PSD notice that in its reasonable opinion, the proposed calculation of
the Merger Consideration is incorrect, and the parties have not been able to
resolve the matter prior to the Closing Date, the True-Up Fund shall be
increased by such disputed amounts and shall be paid in cash by CCI out of the
Greenspun Cash Consideration and the Minority Shareholder Consideration as
provided in Section 2.6 to the Manager to hold in accordance with the Custodial
Agreement until the calculation of the Merger Consideration is finally
determined pursuant to Section 2.5(b) below, at which time the Greenspun
Shareholders and CCI shall deliver a joint written notice to the Manager setting
forth appropriate instructions as to the distribution of the True-Up Fund, as
increased by such disputed amounts, if any, deposited thereunder in cash, in
accordance with the Custodial Agreement.
(b) Final Report. Within 90 days after the Closing, CCI will
deliver to the Greenspun Shareholders and the Manager (on behalf of the PSD
Shareholders) a report (the "Final Report"), similarly certified by an executive
officer of CCI, showing in detail the final calculation of the Merger
Consideration, together with any documents substantiating such calculation
proposed in the Final Report. Each Greenspun Shareholder will, and will use
commercially reasonable efforts to cause the other PSD Shareholders to, provide
CCI with reasonable access to all records which such Greenspun Shareholder or
other PSD Shareholder has in its possession and which are necessary for CCI to
prepare the Final Report and CCI will provide the Greenspun Shareholders and the
Manager with reasonable access to all records which CCI has in its possession
and which are necessary for the Greenspun Shareholders to review the Final
Report. Within 30 days after receipt of the Final Report, the Greenspun
Shareholders (on behalf of the PSD Shareholders) will collectively give CCI
written notice of the PSD Shareholders' objections, if any, to the Final Report.
If there are objections to the Final Report, CCI and the Greenspun Shareholders
shall use good faith efforts to jointly resolve the objections within 30 days of
CCI's receipt of written notice from the
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Greenspun Shareholders of the PSD Shareholders' objections, which resolution, if
achieved, shall be binding upon the parties to this Agreement and the PSD
Shareholders and not subject to dispute or review. If CCI and the Greenspun
Shareholders cannot resolve the discrepancies to their mutual satisfaction
within such 30-day period, CCI and the Greenspun Shareholders shall, within the
following 10 days, retain the Accountants or such other independent public
accounting firm as CCI and the Greenspun Shareholders shall mutually select, to
review the Final Report together with the notice(s) of objections and any other
relevant documents. The cost of retaining the Accountants or such other
accounting firm shall be borne one-half by CCI and one-half by the PSD
Shareholders and shall not be subject to the provisions of Sections 9.3(e) and
13.6. The Accountants or such other accounting firm shall report its conclusions
as to adjustments pursuant to this Section 2.5, which shall be conclusive on all
parties to this Agreement and the PSD Shareholders and not be subject to dispute
or review.
(c) Adjustment to Merger Consideration. (i) If, after
resolution of the Final Report in accordance with Section 2.5(b), the Merger
Consideration determined by the Final Report is greater than the Merger
Consideration determined by the Preliminary Report, then CCI shall pay to the
Manager as agent for the Minority Shareholders and the Greenspun Shareholders
(A) 23.7842% of the amount of such excess in cash to the Minority Shareholders
in proportion to the number of shares of Minority Common Stock held by each of
them immediately prior to the Effective Time, and (B) 76.2158% of the amount of
such excess in cash to the Greenspun Shareholders in proportion to the number of
shares of Greenspun Common Stock held by each of them immediately prior to the
Effective Time. Contemporaneously with the payment by CCI pursuant to the
preceding sentence, Manager shall pay the amount of the True-Up Fund, together
with any interest accrued thereon, to the Minority Shareholders and the
Greenspun Shareholders in the proportions set forth in clauses (A) and (B) of
the preceding sentence.
(ii) If, after resolution of the Final Report in
accordance with Section 2.5(b), the Merger Consideration determined by
the Preliminary Report is greater than the Merger Consideration
determined by the Final Report, then (A) Manager shall pay CCI cash out
of the True-Up Fund in the amount of such excess and any amounts
remaining in the True-Up Fund shall be delivered to the Minority
Shareholders and the Greenspun Shareholders in the proportions set
forth in Section 2.5(c)(i) above, and (B) in the event that the amount
of such excess exceeds the amount of the True-Up Fund, together with
any interest accrued thereon, then CCI shall be entitled to (x) receive
the True-Up Fund, together with any interest accrued thereon, and (y)
have an amount equal to the amount by which such excess exceeds the
amount of the True-Up Fund, together with any interest accrued thereon,
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released to CCI from the Indemnity Escrow Fund, and CCI and the Manager
will deliver joint written instructions to the Escrow Agent to such
effect.
(d) Manager as Agent. The Greenspun Shareholders shall be
entitled to appoint the Manager to act as agent on their behalf and on behalf of
the Minority Shareholders under this Section 2.5.
Section 2.6 Funding of True-Up Fund. At Closing, CCI shall deposit
$2,000,000 with Manager pursuant to the Custodial Agreement (as such amount is
adjusted pursuant to Section 2.5(a), the "True-Up Fund"), which amount shall be
deducted 76.2158% from the Greenspun Cash Consideration and 23.7842% from the
Minority Shareholder Consideration.
Section 2.7 Funding of the Indemnity Escrow Deposit. (a) By the
Minority Shareholders. At Closing, on behalf of the Minority Shareholders, CCI
or Merger Sub shall deposit $5,946,050 plus 23.7842% of the Preclosing Claims in
an amount determined in accordance with Section 7.13(b) and 23.7842% of the
Certificate of Obligation Pre-Closing Claim Reserve Amount as determined
pursuant to Section 2.8 (such aggregate amount referred to as the "Minority
Escrow Amount") in cash with the Escrow Agent, which amount shall be deducted
from the Minority Shareholder Consideration.
(b) By the Greenspun Shareholders. At Closing, on behalf of
the Greenspun Shareholders, CCI shall direct its transfer agent to deposit with
Escrow Agent stock certificates for such number of shares of CCI Common Stock
received by the Greenspun Shareholders pursuant to Section 2.3(c) above
determined by dividing (i) the sum of (A) $19,053,950, (B) 76.2158% of the
Preclosing Claims in an amount determined in accordance with Section 7.13(b) and
(C) 76.2158% of the Certificate of Obligation Claim Reserve Amount as determined
in accordance with Section 2.8, by (ii) the Average Closing Price (such number
of shares referred to as the "Greenspun Escrow Amount," and together with the
Minority Escrow Amount, referred to as the "Indemnity Escrow Deposit") together
with stock powers signed in blank.
2.8 Certificate of Obligation. In the event that after the date of this
Agreement but prior to that date which is one year from the Closing Date, a
third party makes a claim against Merger Sub, CCI or any Affiliate thereof or
CCTV or another PSD Entity to the effect that such third party is entitled to
payment with respect to the Certificate of Obligation (a "Certificate of
Obligation Claim"), then anything to the contrary in this Agreement
notwithstanding, (i) in the event that such Certificate of Obligation Claim is
made prior to the Closing, CCI and PSD shall negotiate in good
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faith in order to agree upon an estimate of an appropriate reserve for the value
of such Certificate of Obligation Claim (the "Certificate of Obligation
Pre-Closing Claim Reserve Amount") (if CCI and PSD are not able to do so within
30 days of the date such Certificate of Obligation Claim is made, the
Accountants shall be engaged to make such estimate), and the Indemnity Escrow
Deposit shall be increased as described in Section 2.7 by the estimated
Certificate of Obligation Pre-Closing Claim Reserve Amount, as determined by CCI
and PSD (or the Accountants); and (ii) if a Certificate of Obligation Claim is
made after the Closing but prior to that date which is one year from the Closing
Date, then CCI shall be entitled to make a claim against the Indemnity Escrow
Deposit with respect to such Certificate of Obligation Claim pursuant to Article
Twelve.
ARTICLE THREE
REPRESENTATIONS AND WARRANTIES OF PSD
Section 3.1 In General. PSD (subject to the limitations on the
indemnification and other obligations set forth in Article Twelve with respect
to such representations and warranties) makes the representations and warranties
set forth below in this Article Three to CCI and Merger Sub to induce CCI and
Merger Sub to enter into this Agreement.
Section 3.2 Organization and Authority; Capitalization and Ownership of
Shares.
(a) PSD Entities. PSD, PSH and PVI are corporations duly
formed, validly existing and in good standing under the laws of the State of
Delaware. Each of CCTV, HN, CTEL and PTEL are corporations duly formed, validly
existing and in good standing under the laws of the State of Nevada. None of
CCTV, PSD, PSH, CTEL or PTEL is qualified to do business as a foreign
corporation in any state or other jurisdiction and none of CCTV, PSD, PSH, CTEL
or PTEL is required to be so qualified to own or lease its properties or to
conduct its business as currently being conducted, except where the failure to
so qualify would not have a material adverse effect on such entity. Each of PVI
and HN is duly qualified to do business, and is in good standing, as a foreign
corporation in the jurisdictions where the ownership or leasing of its
properties or the conduct of its business, as currently being conducted,
requires it to be so qualified, as shown on Schedule 3.2(a), except where the
failure to so qualify would not have a material adverse effect on such entity.
Each of the PSD Entities has all requisite power and authority to own and
operate its properties and to carry on the business associated therewith as now
conducted and to execute and deliver this Agreement (with respect to PSD only)
and all of the other agreements, documents, instruments and certificates
contemplated by, and executed and delivered by it pursuant to this Agreement
(its
9
"Related Agreements"). The execution, delivery and performance by each PSD
Entity of this Agreement (with respect to PSD only) and its Related Agreements
has been duly authorized by such PSD Entity and this Agreement (with respect to
PSD only) is, and each of its Related Agreements will be at Closing, a valid and
binding agreement of such PSD Entity enforceable against such PSD Entity in
accordance with its terms, except as the same may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws affecting
generally the enforcement of creditor's rights and remedies and general
principles of equity, including limitations on the availability of the remedy of
specific performance or injunctive relief regardless of whether specific
performance or injunctive relief is sought in a proceeding at law or in equity.
Complete and correct copies of each PSD Entity's articles or certificate of
incorporation and bylaws, all as amended to date, and of the stock ledgers of
each PSD Entity have been delivered to CCI.
(b) PSD's Capitalization and Share Ownership. The authorized
capital stock of PSD is as set forth on Schedule 3.2(b). All of the issued and
outstanding shares of capital stock of PSD (the "PSD Shares") are owned
beneficially and of record as set forth on Schedule 3.2(b). All of the issued
and outstanding shares of capital stock of PSD have been validly issued and are
fully paid and nonassessable; except as set forth in PSD's certificate of
incorporation, no class of capital stock of PSD is entitled to preemptive
rights; and PSD holds no shares of any class of capital stock in its treasury.
Except as set forth on Schedule 3.2(b) with respect to Liens that will be
released or terminated in connection with the Closing as provided in Section
9.3(c), each stockholder owns the PSD Shares held by it free and clear of all
Liens and at the Effective Time, all such PSD Shares will be free and clear of
all Liens; provided, however, that CCI acknowledges that the PSD Shares are and
will be at the Effective Time subject to Permitted Stock Restrictions. PSD's
sole assets are (i) cash, (ii) the PSH Shares (as defined in Section 3.2(c)) and
(iii) all of the issued and outstanding capital stock of PVI (the "PVI Shares")
(other than PVI's Class C Common Stock held by Coditel). Other than its
ownership of the PSH Shares and a portion of the PVI Shares, PSD conducts no
business, has no employees and owns no property of any nature whatsoever. Except
for such of the Non-System Contracts to which PSD is a party as specified on
Schedule 3.6(a)(ii), PSD is not a party to any lease, contract, agreement or
instrument, and PSD does not own or hold any franchise, permit, license or the
like.
(c) PSH's Capitalization; Ownership of the PSH Shares. The
authorized capital stock of PSH is as set forth on Schedule 3.2(c). All of the
issued and outstanding shares of capital stock of PSH (the "PSH Shares") are
owned beneficially and of record by PSD and PVI as set forth on Schedule 3.2(c).
All of the PSH Shares have been validly issued and are fully paid and
nonassessable. Except as set forth on Schedule 3.2(c) with respect to Liens that
will be released or
10
terminated in connection with the Closing as provided in Section 9.3(c), PSD and
PVI own the PSH Shares free and clear of all Liens; provided, however, that CCI
acknowledges that the PSH Shares are subject to Permitted Stock Restrictions.
PSH's sole asset is the CCTV Shares (as defined in Section 3.2(d)). Other than
its ownership of the CCTV Shares, PSH conducts no business, has no employees and
owns no property of any nature whatsoever. Except for such of the Non-System
Contracts to which PSH is a party as specified on Schedule 3.6(a)(ii), PSH is
not a party to any lease, contract, agreement or instrument, and PSH does not
own or hold any franchise, permit, license or the like.
(d) CCTV's Capitalization; Ownership of the CCTV Shares. The
authorized capital stock of CCTV is as set forth on Schedule 3.2(d). All of the
issued and outstanding shares of capital stock of CCTV (the "CCTV Shares") are
owned beneficially and of record by PSH. All of the CCTV Shares have been
validly issued and are fully paid and nonassessable. Except as set forth on
Schedule 3.2(d) with respect to Liens that will be released or terminated in
connection with the Closing as provided in Section 9.3(c), PSH owns the CCTV
Shares free and clear of all Liens; provided, however, that CCI acknowledges
that the CCTV Shares are subject to Permitted Stock Restrictions.
(e) HN's Capitalization; Ownership of the HN Shares. The
authorized capital stock of HN is as set forth on Schedule 3.2(e). All of the
issued and outstanding shares of capital stock of HN (the "HN Shares") are owned
beneficially and of record by CCTV. All of the HN Shares have been validly
issued and are fully paid and nonassessable. Except as set forth on Schedule
3.2(e) with respect to Liens that will be released or terminated in connection
with the Closing as provided in Section 9.3(c), CCTV owns the HN Shares free and
clear of all Liens; provided, however, that CCI acknowledges that the HN Shares
are subject to Permitted Stock Restrictions.
(f) PVI'S Capitalization; Ownership of PVI Shares. The
authorized capital stock of PVI is as set forth on Schedule 3.2(f). All of the
PVI Shares are owned beneficially and of record as set forth on Schedule 3.2(f).
All of the PVI Shares have been validly issued and are fully paid and
nonassessable. Except as set forth on Schedule 3.2(f), with respect to Liens
that will be released or terminated in connection with the Closing as provided
in Section 9.3(c), all of the PVI Shares owned by PSD are free and clear of all
Liens; provided, however, that CCI acknowledges that such PVI Shares are subject
to Permitted Stock Restrictions. Except for the Non-System Contracts to which
PVI is a party as specified on Schedule 3.6(a)(ii), PVI is not a party to any
lease, contract, agreement or instrument, and PVI does not own or hold any
franchise, permit, license or the like.
11
(g) CTEL's Capitalization; Ownership of the CTEL Shares. The
authorized capital stock of CTEL is as set forth on Schedule 3.2(g). All of the
issued and outstanding shares of capital stock of CTEL (the "CTEL Shares") are
owned beneficially and of record by CCTV. All of the CTEL Shares have been
validly issued and are fully paid and nonassessable. Except as set forth on
Schedule 3.2(g) with respect to Liens that will be released or terminated in
connection with the Closing as provided in Section 9.3(c), CCTV owns the CTEL
Shares free and clear of all Liens; provided, however, that CCI acknowledges
that the CTEL Shares are subject to Permitted Stock Restrictions. CTEL's sole
assets are an interest as a member of TNLLC and a promissory note of TNLLC
payable to the order of CTEL in the original principal amount of $5,000,000
(collectively, the "TNLLC Interests"). Other than its ownership of the TNLLC
Interests, CTEL conducts no business, has no employees and owns no property of
any nature whatsoever. Except for such of the Non-System Contracts to which CTEL
is a party as specified on Schedule 3.6(a)(ii), CTEL is not a party to any
lease, contract, agreement or instrument, and CTEL does not own or hold any
franchise, permit, license or the like.
(h) PTEL's Capitalization; Ownership of the PTEL Shares. The
authorized capital stock of PTEL is as set forth on Schedule 3.2(h). All of the
issued and outstanding shares of capital stock of PTEL (the "PTEL Shares") are
owned beneficially and of record by CCTV. All of the PTEL Shares have been
validly issued and are fully paid and nonassessable. Except as set forth on
Schedule 3.2(h) with respect to Liens that will be released or terminated in
connection with the Closing as provided in Section 9.3(c), CCTV owns the PTEL
Shares free and clear of all Liens; provided, however, that CCI acknowledges
that the PTEL Shares are subject to Permitted Stock Restrictions. PTEL's sole
asset is that certain license described on Schedule 3.2(h) (the "CLEC License").
Other than its ownership of the CLEC License, PTEL conducts no business, has no
employees and owns no property of any nature whatsoever. Except for such of the
Non-System Contracts to which PTEL is a party as specified on Schedule
3.6(a)(ii), PTEL is not a party to any lease, contract, agreement or instrument,
and PTEL does not own or hold any franchise, permit, license or the like, other
than the CLEC License.
(i) No Options. Except for the BellSouth Option and except as
described on Schedule 3.6(a)(ii), there are no outstanding or authorized (i)
securities of any of the PSD Entities convertible into or exchangeable or
exercisable for any shares of its capital stock, (ii) subscriptions, options,
warrants, calls, rights, commitments, or other agreements or obligations of any
kind obligating any of the PSD Entities to issue any additional shares of its
capital stock or any other securities convertible into or evidencing the right
to acquire or subscribe for any shares of its capital
12
stock or (iii) voting trust, voting agreement or other agreement, proxy or
understanding with respect to the voting of any of the shares of capital stock
of any of the PSD Entities.
(j) No Other Subsidiaries. Except as set forth in Schedules
3.2(b)-3.2(h), 3.6(a)(ii) and 3.6(a)(v), none of the PSD Entities owns or has
the right or obligation to acquire, voting securities or other ownership
interests in any other Person.
(k) PVI Assets. Except for assets that will be distributed to
its security holders prior to Closing as permitted by Section 6.9 or used to
redeem or repurchase all of the PVI Shares held by Coditel as permitted by
Xxxxxxx 0.00, XXX has no assets, except for PSH Shares as shown on Schedule
3.2(c).
Section 3.3 No Conflicts or Breach. (a) General. Provided the consents,
approvals and filings described in Schedule 3.3 (the "PSD Consents") are
obtained and made at or prior to the Closing and all waiting periods required
under the HSR Act have expired or otherwise terminated prior to the Closing,
PSD's execution, delivery and performance of this Agreement and its Related
Agreements and the consummation of the transactions contemplated hereby and
thereby does not, and the consummation of the transactions contemplated hereby
and thereby will not, constitute an act of bankruptcy, preference, insolvency or
fraudulent conveyance under any bankruptcy act or other law for the protection
of debtors or creditors, or (i) conflict in any material respect with, or result
in a material breach of, (ii) constitute a material default by any PSD Entity
under, (iii) give any third party the right to accelerate any obligation under
or exercise a right of first refusal with respect to, (iv) result in the
termination, suspension, modification, impairment or violation of, or (v) result
in the creation of any Lien upon:
(A) the respective articles or certificate of
incorporation and bylaws, as amended, of any of the PSD Entities;
(B) any Legal Requirement, judgment or order to which
any of the PSD Entities, the Business, any securities of any of the PSD
Entities, or the Operating Assets is subject;
(C) any of the Non-System Contracts, System
Contracts, Franchises or System Rights (as such terms are defined in
Section 3.6); or
13
(D) any Investment Interest, any securities of any of
the PSD Entities or the Operating Assets.
The consents, approvals and filings described in Schedule 3.3 and identified
with an asterisk shall be deemed "Material Required PSD Consents" for purposes
of this Agreement.
(b) BellSouth. On or prior to the date of this Agreement, PSD
has delivered to CCI the BellSouth Waiver signed by BellSouth in the form
attached hereto as Exhibit R.
Section 3.4 Financial Statements. Attached as Schedule 3.4 are correct
and complete copies of audited consolidated financial statements of PSD,
including its balance sheets, profit and loss statements and statements of cash
flows, at December 31, 1996 and 1997 and for the fiscal years then ended (the
"Audited Financial Statements," with the December 31, 1997 audited consolidated
balance sheet referred to herein as the "Audited Balance Sheet"), and the most
recently available unaudited consolidated financial statements of CCTV (the
unaudited consolidated balance sheet of CCTV included therein being referred to
herein as the "Unaudited Balance Sheet") and consolidated profit and loss
statement of CCTV for the three-month period ended March 31, 1998 (collectively,
as to all of the foregoing, the "Financial Statements"). The Audited Financial
Statements have been certified without qualification by Ernst & Young,
independent certified public accountants for PSD. Except as may otherwise be
noted therein, the Financial Statements have been prepared in accordance with
the books and records of PSD and the other PSD Entities and in accordance with
generally accepted accounting principles ("GAAP") on a consistent basis
throughout the periods referenced above and with each other, except that the
unaudited Financial Statements may not contain footnotes and statements of cash
flows required by GAAP. The Financial Statements fairly present in all material
respects the financial condition and operating results and, with respect to the
Audited Financial Statements only, cash flows, as of the dates and for the
periods indicated therein of PSD and the other PSD Entities, subject only with
respect to the unaudited Financial Statements, to normal year-end audit
adjustments, none of which, to PSD's knowledge, will be material. Except as
disclosed in this Agreement and in Schedule 3.4, none of the PSD Entities has
(i) any liabilities or obligations, whether accrued, contingent or otherwise,
and whether due or to become due, in excess of $1,000,000 in the aggregate,
which are not reflected on the Audited Financial Statements, or (ii) any
material liabilities or obligations, whether accrued, contingent or otherwise,
and whether due or to become due, which are not reflected on the Unaudited
Balance Sheet. Except as set forth on Schedule 3.4, all of the BellSouth
Indebtedness, the CCTV Bank Debt, and any other Indebtedness for Borrowed Money
may be prepaid in full at any time without premium, penalty or other fee or
charge of any kind.
14
Section 3.5 Material Adverse Changes. Except as disclosed in Schedule
3.5, item A.1 of Schedule 3.7 and Schedule 6.2 and except as contemplated or
permitted by this Agreement, from the date of the Audited Balance Sheet the
Business has been operated in the ordinary course and consistent with past
practices and there has not occurred (i) any material adverse change in the
Operating Assets or results of operations or cash flows of the Business; (ii)
any salary or compensation increases to any employee of the Business or any
changes to or creation of any Benefit Plan, except in the ordinary course of
business consistent with past practices; (iii) any theft, damage, destruction or
casualty loss materially and adversely affecting the Business; (iv) any sale of,
or imposition of a Lien on, any material asset of the Business; (v) any
amendment or any termination of any Franchise, System Right, System Contract or
Non-System Contract; (vi) any waiver or release of any material right or claim
of any PSD Entity relating to the Business; (vii) any increase in Indebtedness
for Borrowed Money incurred by any PSD Entity, nor any incurrence of any other
obligation or liability (fixed or contingent) except in the ordinary course of
business and consistent with past practices; (viii) any proceeding with respect
to a merger, consolidation, liquidation or reorganization of any PSD Entity
other than such proceedings relating to this Agreement; (ix) any issuance or
sale of any shares of the capital stock of any PSD Entity, nor any option,
warrant or other right to purchase or acquire any such shares; (x) any loan or
advance made by any PSD Entity to any Person (other than a PSD Entity),
including any of their respective officers, directors, employees and Affiliates;
(xi) any amendment to the articles or certificate of incorporation of any PSD
Entity; (xii) except for the March 31, 1998 rate increase for the Cable System,
any change in the Business' prices or pricing policies with respect to any of
its services; (xiii) any failure to operate the Business in the ordinary course
of business consistent with past practices, including without limitation taking
commercially reasonable steps to preserve CCTV's and HN's business organization
intact and to preserve the goodwill of their respective customers, subscribers,
lessors, lenders and other Persons with whom either has business relations; or
(xiv) any agreement by any of the PSD Entities to take any of the actions
described in the foregoing.
Section 3.6 Information Regarding the Business. (a) In General. Schedule
3.6(a) to this Agreement sets forth:
(i) a list of the material tangible personal property
used or held for use by CCTV or HN in connection with the Business (the
"Tangible Personal Property");
(ii) a listing of each lease, contract, agreement or
instrument to which PSD, PSH, PVI, CTEL or PTEL is a party, or to or by
which PSD, PSH, PVI, CTEL or PTEL is subject or bound, as of the date
hereof (the "Non-System Contracts");
15
(iii) a listing of each lease, contract, agreement or
instrument to which CCTV or HN is a party, or to or by which CCTV or HN
is subject or bound, as of the date hereof (the "System Contracts"),
except for those which are Franchises or System Rights (as defined in
Section 3.6(a)(iv) below) and except for those (A) which (x) can be
canceled without penalty by CCTV or HN upon not more than 30 days prior
notice or (y) provide for aggregate monthly payments by CCTV or HN of
less than $75,000 and as of the date hereof have a remaining term of
not more than 12 months or (B) under which the aggregate remaining
payment obligations of CCTV or HN as of the date hereof is less than
$500,000 in the aggregate;
(iv) a listing of all franchises, ordinances and the
like pursuant to which a Governmental Authority has granted CCTV or HN
permission to provide cable television services to subscribers within a
given area ("Franchises"), all FCC licenses and all business licenses
(except for those business licenses of a nature generally and routinely
required to be obtained and maintained by businesses operating in the
State of Nevada or, with respect to HN, in any other state or
jurisdiction in which HN conducts business), material easements,
material permits or other material evidences of approval of third
parties or any governmental or administrative body (the "System
Rights") held by CCTV or HN, to which CCTV or HN is a party, or to or
by which CCTV or HN is subject or bound, as of the date hereof;
(v) a listing of all material intangible and
intellectual property, including securities and other ownership
interests in other Persons, promissory notes or other evidences of
indebtedness for money borrowed of other Persons (excluding
inter-company indebtedness among the PSD Entities), and material
patents, copyrights, trademarks, trade names and assumed names owned by
the PSD Entities as of the date hereof including those used in
connection with the operation of the Business or held by a PSD Entity
as an investment;
(vi) CTV's and HN's rate structures as of the date
hereof;
(vii) listings of all the programming (by tier)
currently offered to subscribers or customers of CCTV and HN;
(viii) the approximate total number of miles of fully
completed and operational trunk and distribution cable, the approximate
number of miles of aerial plant and
16
the approximate number of miles of underground plant of the Cable
System as of the date hereof;
(ix) the approximate number of homes passed by the
Cable System as of the date hereof as provided in CCTV's regularly
prepared monthly subscriber report;
(x) the bandwidth capacity(ies) of the Cable System
specified in MHz as of the date hereof and the approximate number of
plant miles corresponding to each bandwidth; and
(xi) the number of channels activated throughout the
Cable System (i.e., over 100% of the plant miles) as of the date
hereof.
True and complete copies of all the documents referenced in Schedule 3.6(a) have
been delivered by PSD to CCI (including all amendments and modifications
thereto), except that (i) any documents not so delivered to CCI, as indicated on
said Schedule 3.6(a), will be delivered to CCI within 30 days of the date of
this Agreement and (ii) in the case of standard form agreements which are so
identified as such on Schedule 3.6(a), PSD has (x) delivered to CCI a true and
correct copy of at least one copy of each such standard form agreement, (y) made
available to CCI at the Business' offices true and correct copies of all the
executed standard form agreements, and (z) indicated on Schedule 3.6(a) any
instances where an executed standard form agreement contains material deviations
from such standard form agreement delivered to CCI or listed such executed
agreement thereon.
(b) Status of Franchises, System Contracts, Non-System
Contracts and System Rights. Each of the Franchises, System Contracts,
Non-System Contracts and System Rights is valid, in full force and effect and
enforceable in all material respects in accordance with its terms against such
PSD Entity as is a party thereto, as the case may be, and against the other
parties thereto in the case of the Franchises, and to PSD's knowledge against
the other parties thereto in the case of the System Contracts, Non-System
Contracts and System Rights (except, in each such case, as may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting generally the enforcement of creditor's rights and remedies and
general principles of equity, including limitations on the availability of the
remedy of specific performance or injunctive relief regardless of whether
performance or injunctive relief is sought in a proceeding at law or in equity);
and except as described in Schedule 3.6(b), such PSD Entity as is a party
thereto has in all material respects fulfilled when due, or has taken all action
necessary to enable it to fulfill when due in all material respects, all of its
obligations thereunder. Except as described in Schedule 3.6(b), there has
17
not occurred any material breach by such PSD Entity as is a party thereto, nor
to PSD's knowledge, by any other party thereto, under any of the Franchises,
System Contracts, Non-System Contracts or System Rights. Neither such PSD Entity
as is a party thereto nor, to PSD's knowledge, any other party thereto, is in
arrears in the performance or satisfaction in any material respect of its
obligations under any of the Franchises, System Rights, System Contracts or
Non-System Contracts and no waiver or indulgence has been granted any of the
parties thereto. None of the Governmental Authorities that has issued any
Franchise or System Right has notified any of the PSD Entities in writing (i) of
its intent to modify, revoke, terminate or fail to renew any such Franchise or
System Right, now or in the future, or (ii) that any of the PSD Entities is in
violation of the terms of any such Franchise or System Right, and in each case
to the knowledge of PSD no action has been threatened with respect thereto.
There is not pending any proceeding, application, petition, objection or other
pleading with any Governmental Authority that questions the validity of any
Franchise or System Right or which presents a substantial risk that, if accepted
or granted, would result in the revocation, cancellation, suspension or any
adverse modification of any Franchise or System Right. Except for the BellSouth
Option, no Person (including any Governmental Authority) has any right to
acquire any interest in the Business or the Operating Assets (including any
right of first refusal or similar right), other than rights of condemnation or
eminent domain afforded by law or upon the termination of or default under any
Franchise.
Section 3.7 Title to, and Condition of Operating Assets. (a) Title to
Operating Assets. Except for Permitted Liens and those Liens described in
Schedule 3.7(a), CCTV and HN have good and marketable title to all of the
Operating Assets, free and clear of all Liens. Except as listed on Schedule
3.7(a), no PSD Entity has signed any Uniform Commercial Code financing statement
or any security agreement or mortgage or similar agreement authorizing any
Person to file any financing statement (other than filings made only for
information purposes and not relating to any security interest) or claim any
security interest or Lien with respect to any of the Operating Assets.
(b) Condition of Tangible Personal Property. To PSD's
knowledge, the Tangible Personal Property is in good operating condition and
repair, ordinary wear and tear excepted, and has been constructed and maintained
and has been and is being operated in all material respects in accordance with
all applicable Legal Requirements, System Contracts, Franchises and System
Rights.
Section 3.8 Litigation; Judgments, etc. Except as is disclosed in
Schedule 3.8 and except for proceedings affecting the cable television industry
or in-room video entertainment services industry generally, (i) as of the date
of this Agreement, there are no lawsuits or legal proceedings
18
pending or to PSD's knowledge threatened against, and no judgments or orders
outstanding against or otherwise specifically related to, any PSD Entity or any
PSD Entity's officers, directors or shareholders which could materially and
adversely affect the ability of PSD to perform its obligations under this
Agreement, and (ii) except for lawsuits being defended by PSD's insurance
carriers for which there is adequate coverage, there are no other lawsuits or
other legal proceedings pending or to PSD's knowledge threatened against, and no
judgments or orders outstanding against or otherwise specifically related to,
(x) any PSD Entity, or (y) any PSD Entity's officers, directors or shareholders
relating to any PSD Entity's business or properties. None of the PSD Entities is
in default or violation under any writ, injunction, order or decree of any court
or arbitration panel, or any federal, state, local or other governmental
department, commission, board, bureau, agency or instrumentality.
Section 3.9 Labor Contracts. There are no collective bargaining
agreements, and no contracts or agreements with labor unions, relating to,
involving or affecting the employees of the Business to which any PSD Entity is
a party or by which it is bound, and no PSD Entity has any obligation to bargain
with any labor organization with respect to any such persons. There are not
pending any unfair labor practice charges against any PSD Entity, nor any demand
for recognition, nor any other request or demand from a labor organization for
representative status with respect to any persons employed by any PSD Entity,
and to PSD's knowledge, except as set forth on Schedule 3.9, no such activity is
threatened.
Section 3.10 Finders and Brokers. Except for agreements (the "Broker
Agreements") with Xxxxxxx & Associates, L.P. and with Xxxxxx Capital Corporation
(collectively, the "Brokers," and each a "Broker") pursuant to which PSD is
obligated to pay fees to Brokers upon consummation of the Closing hereunder, (i)
no PSD Entity has entered into any contract, arrangement or understanding with
any Person which may result in an obligation of CCI or any PSD Entity to pay any
finder's fees, brokerage or agents commissions or other like payments in
connection with the negotiations leading up to this Agreement or the
consummation of the transactions contemplated by this Agreement, and (ii) to
PSD's knowledge, there is no claim or basis for any claim for payment of any
finder's fees, brokerage or agent's commissions or like payment in connection
with the negotiations leading to this Agreement or the consummation of the
transactions contemplated hereby.
Section 3.11 Compliance with Laws. (a) In General. (i) Except with respect
to the regulatory status of the Business under, or CCTV's or HN's compliance
with, the FCC rules implementing the rate regulation provisions of the
Communications Act (as to which the PSD Entities make no representations and
warranties in this Agreement other than in Section 3.11(b)),
19
the PSD Entities have complied in all material respects with, and are in
material compliance with, and CCTV and HN have constructed, maintained and
operated, and are constructing, maintaining and operating, the Business in
material compliance with, all applicable laws, including the Communications Act,
the Copyright Act of 1976, the rules and regulations of the FCC, the U.S.
Copyright Office, the Register of Copyrights and the Copyright Tribunal (in each
case as the same are currently in effect). A request for renewal has been filed
timely under Section 626(a) of the Communications Act with the proper
Governmental Authority with respect to all cable television franchises of the
Business expiring within 36 months after the date hereof.
(ii) All material reports, notices, forms and
filings, and all fees and payments, required to be given to, filed
with, or paid to, any Governmental Authority by any PSD Entity under
all applicable laws have been timely and properly given and made by
such PSD Entity, and are complete and accurate in all material
respects, in each case as required by applicable law, including (A) all
cable television registration statements, periodic reports and
aeronautical frequency usage notices, (B) reports and filings required
by the FAA, and (C) for each relevant semiannual reporting period, with
the United States Copyright Office, all required Statements of Account
in true and correct form and copyright royalty fee payments in correct
amounts relating to the Business' carriage of television broadcast
signals and other programming.
(iii) No PSD Entity has received any written notice
from any Governmental Authority or any other Person that it or the
Business, or CCTV's or HN's ownership and operation of the Business, is
in material violation of any applicable law.
(b) Rate Regulation Information. Included in Schedule 3.11(b)
is an accurate description of the regulatory status of the Business under the
FCC rules implementing the rate regulation provisions of the Communications Act,
described by community unit, including (i) whether the local franchising
authority has been certified to regulate the rates for the basic tier and
equipment, (ii) whether any complaints have been filed subjecting the Business'
rates for cable programing services to regulation by the FCC in such community
unit and, if so, the date of the first such complaint for each rate increase,
(iii) the actions that have been taken in anticipation of or response to
regulation for each community unit, including rate changes initiated and forms
filed with the local franchising authorities or the FCC, as the case may be, and
(iv) the status of the regulatory response. PSD has delivered to CCI (A)
complete and correct copies of all FCC Forms 1200, 1220, 1240 and 1205
(including channel listings indicating going forward channels and the date such
channels were added) filed in 1995 and through the date hereof in 1998 with the
local franchising
20
authorities and/or the FCC with respect to the Business, (B) complete and
correct copies of all local franchising authority accounting orders or other
local franchising authority rate orders, (C) complete and correct copies of all
FCC rate orders, (D) complete and correct copies of all local franchising
authority actions taken with respect to the March 1, 1998 rate increase, and (E)
complete and correct copies of all material correspondence from and/or to any
Governmental Authority during 1995, 1996, 1997 and 1998 in connection with the
foregoing or relating to rate regulation generally or specific rates charged to
subscribers to the Business.
Section 3.12 Tax Matters. (a) Except as disclosed in Schedule 3.12,
each PSD Entity has filed timely all Tax Returns required to be filed, and all
such Tax Returns are true, correct and complete in all material respects. All
Tax Returns of each PSD Entity filed after the date hereof and prior to the
Closing will be made in accordance with applicable Legal Requirements and will
be consistent with the past practices of such PSD Entity and will be true,
correct and complete in all material respects. Each PSD Entity has timely paid
and will pay all Taxes which have become due and payable or which will become
due and payable as shown on any Tax Return referred to in the foregoing two
sentences. All Taxes payable by or with respect to any PSD Entity with respect
to any taxable period, or portion thereof, ending on or prior to December 31,
1997 have been fully paid or adequate provision therefor has been made and
reflected on the Financial Statements.
(b) No PSD Entity has received written notice of any proposed
or determined Tax deficiency or assessment from any Taxing Governmental
Authority. Except as disclosed in Schedule 3.12, there are no audits,
examinations, requests for information or other administrative proceedings
pending with respect to any PSD Entity and adequate provision for Taxes with
respect to the audits, examinations or other proceedings set forth on Schedule
3.12 has been made and reflected on the Financial Statements. There are no
outstanding agreements or waivers by or with respect to any PSD Entity that
extend the statutory period of limitations applicable to any federal, state or
local Tax Returns or Taxes for any period. No PSD Entity has entered into any
closing agreements or other agreements with any Taxing Governmental Authority
relating to the payment of Taxes by such PSD Entity which if not timely paid or
discharged may result in the imposition of any Lien on any of the Operating
Assets, and there are no Liens for Taxes on the assets of any PSD Entity, except
for Liens arising by operation of law for Taxes not yet due. There will be no
Tax allocation or Tax sharing agreement in effect on the Effective Date under
which any PSD Entity may be liable, and no PSD Entity is liable for any unpaid
Taxes of any Person (other than the PSD Entities) under Treasury Regulations
Section 1.1502-6, or any similar provision of state, local or foreign law, as a
transferee or successor, by contract or otherwise.
21
Section 3.13 Bonds. A list of all material franchise, construction,
fidelity, performance or other bonds posted or required to be posted by any PSD
Entity is set forth in Schedule 3.13.
Section 3.14 Real Property. (a) Real Property Owned/Leased. None of the
PSD Entities own any real property. None of the PSD Entities lease any real
property except for the leased real property described in Schedule 3.14(a) (the
"Leased Real Property"), which briefly describes the use of such real property
in the operation of the Business. The Leased Real Property has access to such
public roads, utilities and other services as are currently used in the
operation of the Business thereon. Except as set forth in Schedule 3.8, there
are not pending or, to the knowledge of PSD, threatened, any condemnation
actions or special assessments or any pending proceedings for changes in the
zoning with respect to the Leased Real Property, and no PSD Entity has received
any written notice from any Governmental Authority of its intention to take or
use any of the Leased Real Property. All improvements upon the Leased Real
Property are (i) structurally sound with no known material defects, mechanical
failure or damage, (ii) in all material respects in good operating condition and
repair, subject to ordinary wear and tear, (iii) not in need of any material
maintenance or repair, except for ordinary wear and tear, (iv) sufficient for
the operation of the Business as presently operated, and (v) in conformity in
all material respects with all applicable Legal Requirements.
(b) Notice of Investigations. No PSD Entity has received
written notice that any PSD Entity is the subject of any "Superfund" evaluation
or investigation with respect to the Leased Real Property, and has received no
notice that any PSD Entity is the subject of any investigation or proceeding of
any Governmental Authority evaluating whether any remedial action is necessary
to respond to any release of Hazardous Substances on or in connection with the
Leased Real Property.
(c) Environmental Compliance. With respect to the Leased Real
Property, the PSD Entities are in compliance in all material respects with
applicable Legal Requirements relating to the PSD Entities' actual or threatened
emissions, discharges or releases of Hazardous Substances into ambient air,
surface water, ground water, land or otherwise relating to the manufacture,
processing, distribution, use, treatment, storage, disposal, transport or
handling of Hazardous Substances, and all other material environmental, health
or safety Legal Requirements applicable to the PSD Entities. No PSD Entity has
received written notice of, and PSD has no knowledge of circumstances relating
to, any past, present or future events, conditions, circumstances, activities,
practices, incidents, actions or plans, including, but not limited to, the
presence, use, generation, manufacture, disposal, release or threatened release
of any Hazardous Substances upon or from the Leased Real Property, which could
materially interfere with or prevent continued material
22
compliance, or which are reasonably likely to give rise to any material
liability, based upon or related to the processing, distribution, use,
treatment, storage, disposal, transport or handling, or the emission, discharge,
release or threatened release into the environment, of any Hazardous Substance,
from or attributable to the Leased Real Property under any Legal Requirements
relating to the protection of the environment.
(d) Hazardous Substances. "Hazardous Substances" means (i) any
"hazardous waste" as defined by the Resource Conservation and Recovery Act of
1976 (RCRA) (42 U.S.C.A. xx.xx. 6901 et seq.), as amended, and rules and
regulations promulgated thereunder; (ii) any "hazardous substance" as defined by
the Comprehensive Environmental Response, Compensation and Liability Act of 1980
(42 U.S.C.A. xx.xx. 9601 et seq.) (CERCLA), as amended, and rules and
regulations promulgated thereunder; (iii) any substance regulated by the Toxic
Substances Control Act (TSCA) (42 U.S.C. ss. 2601 et seq.), as amended, and
rules and regulations promulgated thereunder; (iv) asbestos requiring abatement,
removal or treatment pursuant to the requirements of any environmental laws; (v)
polychlorinated biphenyls; (vi) any substances regulated under the provisions of
Subtitle I of RCRA relating to underground storage tanks; (vii) any substance
the presence, use, treatment, storage or disposal of which on the Leased Real
Property is prohibited by any Legal Requirements; and (viii) any other substance
which by any Legal Requirement requires special handling, reporting or
notification of any Governmental Authority in its collection, storage, use,
treatment or disposal.
Section 3.15 Insurance. A brief description of all insurance policies
owned or maintained by the PSD Entities and relating to the Business or the
Operating Assets is set forth in Schedule 3.15. The PSD Entities have in all
material respects complied with the conditions of each such insurance policy and
have not failed to give any notice or present any claim thereunder in a due and
timely manner. Such policies are in full force and effect. No PSD Entity has
received any notice of cancellation or nonrenewal of any policy listed or
required to be listed on Schedule 3.15 or any refusal of coverage thereunder or
any notice that any insurer under any such policy is no longer willing or able
to perform its obligations thereunder or to renew any such policy in the future.
None of such insurance policies contains any provision for retroactive
adjustments.
Section 3.16 Sufficiency of the Operating Assets. The Operating Assets
(including leasehold interests in assets leased from third parties), along with
(i) the Excluded Assets, and (ii) the assets described on Schedule 3.16 (the
"Other Required Assets"), constitute all of the assets necessary to operate the
Business as it is presently being operated.
23
Section 3.17 Competitors and Overbuilds. To PSD's knowledge, except as
set forth in Schedule 3.17 and except for the Cable System, (i) there are no
operating cable television systems in all or any portion of the areas for which
any PSD Entity holds a Franchise, (ii) no Person has been granted by any
Franchising Authority or any other governmental cable television licensing
agency, and no Person has submitted a proposal for the issuance by any
Franchising Authority or any other governmental cable television licensing
agency, of any franchise, permit, license, authorization, contract or right,
pursuant to which such Person in either case is or may become entitled to
operate a cable television system, subscription television system, multi-point
distribution system or private operational fixed microwave service, in all or
any portion of the areas for which any PSD Entity holds a Franchise, and (iii)
there are no multi-point distribution systems, multi-channel multi-point
distribution systems, wireless cable systems or satellite master antenna systems
operating in all or any portion of the areas for which any PSD Entity holds a
Franchise, and to PSD's knowledge, no party intends or is seeking to construct
or operate any of the foregoing. Except as set forth in Schedule 3.17, there has
not been any overbuilding of the Cable System by another cable television
system, multi-channel multi-point distribution system or multi-point
distribution system.
Section 3.18 1997 Operating Cash Flow. PSD's consolidated Operating
Cash Flow for the calendar year 1997 was not less than $76,407,000 and for the
quarter ended March 31, 1998 was not less than $20,300,000.
Section 3.19 Year End 1997 Basic Subscriber Count. The number of CCTV's
Basic Subscribers was not less than 283,000 as of December 31, 1997 and not less
than 287,000 as of March 31, 1998.
Section 3.20 HN Hotel Rooms. The number of hotel rooms which HN served
as of December 31, 1997 was not less than 98,000 and as of March 31, 1998 was
not less than 102,000.
Section 3.21 Reorganization. (a) PSD will not, and will not cause or
permit any PSD Entity to, take any action that would cause the Merger to fail to
qualify as a reorganization within the meaning of Section 368(a) of the Code,
and PSD will report the Merger for federal income tax purposes as a
reorganization within the meaning of Section 368(a) of the Code.
(b) Immediately following the Merger, the Surviving
Corporation will hold at least 90% of the fair market value of PSD's net assets
and at least 70% of the fair market value of PSD's gross assets determined in
accordance with Revenue Procedure 77-37, as amended, taking into account amounts
used to pay Merger expenses, any redemptions or distributions other than
24
regular dividends, and all other payments or transfers of assets made in
connection with the transactions contemplated by this Agreement.
(c) On the Closing Date, the fair market value of the assets
of PSD transferred to Merger Sub in the Merger will exceed the amount of
liabilities to which such transferred assets are subject and any other
liabilities assumed by Merger Sub in the Merger.
(d) There is no indebtedness existing between CCI and PSD or
between Merger Sub and PSD that was issued, acquired, or will be settled at a
discount.
(e) PSD is not an investment company as defined in Sections
368(a)(2)(F)(iii) and (iv) of the Code.
(f) PSD is not under the jurisdiction of a court in a title 11
or similar case within the meaning of Section 368(a)(3)(A) of the Code.
(g) The liabilities of PSD assumed by Merger Sub and the
liabilities to which the transferred assets of PSD are subject were incurred in
the ordinary course of PSD's business.
(h) In connection with the Merger, except as provided in
Sections 6.9 and 6.10, (i) none of the capital stock of PSD will be redeemed,
(ii) no distributions will be made with respect to any capital stock of PSD, and
(iii) none of the capital stock of PSD will be acquired by any Person related
(as defined in Treasury Regulations Section 1.368-1(e)(3)) to PSD.
(i) Schedule 3.21 sets forth all bonuses and other
compensatory payments other than payments of base salary made by the PSD
Entities in excess of $50,000 per annum subsequent to December 31, 1996 to any
Person that owns a direct or indirect interest in PSD or any Person related to
such Person.
(j) Other than distributions provided for in Sections 6.9 and
6.10, the amount of cash distributed by the PSD Entities to or on behalf of the
PSD Shareholders subsequent to December 31, 1996 does not exceed $6,000,000.
(k) Other than distributions provided for in Sections 6.9 and
6.10, no property (other than cash) has been transferred by any PSD Entity to or
on behalf of the PSD Shareholders subsequent to December 31, 1996.
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(l) No property has been transferred directly or indirectly
from any PSD Shareholder to or on behalf of the PSD Entities subsequent to
December 31, 1996.
Section 3.22 Intellectual Property. Except as set forth on Schedule
3.6(a), the PSD Entities do not own or control or have any right, license or
interest in, any patent or patent application, trade name, trademark or service
xxxx registration or application, or copyright registration. To PSD's knowledge,
no PSD Entity has (i) infringed upon or violated any patents, trademarks,
service marks, trade names, copyrights or applications or registrations therefor
of any Person, nor (ii) used without permission any confidential information,
trade secrets, technology or know-how of any Person, and in each case there is
no claim or action pending, or to PSD's knowledge threatened, with respect
thereto.
Section 3.23 Accounts Receivable. All accounts receivable and notes
receivable of the PSD Entities (other than the PSD Entities' intercompany notes
receivable) have arisen from bona fide transactions in the ordinary course of
business. Assuming that commercially reasonable efforts are made to collect such
accounts receivable and notes receivable, all accounts receivable and notes
receivable reflected on the Financial Statements (other than the PSD Entities'
intercompany notes receivable) are good and collectible in the ordinary course
of business at the aggregate recorded amounts thereof, net of doubtful accounts
similarly recorded. Any prepayments of revenue or deposits received by any PSD
Entity have been recorded in the Financial Statements as subscriber deposits or
unearned income.
Section 3.24 Bank Accounts; Powers of Attorney. Schedule 3.24 contains
a correct and complete list of all (i) accounts or deposits of any PSD Entity
with banks or other financial institutions, (ii) safe deposit boxes of any PSD
Entity, (iii) persons authorized to sign or otherwise act with respect thereto
as of the date hereof, and (iv) powers of attorney for each PSD Entity.
Section 3.25 Employees, Officers and Directors. Schedule 3.25 lists the
names and positions of each of the officers, directors and employees of each PSD
Entity, and the hourly wage or salary information for such employees previously
delivered to CCI is accurate in all material respects as of the date hereof.
Section 3.26 Employee Benefits. (a) List of Benefit Plans. All of the PSD
Entities' Benefit Plans are listed and described in Schedule 3.26 to this
Agreement and complete and accurate copies of (including any amendments to) any
such written Benefit Plans (or related insurance policies) have been furnished
to CCI, along with copies of any employee handbooks or similar documents
26
describing such Benefit Plans. Any unwritten Benefit Plans also are listed in
Schedule 3.26, and complete descriptions thereof have been furnished to CCI.
Except as disclosed in Schedule 3.26, no PSD Entity is a party to or has in
effect or to become effective after the date hereof any plan arrangement that
will become a Benefit Plan (including, but not limited to, any bonus, cash or
deferred compensation, severance, medical, pension, profit sharing or thrift,
stock option, employee stock ownership, life or group insurance, death benefit,
vacation, sick leave, disability or trust agreement or arrangement), or any
amendment to a Benefit Plan.
(b) Reporting. The PSD Entities have furnished to CCI the
Forms 5500 filed for each of the Benefit Plans (including all attachments and
schedules), actuarial reports, summaries of material modifications, summary
annual reports, and any other employer notices (including governmental filings
and descriptions of material changes to Benefit Plans relating to the PSD
Entities' Benefit Plans for the last three plan years, and the current summary
plan descriptions).
(c) Compliance. Each Benefit Plan has been administered in
compliance in all material respects with its own terms and in material
compliance with the provisions of ERISA, the Code, the Age Discrimination in
Employment Act and any other applicable Legal Requirements. Further, any
elective deferrals made by employees of the Business towards the cost of any
Benefit Plan that was a welfare plan or arrangement were made pursuant to a
cafeteria plan that satisfied the requirements of Section 125 of the Code with
respect to such employees.
(d) Multiemployer Plans. No PSD Entity nor any Affiliate of
any PSD Entity is contributing to, is required to contribute to, or has
contributed within the last six years to, any Multiemployer Plan, and no PSD
Entity nor any Affiliate of any PSD Entity has incurred within the last six
years, or reasonably expects to incur, any "withdrawal liability," as defined
under Section 4201 et seq. of ERISA.
(e) Plan Requirements. At all times on or prior to the
Closing, each Benefit Plan, to the extent such Benefit Plan is intended to be
tax-qualified, satisfies in all material respects all minimum coverage, minimum
participation and non-discrimination requirements, if any, imposed on such
Benefit Plan by the applicable terms of the Code and ERISA. To the extent any
Benefit Plan is structured as a multiple employer plan, such Benefit Plan and
the portion of such plan that covers the employees of the Business, at all times
on or prior to the Closing, satisfies all such coverage, participation and
non-discrimination requirements imposed thereon under applicable Legal
Requirements.
27
(f) Audits. No PSD Entity has knowledge of the existence of
any governmental inspection, investigation, audit or examination of any Benefit
Plan or of any facts that would lead them to believe that any such governmental
inspection, investigation, audit or examination is pending or threatened. There
exists no action, suit or claim (other than routine claims for benefits) with
respect to any Benefit Plan pending or, to PSD's knowledge, threatened against
any of such plan or arrangement.
(g) Retiree Coverage. Except as described in Schedule 3.26, no
PSD Entity nor any Affiliate of any PSD Entity sponsors, maintains or
contributes to any Benefit Plan that provides medical or death benefit coverage
to former employees of the PSD Entities, except to the extent required by
Section 4980B of the Code. Schedule 3.26 lists each former employee of the
Business eligible for a benefit, if any, described in the preceding sentence.
(h) Qualification Standards. Except as described in Schedule
3.26, with respect to each Benefit Plan: (i) each Benefit Plan that is intended
to be tax-qualified, and each amendment thereto, is the subject of a favorable
determination letter, and no plan amendment that is not the subject of a
favorable determination letter would affect the validity of a Benefit Plan's
letter; (ii) no condition or event exists or is expected to occur that could
subject, directly or indirectly, any PSD Entity or any Affiliate of any PSD
Entity to any material liability, contingent or otherwise, or the imposition of
any lien on the assets of any PSD Entity or any Affiliate of any PSD Entity
under the Code or Title IV of ERISA, whether to the Pension Benefit Guaranty
Corporation, the Internal Revenue Service, or any other Person; (iii) no Benefit
Plan ever has incurred an "accumulated funding deficiency," as such term is
defined in Section 302(a)(2) of ERISA and Section 412(a) of the Code, whether or
not waived, and otherwise always has fully met the funding standards required
under Title I of ERISA and Section 412 of the Code; (iv) no "reportable event,"
as that term is defined in Section 4043(b)(1) through (8) of ERISA and, to PSD's
knowledge, Section 4043(b)(9) of ERISA, ever has occurred with respect to any
Benefit Plan and no reportable event requires prior notice; (v) there are no
unfunded liabilities with respect to any Benefit Plan, i.e., the actuarial
present value of all "benefit liabilities" (determined within the meaning of
Section 401(a)(2) of the Code) under such Benefit Plan, whether or not vested,
does not exceed the current value of the assets of such Benefit Plan; (vi) no
prohibited transaction, within the definition of Section 4975 of the Code or
Title 1, Part 4 of ERISA, has occurred that would subject any PSD Entity or CCI
to any liability; and (vii) all contributions, premiums or payments accrued, in
whole or in part, under each Benefit Plan or with respect thereto as of the
Closing will be paid by the PSD Entities, on or prior to Closing or, if later,
within the time period permitted by ERISA and the Code.
28
(i) COBRA. With respect to the Business, Schedule 3.26
contains a complete and accurate list of all qualified beneficiaries, as defined
under Section 4980B(g)(1) of the Code, as of the date hereof (including
qualified beneficiaries who are in the election period for continuation coverage
but who have not yet elected continuation coverage), the date of the applicable
qualifying event and the nature of the qualifying event relating to the duration
of such coverage. There have been no failures to provide continuation coverage
as required by Section 4980B(f) of the Code. PSD agrees to provide to CCI at
Closing an updated list of the qualified beneficiaries with respect to the
Business, as described above, effective as of the Closing.
(j) Deduction Issues. Except as specifically disclosed on
Schedule 3.26 and except for the Closing Bonuses in the amounts previously
disclosed to CCI prior to the date hereof in accordance with Section 2.2(a),
neither the execution and delivery of this Agreement nor the consummation of the
transactions contemplated hereby will (i) result in any payment (including,
without limitation, stay bonuses, severance, or unemployment compensation)
becoming due to any director or employee of any PSD Entity; (ii) result in the
acceleration of vesting under any Benefit Plan; or (iii) materially increase any
benefits otherwise payable under any Benefit Plan.
(k) Employee Stock Options. There are no currently outstanding
stock options or other rights extended to employees, directors or independent
contractors of any PSD Entity, or any Affiliate of any PSD Entity that, in their
current form and without regard to the transactions contemplated by this
Agreement, would grant to such Persons the ability to purchase or otherwise
receive stock in any of the PSD Entities at any time.
Section 3.27 Exchange Act; Investment Company Act. No securities of any
of the PSD Entities are required to be registered under Section 12 of the
Exchange Act. None of the PSD Entities is an "investment company" as such term
is defined in the Investment Company Act of 1940, as amended.
Section 3.28 DGCL Section 203. The board of directors of PSD has
unanimously approved the transactions contemplated by this Agreement and the
Voting Agreement, including the Merger, so as to render the provisions of
Section 203 of the DGCL inapplicable to the transactions contemplated by this
Agreement and to CCI and Merger Sub in connection with this Agreement and the
Voting Agreement. No other state takeover statute or similar statute or
regulation applies or purports to apply to this Agreement, the Voting Agreement
or any of the transactions contemplated hereby. The board of directors of PSD
has directed that this Agreement be submitted to the
29
stockholders of PSD for their approval. Immediately after the execution of this
Agreement, the PSD Shareholders will approve the transactions contemplated
hereby.
Section 3.29 Investments. (a) In General. PSD does not own, directly or
indirectly, of record or beneficially, or have the right or obligation to
acquire, any outstanding securities or other interest in any corporation,
partnership, joint venture or other entity, except for PVI's ownership of the
PVI Non-CCTV Assets and except for the interests described below (collectively,
the "Investment Interests"): (i) CTEL owns a 35% interest in TNLLC, a local
common local exchange carrier; (ii) CCTV owns a minority interest in MTS-CP,
L.P. which owns an equity interest in CablePlus, a private cable and telephony
operator; (iii) CCTV, pursuant to an oral agreement as of the date hereof, owns
a 33 1/3% interest in Las Vegas News Channel, L.L.C. (a/k/a Las Vegas One), a
local news channel in the development stage; and (iv) PSD, pursuant to an oral
understanding, has the right to acquire a 20% interest in Las Vegas CitySearch,
an as yet unorganized local Internet directory web site in the development
stage.
(b) Ownership and Transfer of the Investment Interests. Such
Investment Interests are owned free and clear of any Lien, other than Permitted
Liens and Liens arising (i) pursuant to the constituent documents of such
entities in which the PSD Entities own such Investment Interests and (ii) the
other agreements relating thereto listed on Schedule 3.6(a). Except for this
Agreement and those agreements listed on Schedule 3.6(a) and relating to such
Investment Interests, no PSD Entity is a party to or is bound by any agreement,
arrangement, option, warrant, call, right or commitment of any character,
whether absolute or contingent, relating to the issuance, sale, purchase or
redemption of all or any portion of the respective PSD Entity's rights to an
ownership interest in the Investment Interests. After the consummation of the
Merger, the respective PSD Entities will continue to own good and valid title to
the Investment Interests, free and clear of any and all Liens, other than
Permitted Liens and Liens arising (i) pursuant to the constituent documents of
such entities in which the PSD Entities own such Investment Interests and (ii)
the other agreements relating thereto listed on Schedule 3.6(a).
(c) Organization. TNLLC is a Delaware limited liability
company, MTS-CP, L.P. is a Delaware limited partnership, and Las Vegas News
Channel, L.L.C. is a Delaware limited liability company. Complete and correct
copies of the organizational documents of TNLLC, MTS-CP, L.P. and Las Vegas News
Channel, L.L.C., all as amended to date, have been delivered to CCI.
(d) Financial Statements. Attached as Schedule 3.29 are
correct and complete copies of the audited financial statements of TNLLC,
including its balance sheet, profit and loss
30
statement and statement of cash flows, at December 31, 1997 and for the fiscal
year then ended. To PSD's knowledge, such audited financial statements are not
inaccurate in any material respect and no material adverse change has occurred
in TNLLC's financial condition since the date of such audited financial
statements.
(e) Additional Contributions. Except as set forth on Schedule
3.29, no PSD Entity is party to any agreement or understanding pursuant to which
such PSD Entity is required to make any further investment in the entities in
which the PSD Entities own such Investment Interests or to make any additional
contributions to such entities in connection with PSD's ownership of the
Investment Interests.
Section 3.30 No Omissions. Except as set forth or referred to in this
Agreement or in the Schedules hereto, to PSD's knowledge, there exists no
present condition or state of facts or circumstances that has a Material Adverse
Effect or that would prevent any of the PSD Entities from conducting its
business after the Merger in all material respects in the same manner in which
it has heretofore been conducted.
Section 3.31 Tax Opinion. PSD has been advised by its tax counsel that,
if the Merger were to be effected on the date of this Agreement, in accordance
with the terms of this Agreement, such tax counsel would render the opinion
described in Section 8.7.
ARTICLE FOUR
REPRESENTATIONS AND WARRANTIES OF GREENSPUN SHAREHOLDERS
Section 4.1 In General. Each Greenspun Shareholder jointly and
severally (subject to the limitations on the indemnification and other
obligations set forth in Article Twelve with respect to such representations and
warranties) makes the representations and warranties set forth below in this
Article Four to CCI and Merger Sub to induce CCI and Merger Sub to enter into
this Agreement.
Section 4.2 Organization and Authority. Each Greenspun Shareholder is
an entity duly formed, validly existing and in good standing under the laws of
the state of its organization, and each Greenspun Shareholder has all requisite
power and authority to execute and deliver this Agreement and all of the other
agreements, documents, instruments and certificates contemplated by, and
executed and delivered by it pursuant to, this Agreement (its "Related
Agreements") and perform its obligations under this Agreement and its Related
Agreements. The execution, delivery and
31
performance by each Greenspun Shareholder of this Agreement and its Related
Agreements has been duly authorized by such Greenspun Shareholder and this
Agreement and the Voting Agreement are, and each of its other Related Agreements
will be when delivered, a valid and binding agreement of such Greenspun
Shareholder, enforceable against such Greenspun Shareholder in accordance with
its terms, except as the same may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting generally the
enforcement of creditor's rights and remedies and general principles of equity,
including limitations on the availability of the remedy of specific performance
or injunctive relief regardless of whether specific performance or injunctive
relief is sought in a proceeding at law or in equity.
Section 4.3 Securities Representations. Each of the Greenspun
Shareholders has received and reviewed a copy of CCI's Form 10-K for the fiscal
year ended December 31, 1997. Each Greenspun Shareholder either (i) is an
"accredited investor" within the meaning of Rule 501(a) of Regulation D under
the Securities Act; or (ii) has appointed a "purchaser representative" within
the meaning of Rule 501(h) of Regulation D under the Securities Act. Each
Greenspun Shareholder which is not an "accredited investor" within the meaning
of Rule 501(a) of Regulation D under the Securities Act, either alone or with
its purchaser representative, has such knowledge and experience in business and
financial matters and such knowledge concerning the business, operations and
financial condition of PSD and of CCI that such Greenspun Shareholder (A) is
capable of evaluating the merits and risks of any investment in the shares of
CCI Class A Common Stock and CCI Preferred Stock and (B) fully understands the
nature, scope, and duration and limitations on transfer contained herein and
under applicable law. Each Greenspun Shareholder, or such Greenspun
Shareholder's purchaser representative, has had an adequate opportunity to ask
questions and receive answers (and has asked such questions and received answers
to his satisfaction) from the officers of CCI concerning the business,
operations and financial condition of CCI. Each Greenspun Shareholder can bear
the economic risk of an investment in the shares of CCI Class A Common Stock and
CCI Preferred Stock and can afford a complete loss of such investment. Except as
required by applicable law, such Greenspun Shareholder has no contract,
undertaking, agreement or arrangement, written or oral, with any other person to
sell, transfer or grant participation in any shares of CCI Class A Common Stock
or CCI Preferred Stock to be acquired by such Greenspun Shareholder in the
Merger.
Section 4.4 Tax Opinion. The Greenspun Shareholders have been advised
by their tax counsel that, if the Merger were to be effected on the date of this
Agreement, in accordance with the terms of this Agreement, such tax counsel
would render the opinion described in Section 8.7.
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ARTICLE FIVE
REPRESENTATIONS AND WARRANTIES OF CCI AND MERGER SUB
Section 5.1 In General. CCI and Merger Sub (subject to the limitations
on the indemnification and other obligations set forth in Article Twelve with
respect to such representations and warranties) each makes the following
representations and warranties set forth below in this Article Five to PSD and
the Greenspun Shareholders to induce PSD and the Greenspun Shareholders to enter
into this Agreement.
Section 5.2 Organization and Authority. CCI is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware. Merger Sub is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware, and is, or will be as of
Closing, qualified to transact business and in good standing as a foreign
corporation in the State of Nevada. CCI and Merger Sub have all requisite power
and authority to own and operate their respective properties and to carry on
their respective businesses as now conducted. Each of CCI and Merger Sub has all
requisite power and authority to execute and deliver this Agreement and all
other of its agreements, documents, instruments and certificates contemplated
by, and executed and delivered by it pursuant to, this Agreement (its "Related
Agreements") and perform its obligations under this Agreement and its Related
Agreements. The execution, delivery and performance by each of CCI and Merger
Sub of this Agreement and its Related Agreements has been duly authorized by
each of CCI and Merger Sub and this Agreement is, and at the Closing its Related
Agreements will be, a valid and binding agreement of each of CCI and Merger Sub
enforceable against each of CCI and Merger Sub in accordance with its terms,
except as the same may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting generally the enforcement
of creditors' rights and remedies and general principles of equity, including,
any limitations on the availability of the remedy of specific performance or
injunctive relief regardless of whether specific performance or injunctive
relief is sought in a proceeding at law or in equity. Complete and correct
copies of each of CCI's and Merger Sub's Articles or Certificate of
Incorporation and Bylaws, all as amended to date, have been delivered to PSD and
the Greenspun Shareholders. Neither CCI nor Merger Sub, nor any of their
respective Subsidiaries, was an "interested stockholder" of PSD, as defined for
purposes of Section 203 of the DGCL, immediately prior to the approval of the
transactions contemplated by this Agreement and the Voting Agreement by the
board of directors of PSD.
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Section 5.3 No Conflicts or Breach. Provided the consents, approvals
and filings described in Schedule 5.3 (the "CCI Required Consents and Filings")
are obtained and made at or prior to Closing (which CCI Required Consents and
Filings shall not be conditions to CCI's or Merger Sub's obligations to close
under this Agreement), and all waiting periods required under the HSR Act have
expired or otherwise terminated prior to Closing, each of CCI's and Merger Sub's
execution, delivery and performance of this Agreement and its Related Agreements
do not and will not constitute an act of bankruptcy, preference, insolvency or
fraudulent conveyance under any bankruptcy act or other law for the protection
of debtors or creditors, or (i) conflict in a material respect with, or result
in a material breach of, (ii) constitute a material default by CCI or Merger Sub
under, (iii) give any third party the right to accelerate any obligation under
or exercise a right of first refusal with respect to, (iv) result in the
termination, suspension, modification, impairment or violation of, or (v) result
in the creation of any Lien upon:
(A) the respective certificate of incorporation and
bylaws of either CCI or Merger Sub;
(B) any Legal Requirement, judgment or order to which
either CCI or Merger Sub or any of their respective assets or business
are subject;
(C) any lease, contract, agreement, instrument,
franchise, license or permit to which either CCI or Merger Sub is a
party or by which, or to which either CCI or Merger Sub, their
respective assets or business are bound or subject; or
(D) either CCI's or Merger Sub's assets;
except for such conflicts, breaches, defaults, accelerations, exercises, or
violations that do not have a CCI Material Adverse Effect or prevent or
materially delay the performance of this Agreement by CCI or Merger Sub.
Section 5.4 Litigation. Except as is disclosed in the CCI SEC Reports
filed prior to the date hereof and except for proceedings affecting the cable
television, broadband distribution or programming industries generally, there
are no lawsuits or legal proceedings pending, or to CCI's knowledge threatened,
against CCI or any of its Subsidiaries which could materially and adversely
affect the ability of CCI to perform its obligations under this Agreement, nor
are there any judgments or orders outstanding against CCI or any of its
Subsidiaries that could have such effect.
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Section 5.5 Finders and Brokers. CCI has not entered into any contract,
arrangement or understanding with any Person which will result in the obligation
of any PSD Shareholder or any PSD Entity to pay any finder's fees, brokerage or
agent's commissions or other like payments in connection with the negotiations
leading to this Agreement and the Related Agreements or the consummation of the
transactions contemplated hereby or thereby, and, except for the Broker
Agreements, CCI is not aware of any claims or basis for any claim for payment of
any finder's fees, brokerage or agent's commissions or other like payments in
connection with the negotiations leading to this Agreement or the consummation
of the transaction hereby.
Section 5.6 Capital Stock. (a) CCI. The authorized capital stock of CCI
is as set forth on Schedule 5.6. All of the outstanding shares of capital stock
of CCI are duly authorized, validly issued, fully paid and nonassessable. As of
the close of business on March 31, 1998, the number of shares of capital stock
of CCI issued and outstanding and the number of shares held in the treasury of
CCI are as set forth on Schedule 5.6. Except as disclosed in the CCI SEC
Reports, all outstanding shares of capital stock of the Significant Subsidiaries
(as defined for purposes of Regulations S-X under the Exchange Act) of CCI are
owned by CCI or a direct or indirect wholly-owned Subsidiary of CCI, free and
clear of all liens, charges, encumbrances, claims and options of any nature. As
of the close of business on March 31, 1998, there were outstanding options to
acquire no more than the number of shares of CCI capital stock set forth on
Schedule 5.6.
(b) Merger Sub. The authorized capital stock of Merger Sub is
as set forth on Schedule 5.6. All of the outstanding shares of capital stock of
Merger Sub are duly authorized, validly issued, fully paid and nonassessable. As
of the date of this Agreement, the number of shares of capital stock of Merger
Sub issued and outstanding and the number of shares held in the treasury of
Merger Sub are as set forth on Schedule 5.6. As of the date of this Agreement,
there were no outstanding options to acquire shares of capital stock of Merger
Sub.
Section 5.7 Transaction Shares. The shares of CCI Class A Common Stock
and CCI Preferred Stock to be issued pursuant to Article Two will, when issued,
be duly authorized, validly issued, fully paid and nonassessable, free and clear
of all Liens; provided, however, that such shares of CCI Class A Common Stock
and CCI Preferred Stock shall be subject to Permitted Stock Restrictions.
Section 5.8 Reports and Financial Statements. (a) CCI has filed all reports
(including proxy statements) and registration statements required to be filed
with the SEC since January 1, 1996 (collectively, the "CCI SEC Reports"). CCI
has previously furnished or made available to PSD true
35
and complete copies of all CCI SEC Reports filed prior to the date hereof. None
of the CCI SEC Reports, as of their respective dates, contained any untrue
statement of material fact or omitted to state a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. Each of the balance
sheets (including the related notes) included in the CCI SEC Reports presents
fairly, in all material respects, the consolidated financial position of CCI and
its Subsidiaries as of the respective dates thereof, and the other related
statements (including the related notes) included in the CCI SEC Reports present
fairly, in all material respects, the results of operations and the changes in
financial positions of CCI and its Subsidiaries for the respective periods or as
of the respective dates set forth therein, all in conformity with GAAP
consistently applied during the periods involved, except as otherwise noted
therein and subject, in the case of the unaudited interim financial statements,
to normal year-end adjustments, none of which, to CCI's knowledge, will be
material. All of the CCI SEC Reports, as of their respective dates, complied in
all material respects with the requirements of the Exchange Act, the Securities
Act and the applicable rules and regulations thereunder.
(b) Except (i) as and to the extent disclosed or reserved
against on the balance sheet of CCI as of December 31, 1997 included in the CCI
SEC Reports, or (ii) as incurred after the date thereof in the ordinary course
of business consistent with prior practice and not prohibited by this Agreement,
CCI does not have any liabilities or obligations of any nature, absolute,
accrued, contingent or otherwise and whether due or to become due, that,
individually or in the aggregate, have or would have a CCI Material Adverse
Effect.
(c) During the period since December 31, 1997, except as
disclosed in the CCI SEC Reports filed prior to March 28, 1998, there has not
been, and nothing has occurred that has had, a CCI Material Adverse Effect.
Section 5.9 Reorganization. (a) Neither CCI nor Merger Sub will take
any action that would cause the Merger to fail to qualify as a reorganization
within the meaning of Section 368(a) of the Code, and CCI and Merger Sub will
report the Merger for federal income tax purposes as a reorganization within the
meaning of Section 368(a) of the Code.
(b) Immediately prior to the Merger, CCI will be in control of
Merger Sub, within the meaning of Section 368(c) of the Code.
36
(c) Following the Merger, CCI will cause the Surviving
Corporation to continue the historic business of PSD or use a significant
portion of PSD's business assets in a business, in each case within the meaning
of Treasury Regulations Section 1.368-1(d).
(d) CCI has no present plan or intention, following the
Merger, to liquidate the Surviving Corporation or merge the Surviving
Corporation with or into another corporation, or to sell, transfer or otherwise
dispose of the stock of the Surviving Corporation or the assets of the Surviving
Corporation except for dispositions made in the ordinary course of business and
transfers described in Section 368(a)(2)(C) of the Code.
(e) Neither CCI nor Merger Sub is an investment company as
defined in Sections 368(a)(2)(F)(iii) and (iv) of the Code.
(f) Following the Merger, the Surviving Corporation will not
issue additional shares of its stock that would result in CCI losing control of
the Surviving Corporation within the meaning of Section 368(c) of the Code.
(g) CCI has no present plan or intention to reacquire or cause
any Person related (as defined in Treasury Regulations Section 1.368-1(e)(3)) to
CCI to acquire any of the CCI Class A Common Stock or CCI Preferred Stock issued
to the holders of PSD Class A Common Stock or PSD Class B Common Stock pursuant
to the Merger.
Section 5.10 Tax Opinion. CCI has been advised by its tax counsel that,
if the Merger were to be effected on the date of this Agreement, in accordance
with the terms of this Agreement, such tax counsel would render the opinion
described in Section 7.8.
ARTICLE SIX
COVENANTS AND CONDUCT OF BUSINESS AND
TRANSACTIONS PRIOR TO CLOSING
Section 6.1 Covenants of CCI. (a) CCI's Negative Covenants. From the
date hereof through the Closing, without the prior written consent of PSD, which
consent shall not be unreasonably withheld or delayed, unless otherwise required
or permitted by any other provision of this Agreement or any Related Agreement,
CCI shall not take any action that would cause the representations and
warranties made by CCI in this Agreement not to be true, correct and accurate,
in all material respects (determined as provided in Section 8.4), as of the
Closing.
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(b) Receipt of Consents. Prior to the date of Closing, CCI
shall seek, obtain and make all the CCI Required Consents and Filings described
in Schedule 5.3.
(c) Access to Information. Subsequent to the Closing, CCI
shall, upon reasonable prior notice and without undue interruption to the
operation of the Business, permit the authorized representatives of the
Greenspun Shareholders and the Manager to have reasonable access during normal
business hours to those of the properties, records and documents of CCI,
Surviving Corporation or the PSD Entities relating to any of the PSD Entities,
the Operating Assets and the Business which are necessary for the purposes of
preparing Tax Returns required to be filed by or on behalf of the Greenspun
Shareholders, the Manager or any PSD Shareholder, or defending claims asserted
against any of them with respect to any of the PSD Entities, the Operating
Assets and the Business or this Agreement, or as otherwise required by law;
provided, however, that in no event shall CCI be obligated to comply with any of
the foregoing if such compliance will give the Greenspun Shareholders and the
Manager access to any information which CCI or the PSD Entities, or any of their
Affiliates, is required by contract or otherwise to keep confidential. CCI
agrees that with respect to such confidential information, CCI shall, upon the
specific request of the Greenspun Shareholders and the Manager, use reasonable
commercial efforts to seek the consent of such Persons as may be necessary to
permit the Greenspun Shareholders and the Manager access to such information
without violating the confidential nature thereof.
Section 6.2 Covenants of PSD. (a) PSD's Negative Covenants. From the
date hereof through the Closing, without the prior written consent of CCI (which
will not be unreasonably withheld or delayed), except for such rate increases as
CCTV may implement under applicable Legal Requirements and except as set forth
on Schedule 6.2 or unless otherwise required or permitted by any other provision
of this Agreement or any Related Agreement, PSD shall not, and shall cause the
other PSD Entities not to (i) take any action which would cause the
representations and warranties made by PSD in this Agreement not to be true,
correct and accurate, in all material respects (determined as provided in
Section 7.4), as of the Closing; provided, however, that the PSD Entities shall
be entitled, in the ordinary course of business, to enter into or obtain new
contracts, agreements, commitments, understandings, licenses, franchises,
certificates of public convenience and necessity, permits, authorizations,
ordinances or registrations, or renew any such contract, agreement, commitment,
understanding, license, franchise, certificate of public convenience or
necessity, permit, authorization, ordinance or registration, that, in such cases
(A) directly relates to capital expenditures to be made by the PSD Entities in
accordance with Section 6.12 of this Agreement or in connection with CCTV's
Cable System upgrade or otherwise, in each case substantially consistent with
past practices, and including, without limitation, entering into joint
38
trench agreements and other agreements for new plant expansion, or (B) involves
payments by CCI, the Surviving Corporation or any of their Affiliates after the
Closing not in excess of $100,000 individually, or (C) can be terminated without
liability to CCI, the Surviving Corporation or any of their Affiliates on not
less than 30 days' notice after the Closing; (ii) modify in any material
respect, terminate, renew for a period extending past the Termination Date,
suspend or abrogate any material System Contract or Non-System Contract; (iii)
(A) terminate any Franchise or material System Right or (B) modify in any
material respect, renew for a period extending past the Termination Date,
suspend or abrogate any Franchise or material System Right; (iv) engage in any
marketing, subscriber installation or collection practices that are inconsistent
in any material respect with such practices of CCTV or HN, as the case may be,
for the periods covered by the Financial Statements; (v) dispose of any
Operating Assets, except for sales of non-material assets in the ordinary course
of business and consistent with past practices (including practices during the
periods covered by the Financial Statements); (vi) grant or agree to grant any
increase in the rates of salaries or compensation payable to employees of the
Business (other than the Closing Bonuses as previously disclosed to CCI in
accordance with Section 2.2(a) and other than as required by law and regularly
scheduled bonuses and increases in the ordinary course of business); (vii) issue
any additional equity securities of any PSD Entity, or any option or other
instrument exchangeable for or convertible into any such equity security; (viii)
make any change in any of the accounts or deposits, safe deposit boxes or
persons authorized to sign with respect thereto set forth on Schedule 3.24; or
(ix) establish or adopt any new Benefit Plan (other than as required by law).
(b) PSD's Affirmative Covenants. From the date hereof through
the Closing, unless otherwise required or permitted by any other provision of
this Agreement or any Related Agreement, PSD shall and shall cause the other PSD
Entities to (i) in all material respects operate the Business in the ordinary
course of business; (ii) use reasonable efforts to preserve the goodwill and
business of the subscribers, customers, advertisers, employees, suppliers and
others having business relations with the Business; (iii) continue to construct
franchise required line extensions and otherwise construct and maintain cable
plant for the Cable System in the ordinary course of business consistent with
past practices; and deliver to CCI a copy of CCTV's and HN's monthly capital
expenditures reports; (iv) subject to matters, such as a casualty, over which
the PSD Entities have no control, maintain in all material respects the
Operating Assets in good operating condition (normal wear and tear excepted);
(v) maintain or enhance all bonds and casualty and liability insurance relating
to the Business as in effect on the date of this Agreement; (vi) keep all of the
PSD Entities' business books, records and files in the ordinary course of
business in accordance with past practices, and pay, in the ordinary course of
business consistent with past practices, all of the PSD Entities' accounts
payable and other debts, liabilities and obligations, other than amounts
disputed
39
in good faith; (vii) continue to implement CCTV's procedures for disconnection
and discontinuance of service of subscribers whose accounts are delinquent in
accordance with those in effect on the date hereof; (viii) maintain inventories
of equipment, cable and supplies at a level substantially consistent with the
level of inventory maintained by CCTV and HN, as the case may be, during the 12
months preceding the date hereof, except that the quantity of inventory related
to the Cable System upgrade will be reduced due to the construction upgrade as
the upgrade progresses towards completion; (ix) report and write off accounts
receivable in the ordinary course of business in accordance with past practices;
(x) withhold and pay when due all Taxes, and file on a timely basis all Tax
Returns, relating to the PSD Entities; (xi) subject to matters over which the
PSD Entities have no control, maintain CCTV's and HN's service quality in all
material respects at a level at least consistent with past practices; (xii) file
with the FCC all material reports required to be filed under applicable FCC
rules and regulations, and otherwise comply in all material respects with all
Legal Requirements; (xiii) promptly deliver to CCI as they are available true
and complete copies of CCTV's and HN's monthly unaudited operating statements
and monthly subscriber or customer reports; (xiv) promptly notify CCI if CCTV is
unable to obtain equipment necessary to enable CCTV to meet the Closing
condition schedule for plant upgrade set forth in Section 7.12 and (xv) promptly
notify CCI of any circumstance, event or action by any PSD Entity or otherwise
(A) which, if known as of the date hereof, would have been required to be
disclosed by PSD in or pursuant to this Agreement, or (B) the existence,
occurrence or taking of which would result in any of the representations and
warranties of PSD in this Agreement (i) if specifically qualified by
materiality, not being true and complete as so qualified, and (ii) if not
qualified by materiality, not being true and correct in all material respects,
in each case when made or at the Closing.
Section 6.3 Compliance with HSR Act and Rules. CCI, PSD and the
Greenspun Shareholders shall within 30 days after the date hereof file or cause
to be filed all necessary Notification and Report Forms (the "HSR Reports")
mandated by the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976, as
currently in effect (the "HSR Act"), and the rules and regulations promulgated
thereunder (the "HSR Rules"), to be filed by them, or by any other Person as a
result of the transactions contemplated by this Agreement and coordinate the
filing of such HSR Reports (and exchanging relevant portions of drafts thereof)
so as to present all HSR Reports to the FTC and the DOJ at the time selected by
the mutual agreement of PSD and CCI, and to avoid substantial errors or
inconsistencies in the description of the transaction. CCI shall pay all fees
payable by the "acquiring person" in connection with the filing of the HSR
Reports. The parties shall use commercially reasonable efforts to respond, or to
cause such other Persons to respond, as promptly as reasonably practicable to
any inquiries received from the FTC or the Antitrust Division of the DOJ for
additional information or documentation and to respond, or to cause such other
Persons to
40
respond, as promptly as reasonably practicable to all inquiries and requests
received from any other Governmental Authority in connection with antitrust
matters. The parties shall use their respective commercially reasonable efforts
to overcome any objections that may be raised by the FTC or the Antitrust
Division of the DOJ or any other Governmental Authority having jurisdiction over
antitrust matters. Notwithstanding anything to the contrary in this Agreement,
neither CCI nor PSD shall be required to agree to any prohibition, limitation or
other requirements that would (i) prohibit or limit the ownership or operation
by such Person or any of its Affiliates of any portion of the business or assets
of such Person or any of its Affiliates, or compel such Person or any of its
Affiliates to dispose of or hold separate any portion of the business or assets
of such Person or any of its Affiliates, or (ii) prohibit such Person or any of
its Affiliates from effectively controlling in any material respect the business
or operations of such Person or any of its Affiliates.
Section 6.4 Risk of Loss. The risk of any loss or damage to the
Operating Assets resulting from fire, theft or any other casualty (except
reasonable wear and tear) shall be borne by the PSD Entities at all times prior
to Closing. In the event of any material loss or damage to any portion of the
Operating Assets prior to Closing, PSD shall promptly notify CCI of same in
writing. Such notice shall specify with particularity the loss or damage
incurred, the cause thereof, if known or reasonably ascertainable, and the
insurance coverage related thereto. In the event that in CCI's and PSD's joint
reasonable estimation any such loss or damage shall occur but not exceed
$5,000,000 in the aggregate as to all the Operating Assets so affected, and such
affected Operating Assets shall not have been replaced with Operating Assets of
reasonably comparable quality and specification reasonably satisfactory to CCI
prior to Closing, or replaced or restored in all material respects to their
condition preceding such loss or damage reasonably satisfactory to CCI prior to
Closing, the Merger Consideration shall be reduced by an amount equal to the
difference between (i) the amount of all insurance proceeds payable as a result
of the occurrence of the event resulting in such loss or damage, and (ii) CCI's
and PSD's joint reasonable estimate of the full replacement cost of all such
damaged or lost Operating Assets, provided the amount in clause (ii) is greater
than the amount in clause (i). In the event that, in CCI's and PSD's joint
reasonable estimation, any such loss or damage shall occur and exceed $5,000,000
in the aggregate as to all of the Operating Assets affected by any casualty, and
prior to Closing such affected Operating Assets shall not have been replaced
with assets of comparable quality and specification reasonably satisfactory to
CCI, or replaced or restored in all material respects to their condition
preceding such loss or damage reasonably satisfactory to CCI, then CCI may, at
its option, elect either to: (x) terminate this Agreement effective upon giving
written notice thereof to PSD, in which case neither PSD nor CCI shall have any
liability or obligation to the other, except for that arising from a breach or
default under this Agreement as provided in Section 10(b) and except that
Articles Ten, Eleven and Thirteen shall continue in full
41
force and effect; or (y) consummate the transactions contemplated hereby without
such replacement or restoration of the assets having been performed, subject to
an adjustment to the Merger Consideration paid at Closing equal to $5,000,000;
provided, that the foregoing notwithstanding, in the event that CCI delivers to
PSD a termination notice as set forth above, PSD shall be entitled by delivery
of written notice to CCI within five Business Days of PSD's receipt of such
termination notice, to agree to replace such affected Operating Assets with
Operating Assets of reasonably comparable quality and specification reasonably
satisfactory to CCI prior to Closing, or to replace or restore such affected
Operating Assets in all material respects to their condition preceding such loss
or damage reasonably satisfactory to CCI prior to Closing, or to reduce the
Merger Consideration by an amount equal to the difference between (A) the amount
of all insurance proceeds payable as a result of the occurrence of the event
resulting in such loss or damage, and (B) CCI's and PSD's joint reasonable
estimate of the full replacement cost of all such damaged or lost Operating
Assets, provided the amount in clause (B) is greater than the amount in clause
(A), in which event the Merger Agreement will not be terminated. In the event
that PSD and CCI are unable to agree as to the amount of any such loss or damage
or the full replacement cost of any damaged or lost Operating Assets (in any
event, a "Loss Determination") (whether for purposes of determining an
adjustment to the Merger Consideration or for determining whether or not CCI has
the right to terminate this Agreement) within 30 days after the initiation of
discussions by one of the parties regarding such Loss Determination, then CCI
and PSD shall jointly engage Price Waterhouse LLP (the "Accountants") or such
other unaffiliated third party advisor which has experience in evaluating issues
related to the cable television business as CCI and PSD shall mutually select if
the Accountants are unwilling to accept such engagement to make the Loss
Determination, which shall be final and conclusive and binding on CCI and PSD.
The fees and expenses of the Accountants (or such other third party advisor)
shall be borne one-half by CCI and one-half by PSD.
Section 6.5 Use of Names and Logos. (i) For a period of 90 days after
the Closing, CCI shall be entitled to use the "Prime" or "Prime Cable"
trademarks, trade names, service marks, service names, logos and similar
proprietary rights, and (ii) for a period of 180 days after the Closing, CCI
shall be entitled to use the "ExpressNet" trademark, trade name, service xxxx,
service name, logo and similar property rights, in each case of the Manager and
its Affiliates to the extent incorporated in or on the Operating Assets or, in
the case of "ExpressNet," used to identify a service in the customer billing
statements; provided, that CCI shall exercise reasonable commercial efforts to
remove all such names, marks, logos and similar proprietary rights from the
Operating Assets as soon as reasonably practicable following the Closing.
Notwithstanding the foregoing, CCI will not be required to remove or discontinue
using any such names, marks, logos or similar proprietary
42
marks that are affixed to converters, modems or other similar items in customer
homes or properties making such removal or discontinuation impracticable for
CCI.
Section 6.6 No Solicitation. The PSD Entities shall not, and shall use
reasonable efforts to cause their respective officers, employees, agents,
advisors and representatives (including, without limitation, any investment
banker, attorney or accountant retained by the PSD Entities) not to, initiate,
solicit or encourage, directly or indirectly, any inquiries or the making of any
proposal with respect to any Alternative Transaction, engage in any negotiations
concerning, or provide any other Person any information or data relating to the
Business for the purposes of, or have any discussions with any Person relating
to, or otherwise cooperate in any way with or assist or participate in,
facilitate or encourage, any inquiries or the making of any proposal which
constitutes, or may reasonably be expected to lead to, any effort or attempt by
any other Person to seek or effect an Alternative Transaction. Each PSD Entity
shall, and shall use reasonable efforts to cause its respective officers,
employees, agents, advisors and representatives to, terminate all discussions or
negotiations with any Person with respect to any Alternative Transaction. Each
PSD Entity shall notify CCI immediately of any proposal with respect to an
Alternative Transaction (or inquiries with respect thereto) that are received
by, or any negotiations or discussions with respect thereto of which it is aware
that are sought to be initiated with, any PSD Entity or any of its Affiliates,
will advise CCI of the identity of any Person making any such proposal with
respect to an Alternative Transaction and of the terms thereof, and shall keep
CCI apprised with respect to all matters relating thereto.
Section 6.7 Consents. (a) Receipt of Consents. From the date hereof
through the Closing, PSD shall cause the PSD Entities to use reasonable
commercial efforts to seek, obtain and make all the PSD Consents described in
Schedule 3.3 and shall cause the PSD Entities to use reasonable commercial
efforts to assist CCI to seek, obtain and make all the CCI Required Consents and
Filings described in Schedule 5.3. If, notwithstanding its commercially
reasonable efforts, PSD is unable to obtain such PSD Consents, PSD shall not be
liable to CCI for any breach of covenant with respect to any such PSD Consent
not obtained. From the date hereof through the Closing, CCI shall use reasonable
commercial efforts to assist PSD to seek, obtain and make all the PSD Consents
described in Schedule 3.3. Nothing herein shall require the expenditure or
payment of any funds (other than in respect of normal and usual attorneys fees,
filing fees, or other normal costs of doing business, including without
limitation, payment of consultants' or attorneys' fees as required by any
Franchising Authority) or the giving of any other consideration by any PSD
Entity (except as may be required to cure any default by such PSD Entity) or CCI
in order to obtain any PSD Consent; provided, however, that all reasonable fees
or out-of-pocket costs (for example, application and
43
processing fees and consultants' or attorneys' fees of Franchising Authorities)
imposed by Franchising Authorities or other Persons upon any PSD Entity or CCI
in connection with obtaining the PSD Consents therefrom shall be borne equally
by CCI, on the one hand, and PSD, on the other hand, except for any fees or
costs as may be required to cure any default by any PSD Entity in connection
with obtaining the PSD Consents, which shall be borne solely by PSD.
Notwithstanding anything to the contrary in this Agreement, neither CCI nor PSD
shall be required in connection with obtaining the PSD Consents to agree to any
prohibition, limitation or other requirement that would (i) prohibit or limit
the ownership or operation by such Person or any of its Affiliates of any
portion of the business or assets of such Person or any of its Affiliates, or
compel such Person or any of its Affiliates to dispose of or hold separate any
portion of the business or assets of such Person or any of its Affiliates, or
(ii) prohibit such Person or any of its Affiliates from effectively controlling
in any material respect the business or operations of such Person or any of its
Affiliates.
(b) CCI Cooperation. CCI shall cooperate with and assist PSD
in all commercially reasonable respects in obtaining any necessary PSD Consents,
but, except as described in Section 6.7(d), CCI shall not be required to accept
any changes in, or the imposition of any adverse condition to, any Franchise.
CCI shall not, without the prior consent of PSD (which shall not be unreasonably
withheld or delayed), (i) contact any Person or Franchising Authority with
respect to the PSD Consents or transfers, renewals or extensions of Franchises,
System Rights, material System Contracts or material Non-System Contracts, or
(ii) seek any amendments or modifications to the Franchises, System Rights,
material System Contracts or material Non-System Contracts which could
reasonably be expected to delay or prevent obtaining the PSD Consents.
(c) CCI Information. CCI shall promptly furnish to any
Franchising Authority or other Person from whom a PSD Consent is required such
accurate and complete information regarding CCI, including financial information
concerning CCI and other information relating to the cable and other media
operations of CCI (other than information which CCI reasonably deems to be
proprietary), as the Franchising Authority or other Person may reasonably and
lawfully require, and CCI shall promptly furnish to PSD a copy of any such
information provided. If requested by PSD, CCI agrees to be represented, at
CCI's expense, at any such meetings or hearings as may be scheduled to consider
any application or request for any of the PSD Consents to be sought or made by
PSD.
(d) Franchise Renewals and Extensions. (i) From the date
hereof through Closing, PSD shall cause all requests for renewal under Section
626(a) of the Communications Act to be filed with the proper Governmental
Authority with respect to any Franchise as soon as
44
practicable after the date which is 36 months prior to the expiration date of
any such Franchise (and in no event later than 30 months prior to the expiration
date thereof), provided that PSD shall consult with CCI prior to the filing of
any such renewal requests.
(ii) CCTV (w) timely filed with the proper
Governmental Authority on May 5, 1997 the request for renewal under
Section 626(a) of the Communications Act to preserve CCTV's renewal
rights under the Communications Act with respect to the Franchise for
the City of Las Vegas, (x) timely filed with the proper Governmental
Authority on January 16, 1998 the request for renewal under Section
626(a) of the Communications Act to preserve CCTV's renewal rights
under the Communications Act with respect to the Franchise for the City
of North Las Vegas, (y) has timely submitted any other required notices
to the proper Governmental Authorities to preserve CCTV's renewal
rights under the Communications Act with respect to all Franchises
expiring within 36 months from the date of this Agreement, and (z) will
timely submit the required notices to the proper Governmental
Authorities with respect to such other Franchises as is required by
Section 6.7(d)(i) above (in each case such Franchise is referred to
herein as an "Expiring Franchise"). PSD shall (A) cause CCTV to use
commercially reasonable efforts to have the respective Governmental
Authorities approve the transfer of the Expiring Franchises to CCI
without any change in (other than an extension to the franchise term of
such Expiring Franchises), or imposition of any adverse condition to,
the terms and provisions of such Expiring Franchises as in effect on
the date of this Agreement, or (B) cause CCTV, in cooperation with CCI,
to renew such Expiring Franchises for an additional term beyond their
respective current expiration dates on terms and conditions not
materially less favorable to the franchisee in the aggregate than terms
and conditions in renewal franchises for comparable cable television
systems operated by CCI and its Affiliates in the United States (the
comparability analysis to include, but not be limited to, the length of
the franchise term, number of subscribers, population density,
demographics of the community and revenue per subscriber).
Section 6.8 Franchise Consents Not Obtained. (a) If any PSD Consent to
the change of control of one or more Franchises is not obtained prior to the
Termination Date and such Franchises cover five percent (5%) or more of all
Basic Subscribers, then CCI and PSD agree to negotiate in good faith for a
period not to exceed 90 days from the Termination Date to enter into agreements
(reasonably acceptable to PSD, CCI, the FCC and, to the extent required, other
applicable Governmental Authorities) which would permit the Closing to occur
hereunder within said 90 day period.
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(b) If any PSD Consent to the change of control of a Franchise
is not obtained prior to the Termination Date and such Franchise covers less
than five percent (5%) of all Basic Subscribers (the "Boulder City Consent"),
then CCI and PSD agree to proceed to Closing in the absence of such Consent, in
which event the Merger Consideration shall be reduced by an amount equal to (i)
the quotient of (A) the Merger Consideration as otherwise determined in
accordance with Section 2.2, divided by (B) the total number of Basic
Subscribers of the Cable System, multiplied by (ii) the number of Basic
Subscribers of the Cable System attributable to such Franchise, and such amount
shall be paid by CCI, in cash and stock in the same manner as the Indemnity
Escrow Deposit was funded pursuant to Section 2.7, into escrow with the Escrow
Agent pursuant to an escrow agreement reasonably satisfactory to CCI, PSD and
the Greenspun Shareholders. The Escrow Agent shall hold such amount in
accordance with such escrow agreement for a period of 270 days, at which time
CCI and the Greenspun Shareholders shall deliver a joint written notice to the
Escrow Agent setting forth appropriate instructions as to distribution from
escrow of such amount. CCI and the Greenspun Shareholders during such 270-day
period shall use commercially reasonable efforts to obtain the Boulder City
Consent. If such Boulder City Consent is not obtained prior to the end of such
270-day period, CCI and the Greenspun Shareholders shall direct the Escrow Agent
to disburse the escrowed funds to CCI, and CCI and the Greenspun Shareholders
shall be under no further obligation to seek such consent. If such Boulder City
Consent is obtained prior to the end of such 270-day period, CCI and the
Greenspun Shareholders shall direct the Escrow Agent to disburse the escrowed
funds to the Greenspun Shareholders on behalf of the Greenspun Shareholders and
the Minority Shareholders in accordance with the terms of such escrow agreement.
Section 6.9 Distribution of PVI Excluded Assets. Anything in this
Agreement to the contrary notwithstanding, PVI may, prior to or at the Closing,
distribute to PSD and Coditel as dividends on PVI's outstanding capital stock in
accordance with PVI's certificate of incorporation all of the PVI Non-CCTV
Assets (as defined below) and PSD may in turn distribute all of the PVI Non-CCTV
Assets which it receives from PVI to the stockholders of PSD in partial
redemption of PSD's issued and outstanding shares of PSD Preferred Stock in
accordance with PSD's certificate of incorporation. If such distributions and
redemption have not been made prior to the Closing, and as a consequence are to
be made at the Closing, such distributions and redemption shall be made and
consummated immediately prior to the consummation of the Merger. The "PVI
Non-CCTV Assets" shall consist of all of the assets of PVI other than the PSH
Shares owned by PVI as shown on Schedule 3.2(d). All of the PVI Non-CCTV Assets
are described in Schedule 6.9, and the parties agree that as of Xxxxx 00, 0000
xxx XXX Xxx-XXXX Assets have the approximate values shown on Schedule 6.9.
46
Section 6.10 Redemption or Repurchase of PVI Shares Owned by Coditel.
Anything in this Agreement to the contrary notwithstanding, PSD shall cause PVI
to use commercially reasonable efforts to redeem or repurchase for cash or PVI
Non-CCTV Assets which as of March 31, 1998 have the approximate values shown in
Schedule 6.9, all PVI Shares owned by Coditel prior to Closing in accordance
with PVI's certificate of incorporation, or on terms no less favorable than
those provided in such certificate of incorporation, so that immediately prior
to Closing, all PVI Shares shall be held by PSD.
Section 6.11 Interim Financial Statements. PSD shall deliver to CCI (i)
unaudited monthly operating statements of CCTV and of HN within 45 days after
the end of each month, (ii) unaudited quarterly consolidated and consolidating
financial statements for PSD within 60 days after the end of each calendar
quarter (other than the calendar quarter ending December 31) and (iii) audited
annual consolidated and consolidating financial statements for PSD within 120
days after the end of each calendar year (and PSD shall use commercially
reasonable efforts to deliver such annual financial statements within 75 days
after the end of each calendar year), for each calendar month, quarter and year
ending between the date of this Agreement and the Closing Date (the "Interim
Financial Statements") and any other similar regularly prepared materials that
CCI may reasonably request, including without limitation month-end billing
reports and month-end subscriber reports prepared by PSD or any PSD Entity in
the ordinary course of its business. Except as may otherwise be noted therein,
the Interim Financial Statements shall be prepared, and upon delivery of each
Interim Financial Statement to CCI, PSD shall be deemed to represent and warrant
to CCI that such Interim Financial Statement has been prepared, in accordance
with the books and records of PSD and the other PSD Entities and in accordance
with GAAP on a consistent basis throughout the periods covered thereby, except
for the absence of footnotes and statements of cash flows. The Interim Financial
Statements shall fairly present in all material respects, and upon delivery of
each Interim Financial Statement to CCI, PSD shall be deemed to represent and
warrant to CCI that such Interim Financial Statement fairly presents in all
material respects, the financial condition and operating results as of the dates
and for the periods indicated therein of PSD and the other PSD Entities, subject
only with respect to the monthly and quarterly Interim Financial Statements to
normal year-end adjustments.
Section 6.12 Capital Expenditures. Notwithstanding anything in this
Agreement to the contrary, from the date of this Agreement until Closing, PSD
shall make capital expenditures, including without limitation for purposes of
completing line extensions, placing conduit or cable in new developments,
fulfilling installation requests, and upgrading cable plant and converters in
the Business in connection with the Cable System upgrade, in such manner and in
such amounts as are
47
consistent with the business plan for the Business for 1998 and in any event in
amounts averaging, on a monthly basis, at least $4,000,000 per month. From the
date of this Agreement through Closing, PSD shall promptly deliver to CCI
quarterly progress reports setting forth the monthly capital expenditures made
with respect to the Business during such quarter.
Section 6.13 Stockholder Approval. (a) Pursuant to the Voting
Agreement, PSD Shareholders holding at least a majority of the total number of
shares of PSD Class A Common Stock and PSD Class B Common Stock have agreed to
execute, or cause to be executed, immediately following execution and delivery
of this Agreement a written consent with respect to all shares of PSD capital
stock owned by them or which they have the right to vote or consent in favor of
approval and adoption of the Merger and this Agreement in the form attached
hereto as Exhibit C (the "Stockholders Consent"). PSD agrees to use commercially
reasonable efforts to cause each of the other PSD Shareholders, who are listed
on Schedule 6.13, to execute and deliver on or before May 19, 1998 a counterpart
of the Voting Agreement and the Stockholder Consent, unless extended by mutual
agreement of PSD and CCI. Notwithstanding the foregoing, if CCI so requests, PSD
will take all action necessary in accordance with applicable Legal Requirements
and its certificate of incorporation and bylaws to convene a meeting of its
stockholders to consider and vote upon the approval and adoption of this
Agreement and the transactions contemplated hereby, and to submit this Agreement
to the stockholders of PSD for their approval, or to solicit a further written
consent, in lieu of a stockholders' meeting, of its stockholders approving and
adopting this Agreement and the transactions contemplated hereby, and PSD and
its board of directors shall take all lawful reasonable action to solicit, and
use all reasonable efforts to obtain, such approval.
(b) CCI, as the sole stockholder of Merger Sub, hereby
consents to the adoption of this Agreement by Merger Sub and agrees that such
consent shall be treated for all purposes as a vote duly adopted at a meeting of
the stockholders of Merger Sub held for this purpose.
Section 6.14 Affiliates of CCI and PSD. Concurrently with the execution
of this Agreement, each of the directors of PSD has executed an agreement to the
effect set forth in this Section 6.14. Prior to the Effective Time, PSD shall
deliver to CCI a letter identifying all other Persons who, to PSD's knowledge,
at the time of the execution and delivery of the Stockholders Consent or at the
Effective Time, may be deemed to be "affiliates" of PSD for purposes of Rule 145
under the Securities Act or who may otherwise be deemed to be Affiliates of PSD
(the "Rule 145 Affiliates"). PSD shall use all reasonable efforts to cause each
Person who is identified as a Rule 145 Affiliate in such list to deliver to CCI
on or prior to the 30th day prior to the Effective Time, a written agreement, in
the form attached hereto as Exhibit D, that such Rule 145 Affiliate will not
48
(a) sell, pledge, transfer or otherwise dispose of any Transaction Common Shares
issued to such Rule 145 Affiliate pursuant to the Merger, except pursuant to an
effective registration statement or in compliance with Rule 145 under the
Securities Act or an exemption from the registration requirements of the
Securities Act, or (b) sell, pledge, transfer or otherwise dispose of, or hedge
or otherwise reduce its risk with respect to, any shares of PSD capital stock or
any Transaction Common Shares, in each case from the 30th day prior to the
Effective Time to the time that results covering at least 30 days of combined
operations of PSD and CCI have been published by CCI in the form of a quarterly
earnings report, an effective registration statement filed with the SEC, a
report to the SEC on Form 10-K, 10-Q or 8-K, or any other public filing or
announcement which includes the combined results of operations.
Section 6.15 Environmental Investigations. (a) As soon as practicable
after the date of this Agreement (but in no event more than 60 days after the
date of this Agreement), CCI may obtain at CCI's expense a Phase I environmental
audit of the Leased Real Property (which shall include a limited asbestos
survey), or on such parcels of the Leased Real Property as CCI may determine.
CCI shall engage EnecoTech, Inc. or, at CCI's option, another nationally known
environmental auditing company to perform the aforesaid audit. PSD will comply
with any reasonable request for information made by CCI or its agents in
connection with any such investigation and shall afford CCI and its agents
access to all operations of the PSD Entities, including without limitation all
areas of the Leased Real Property, at reasonable times and in a reasonable
manner in connection with any such investigation. If the results of those
investigations would cause a reasonable purchaser to perform further
investigation or testing with respect to any of the Leased Real Property, CCI
shall cause to be performed Phase II environmental audits with respect to such
Leased Real Property, which shall be completed no more than 120 days after the
date of this Agreement. CCI agrees to promptly deliver to PSD copies of all
audits and other reports obtained by CCI with respect to such investigations
and, at PSD's expense, all other information related thereto which is reasonably
requested by PSD. Further, CCI agrees to restore any test borings and other
physical damage to any of the assets and properties of any PSD Entity caused by
such investigations and agrees to indemnify and hold the PSD Indemnitees
harmless in accordance with Section 12.3 from any such damage, without regard to
the Indemnification Threshold set forth in Section 12.9; which obligations shall
in no event be construed to include the cost of any remedial action indicated by
such investigations.
(b) In the event that as a result of any of the environmental
investigations, CCI's environmental consultant reasonably determines that
remedial action is required by law, and CCI and PSD jointly reasonably conclude
that PSD has legal responsibility for such remediation (as opposed to the
landlord under the System Contract relating to such Leased Real Property), then
(i)
49
PSD shall have the right to engage at PSD's expense a nationally known
environmental auditing company to provide a second opinion, in which case the
parties agree to use an average of the two estimates for purposes of this
Section 6.15; and (ii) if (A) the aggregate cost of such remedial action is
$5,000,000 or less for all parcels of Leased Real Property, then CCI shall
consummate the transactions contemplated hereby without such remedial action
having been taken, subject to an adjustment to the Merger Consideration paid at
Closing equal to the aggregate required remediation costs; or (B) the aggregate
cost of such remedial action is more than $5,000,000 for all parcels of Leased
Real Property and PSD does not elect to cause remedial action to be performed in
accordance with all applicable Legal Requirements prior to Closing, CCI may
elect either to terminate this Agreement, or to consummate the transactions
contemplated hereby without such remedial action having been taken, subject to
an adjustment to the Merger Consideration paid at Closing equal to the required
remediation costs but in no event more than $5,000,000; provided, that the
foregoing notwithstanding, in the event that CCI delivers to PSD a termination
notice as set forth above, PSD shall be entitled by delivery of written notice
to CCI within five Business Days of PSD's receipt of such termination notice, to
agree to (A) cause such remedial action to be performed in accordance with all
applicable Legal Requirements prior to Closing or (B) to adjust the Merger
Consideration paid at Closing equal to the required remediation costs, in either
of which events the Merger Agreement will not be terminated.
(c) In the event that as a result of any of the environmental
investigations, CCI's environmental consultant reasonably determines that
remedial action is required by law and CCI and PSD jointly reasonably conclude
that the landlord under the System Contract relating to such Leased Real
Property has legal responsibility for such remediation (as opposed to PSD), then
PSD shall use commercially reasonable efforts to (i) cause such landlord to
perform remedial action in accordance with all applicable Legal Requirements
prior to Closing; or (ii) cause such landlord to make arrangements prior to
Closing, reasonably satisfactory to CCI, in its reasonable discretion, for the
performance of remedial action in accordance with all applicable Legal
Requirements subsequent to Closing.
(d) If CCI and PSD cannot jointly agree as to whether PSD or
the landlord under the System Contract relating to such Leased Real Property has
such legal responsibility for such remediation within 30 days after written
notice from CCI to PSD that CCI believes PSD or the landlord under the System
Contract relating to such Leased Real Property has such legal responsibility, or
if such landlord refuses to perform such remediation or make arrangements
reasonably satisfactory to CCI with respect thereto, then (i) if (A) PSD has
terminated the System Contract relating to such Leased Real Property without
liability other than the payment of money,
50
and (B) the aggregate cost of (x) performing remedial action for such Leased
Real Property in accordance with all applicable Legal Requirements, (y)
terminating the System Contract relating to such Leased Real Property and (z)
obtaining substitution property as provided below, is $5,000,000 or less, then
PSD shall with CCI's consent (which shall not be unreasonably withheld or
delayed), acquire or lease a substantially similar parcel of real property to
substitute for the Leased Real Property that is subject to the environmental
problem, in which case PSD shall bear all costs and expenses (direct, indirect
and consequential) in any way related to the identification and acquisition of
such real property, and the construction and relocation of the plant and
facilities of the Business resulting from such substitution of the Leased Real
Property; or (ii) if (A) PSD has not been able to terminate the System Contract
relating to such Leased Real Property without liability other than for the
payment of money or (B) PSD has terminated the System Contract relating to such
Leased Real Property without liability other than the payment of money, but the
aggregate cost of (x) performing remedial action for such Leased Real Property
in accordance with all applicable Legal Requirements, (y) terminating the System
Contract relating to such Leased Real Property and (z) obtaining substitution
property as provided above, is more than $5,000,000, then CCI may, at its
option, elect either to: (A) terminate this Agreement effective upon giving
written notice thereof to PSD, in which case neither PSD nor CCI shall have any
liability or obligation to the other, except for that arising from a breach or
default under this Agreement as provided in Section 10(b) and except that
Articles Ten, Eleven and Thirteen shall continue in full force and effect; or
(B) consummate the transactions contemplated hereby without such remediation
being performed or substitution property being obtained, subject to an
adjustment to the Merger Consideration paid at Closing equal to $5,000,000;
provided, that the foregoing notwithstanding, in the event that CCI delivers to
PSD a termination notice as set forth above, PSD shall be entitled by delivery
of written notice to CCI within five Business Days of PSD's receipt of such
termination notice, to agree to (A) cause such remedial action to be performed
in accordance with all applicable Legal Requirements prior to Closing, (B)
obtain such substitution property and bear all costs and expenses associated
therewith or (C) adjust the Merger Consideration paid at Closing equal to the
required remediation assets, in which event the Merger Agreement will not be
terminated.
Section 6.16 Employee Benefits. (a) Retirement Plans. PSD shall cause
the portion of the Prime Cable 401(k) Retirement and Savings Plan (the "Prime
Cable Plan") that provides benefits to employees of CCTV to be spun off to a new
single employer retirement plan (the "CCTV Plan"). Such spin off shall be
accomplished in accordance with the requirements of Code Section 414(l), and
shall be completed not more than 120 days after the execution of the Agreement.
The assets in the CCTV Plan subsequent to such spin off shall continue to be
invested in the same manner as such assets were invested prior to the spin off.
The current trustee of the Prime Cable Plan also shall be
51
the trustee of the CCTV Plan, and PSD shall cause a separate trust to be
established to hold the assets of the CCTV Plan. In the event that CCI
determines that the CCTV Plan should be terminated, and subject to the provision
by CCI to PSD of written notice of such decision to terminate the CCTV Plan at
least 30 days prior to the Closing Date, PSD shall cause the CCTV Plan to be
terminated as of a date prior to the Closing Date. In the event that CCI
determines that the Hospitality Network, Inc. 401(k) Savings and Retirement Plan
(the "HN Plan") should be terminated, and subject to the provision by CCI to PSD
of written notice of such decision to terminate the HN Plan at least 30 days
prior to the Closing Date, PSD also shall cause the HN Plan to be terminated as
of a date prior to the Closing Date. PSD and the Greenspun Shareholders shall
cause the plan sponsors of the Prime Cable Plan and the HN Plan to provide to
CCI, both before and after the Closing Date, any assistance as may reasonably be
requested by CCI to effectuate the provision of this subsection; provided,
however, that CCI agrees to reimburse the Greenspun Shareholders or the plan
sponsors for the expenses directly incurred with any such assistance requested
by CCI after the Closing Date.
(b) Welfare Plans. PSD (prior to the Effective Time) and the
Greenspun Shareholders (from and after the Effective Time) shall agree to use
reasonable efforts to assist CCI, at CCI's request, to duplicate as close as
reasonably possible any insurance policies providing coverage to any employees
of the Business under an insured Benefit Plan as in existence as of the Closing
and to name CCI as the holder of the duplicate insurance policies.
Notwithstanding the foregoing, the Greenspun Shareholders shall cause all
medical claims incurred by employees of the Business prior to Closing to be
considered under the Benefit Plans providing medical coverage to such employees
on the Closing Date. For purposes of this Section 6.16(b), a claim shall be
treated as incurred at the time that treatment is provided and not when a claim
is filed or paid.
(c) Disability. PSD (prior to the Effective Time) and the
Greenspun Shareholders (from and after the Effective Time) shall cause the
Benefit Plans that provide long term disability coverage to the employees of the
Business for the period prior to the Closing Date to continue to provide such
disability coverage to employees of the Business that either are receiving long
term disability benefits under the Benefit Plans as of the Closing Date or who,
to the extent permitted under such Benefit Plans, subsequently become eligible
for long term disability benefits thereunder because of an event occurring prior
to the Closing Date.
(d) Deferrals and Loan Information. PSD shall furnish to CCI,
as soon as practicable prior to the Closing, but not later than 10 days prior to
the Closing, a list, calculated as of the Closing Date, estimating (i) the
amounts of compensation deferred by each employee of the Business under either
the CCTV Plan or the HN Plan, as appropriate, during the calendar year in
52
which the Closing occurs; and (ii) those employees who, as of the Closing Date,
have outstanding participant loans from either the CCTV Plan or the HN Plan, as
appropriate, including the amount and term of such loans.
(e) Reporting. PSD and the Greenspun Shareholders shall cause
Manager and Consultant to cooperate with CCI with respect to any filings and
information necessary to effect the transactions contemplated by this Section
6.16, including without limitation the provision of employee communications to
employees of the Business at any time prior to the Closing.
Section 6.17 Reasonable Efforts. Upon the terms and subject to the
conditions set forth in this Agreement, each of the parties hereto agrees to use
its commercially reasonable efforts to take, or cause to be taken, all actions,
and to do, or cause to be done, all things necessary, proper or advisable to
satisfy the conditions set forth in Articles Seven and Eight (unless waived in
accordance with the terms thereof) and to consummate and make effective the
transactions contemplated by this Agreement.
Section 6.18 True-Up Fund. PSD and the Greenspun Shareholders shall
cause the Manager to execute and deliver with the Greenspun Shareholders and CCI
at the Closing a custodial agreement (the "Custodial Agreement") on terms
(including indemnification provisions reasonably acceptable to the Manager)
reasonably satisfactory to each of the Greenspun Shareholders, CCI and the
Manager.
ARTICLE SEVEN
CONDITIONS OF CCI'S AND MERGER SUB'S OBLIGATIONS
Section 7.1 In General. The obligations of CCI and Merger Sub to
complete the transactions provided for in this Agreement are subject to all of
the conditions set forth below in this Article Seven, any of which may be waived
in writing by CCI and Merger Sub.
Section 7.2 Consents. All of Material Required PSD Consents, other than
the Boulder City Consent, shall have been obtained, made and delivered to CCI
and shall be in full force and effect as of the Closing with, as a result of
obtaining any PSD Consent, no change having been made in the terms of any
Franchise except as provided in Section 6.7(d) and, in the case of any PSD
Consent from a Governmental Authority, such PSD Consent shall have become Final
and shall be in full force and effect. Notwithstanding the foregoing, the
approvals and consents relating to the
53
FCC licenses (other than CARS licenses) identified in Schedule 3.3 shall be
deemed to have been obtained as required above in this Section 7.2 if the FCC,
on or prior to the Closing Date, grants "special temporary authority" or
"conditional authority" to CCI to use the same or, in the case of business radio
licenses, so long as a temporary authorization or conditional authorization is
available to CCI under FCC rules and CCI reasonably expects that the FCC's
consent can be obtained within 120 days after Closing.
Section 7.3 Performance by PSD. PSD and the Greenspun Shareholders
shall have performed in all material respects all of their respective agreements
and covenants under this Agreement (including, but not limited to, making, or
standing willing and able to make, the deliveries and taking, or standing
willing and able to take, the actions required by Section 9.2) to the extent
such are required to be performed at or prior to the Closing.
Section 7.4 Truth of Representations and Warranties. Each of the
representations and warranties of PSD and the Greenspun Shareholders contained
in this Agreement (i) if specifically qualified by materiality, shall be true
and complete as so qualified, and (ii) if not qualified by materiality, shall be
true and complete in all material respects, in each such case, on and as of the
date hereof and as of the Closing Date, with the same effect as if then made,
except where any such representation or warranty is as of a specific earlier
date, in which event it shall remain true and correct (as qualified) as of such
earlier date, and except as any such representation or warranty may be affected
by specific transactions or occurrences contemplated in or permitted by this
Agreement or any Related Agreement. The foregoing notwithstanding, the Closing
condition set forth above in this Section 7.4 shall be deemed to be satisfied
unless the failure of such representations and warranties to be so true and
complete in all material respects, if not qualified by materiality, and true and
complete as so qualified, if qualified by materiality, shall individually or in
the aggregate constitute a Material Adverse Effect.
Section 7.5 Absence of Proceedings. All waiting periods required under
the HSR Act shall have expired or otherwise terminated prior to the Closing, and
no judgment or order shall have been issued, and no action or proceeding shall
have been instituted by any Governmental Authority on or prior to the Closing,
that has or would have if successful a Material Adverse Effect or a CCI Material
Adverse Effect or that would prevent the consummation of the transactions
contemplated by this Agreement in the manner provided in this Agreement.
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Section 7.6 Opinion of FCC Counsel. CCI shall have received an opinion
of Xxxx, Raywid & Xxxxxxxxx, special FCC counsel to PSD, dated as of the Closing
Date, in form and substance reasonably satisfactory to CCI ("PSD's FCC Counsel's
Opinion").
Section 7.7 Opinion of PSD's Counsel. CCI shall have received an
opinion of Xxxxx Xxxxxxxxx Xxxxxxx & Xxxxxxxx, P.C., counsel for PSD, dated as
of Closing, in form and substance reasonably satisfactory to CCI ("PSD's
Counsel's Opinion").
Section 7.8 Tax Opinion. CCI shall have received an opinion from CCI's
tax counsel to the effect that, if the Merger is consummated in accordance with
the provisions of this Agreement, the Merger should be treated for federal
income tax purposes as a reorganization within the meaning of Section 368(a) of
the Code.
Section 7.9 Stockholder Approval. This Agreement and the transactions
contemplated hereby shall have been duly approved and adopted or ratified by the
requisite holders of shares of PSD capital stock in accordance with applicable
Legal Requirements and the certificate of incorporation and bylaws of PSD and
the provisions of Section 6.13 hereof.
Section 7.10 Voting Agreement. There shall not have been a material
breach of Sections 1(d), 1(e) or 3 of the Voting Agreement, or a breach of any
other section of the Voting Agreement, by any of the PSD Shareholders, and the
Voting Agreement shall be in full force and effect.
Section 7.11 Cable System Upgrade. The number of miles of distribution
plant of the Cable System that have been upgraded, spaced and activated to a
capacity of 750 MHz as of Closing shall be at least the number of miles set
forth below opposite the date below which is the Closing Date:
Closing Date Miles Upgraded
May 31, 1998 1,531
June 30, 1998 1,662
July 31, 1998 1,823
August 31, 1998 1,984
September 30, 1998 2,145
October 31, 1998 2,306
November 30, 1998 2,467
December 31, 1998 2,628
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The foregoing notwithstanding, the Closing condition set forth above in this
Section 7.11 shall not be deemed not to be satisfied if CCTV is unable, due to
circumstances beyond its control, to obtain the necessary equipment to cause the
distribution plant of the Cable System to have been upgraded, spaced and
activated to a capacity of 750 MHz in accordance with such schedule.
Section 7.12 Pre-Closing Cash Flow. If the Closing occurs in 1998,
PSD's consolidated Operating Cash Flow for the period from January 1, 1998
through the end of the full calendar month ended immediately preceding the month
in which the Closing occurs must equal at least 95% of the budgeted operating
cash flow of PSD for the same period, after making provisions in such budgets
for the Closing Bonuses. If the Closing occurs in 1999, either (i) PSD's average
monthly consolidated Operating Cash Flow for the period from January 1, 1999
through the end of the full calendar month ended immediately preceding the month
in which the Closing occurs, or (ii) PSD's average monthly Operating Cash Flow
for the 12 months ended immediately preceding the month in which the Closing
occurs, must equal at least 105% of PSD's average budgeted monthly operating
cash flow for the same period in 1998 that corresponds to the period referenced
in clause (i) above, after making provision in such budget for the Closing
Bonuses. The budgeted operating cash flow of PSD for 1998 is attached hereto as
Schedule 7.12.
Section 7.13 Relationship between CCI's Conditions to Closing and CCI's
Right to Indemnification. (a) In General. CCI's obligation to consummate the
transactions contemplated by this Agreement is subject to the conditions set
forth in this Article Seven being satisfied. Such conditions apply exclusively
to the determination of CCI's obligation to consummate such transaction, and are
not applicable to CCI's right to post-Closing indemnification. Following the
Closing, CCI's right to indemnification by PSD shall be determined exclusively
pursuant to Article Twelve which shall govern CCI's right to indemnification
independently from, and without regard to, the conditions of CCI's obligation to
close and such that CCI could potentially have a post-Closing right to
indemnification under Article Twelve for certain circumstances that would not
have excused CCI's obligation to close because such circumstances were
insufficient to result in a failure of CCI's conditions to Closing.
(b) No later than 15 Business Days prior to the date of
Closing, CCI shall prepare and deliver to PSD written notice (the "Preclosing
Indemnification Notice") of any claims or demands for indemnification against
PSD under Article Twelve of which CCI has knowledge as of such date (the
"Preclosing Claims"), specifying the nature of such Preclosing Claims and the
amount
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or good faith estimated amount thereof to the extent then feasible. Following
CCI's delivery of the Preclosing Indemnification Notice, CCI and PSD shall
negotiate in good faith for a period of 10 Business Days to resolve any dispute
and to reach an agreement on the validity and amount of such Preclosing Claims.
If CCI and PSD agree at or prior to the expiration of said 10 Business Day
period as to the validity and estimated amount of such Preclosing Claims, then
the Indemnity Escrow Deposit shall be increased as described in Section 2.7
above. In the event CCI and PSD are unable to agree to the validity and amount
of any such Preclosing Claims at or prior to the expiration of such 10 Business
Day period, then PSD and CCI shall within such 10 Business Day period jointly
engage one or more mutually agreeable third party qualified experts which have
experience in evaluating issues related to the cable television business and to
the particular issue in dispute (or the Accountants if third party qualified
experts have not been mutually selected prior to the expiration of such 10
Business Day period) to make the determination of the validity and estimated
amount of such Preclosing Claims within 5 Business Days of engagement. Upon a
determination by the qualified experts (or the Accountants) that any such
Preclosing Claims are valid and the amount thereof, the Indemnity Escrow Deposit
shall be increased as described in Section 2.7 above; provided, however, that
the Closing Date may be delayed at the request of either CCI or PSD until the
last day of the next calendar month in the event the third party qualified
experts (or the Accountants) are unable to make such determination within such 5
Business Day period.
(c) The amount of Preclosing Claims shall be limited to
$25,000,000, such that the maximum amount to be deposited pursuant to the
Indemnity Escrow Agreement for Preclosing Claims and the Indemnity Escrow
Deposit is $50,000,000.
ARTICLE EIGHT
CONDITIONS OF PSD'S OBLIGATIONS
Section 8.1 In General. The obligations of PSD to complete the
transactions provided for in this Agreement are subject to all of the conditions
set forth below in this Article Eight, any of which may be waived in writing by
PSD.
Section 8.2 Receipt of Consents. All of Material Required PSD Consents
shall have been obtained and made and shall be in full force and effect as of
the Closing with, as a result of obtaining any PSD Consent, no change having
been made in the terms of any Franchise except as provided in Section 6.7(d).
The approvals and consents relating to the FCC licenses (other than CARS
licenses) identified in Schedule 3.3 shall be deemed to have been obtained as
required above in this Section
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8.2 if the FCC, on or prior to the Closing Date, grants "special temporary
authority" or "conditional authority" to CCI to use the same or, in the case of
business radio licenses, so long as a temporary authorization or conditional
authorization is available to CCI under FCC rules and CCI reasonably expects
that the FCC's consent can be obtained within 120 days after Closing.
Section 8.3 Performance by CCI and Merger Sub. CCI and Merger Sub shall
have performed in all material respects all of their respective agreements and
covenants under this Agreement (including, but not limited to, making, or
standing willing and able to make, the deliveries and taking, or standing
willing and able to take, the actions required by Section 9.3) to the extent
such are required to be performed at or prior to the Closing.
Section 8.4 Truth Of Representations and Warranties. Each of the
representations and warranties of CCI and Merger Sub contained in this Agreement
(i) if specifically qualified by materiality, shall be true and complete as so
qualified, and (ii) if not qualified by materiality, shall be true and complete
in all material respects, in each such case, on and as of the date hereof and as
of the Closing Date, with the same effect as if then made, except where any such
representation or warranty is as of a specific earlier date in which event it
shall remain true and correct (as qualified) as of such earlier date, and except
as any such representation or warranty may be affected by specific transactions
or occurrences contemplated in or permitted by this Agreement or any Related
Agreement. The foregoing notwithstanding, the Closing condition set forth above
in this Section 8.4 shall be deemed satisfied unless the failure of such
representations and warranties to be so true and complete in all material
respects, if not qualified by materiality, and true and complete as so
qualified, if qualified by materiality, shall individually or in the aggregate
constitute a CCI Material Adverse Effect.
Section 8.5 Absence of Proceedings. All waiting periods required under
the HSR Act shall have expired or otherwise terminated prior to the Closing, and
no judgment or order shall have been issued, and no action or proceeding shall
have been instituted by any Governmental Authority on or prior to the Closing
that has or would have if successful a Material Adverse Effect, a CCI Material
Adverse Effect or that would prevent the consummation of the transactions
contemplated by this Agreement in the manner provided in this Agreement.
Section 8.6 Opinion of CCI's Counsel. PSD and the PSD Shareholders
shall have received an opinion of Dow, Xxxxxx & Xxxxxxxxx, PLLC, counsel for
CCI, dated as of the Closing, in form and substance reasonably satisfactory to
PSD ("CCI's Counsel's Opinion").
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Section 8.7 Tax Opinion. PSD shall have received an opinion from PSD's
tax counsel and the Greenspun Shareholders shall have received from their tax
counsel an opinion dated as of the Effective Date to the effect that, if the
Merger is consummated in accordance with the provisions of this Agreement, the
Merger should be treated for federal income tax purposes as a reorganization
within the meaning of Section 368(a) of the Code.
Section 8.8 Stockholder Approval. This Agreement and the transactions
contemplated hereby shall have been duly approved and adopted or ratified by the
requisite holders of shares of PSD capital stock in accordance with applicable
Legal Requirements and the certificate of incorporation and bylaws of PSD and
the provisions of Section 6.13 hereof.
Section 8.9 Relationship between PSD's Conditions to Closing and PSD's
Right to Indemnification. PSD's obligation to consummate the transactions
contemplated by this Agreement is subject to the conditions set forth in this
Article Eight being satisfied. Such conditions apply exclusively to the
determination of PSD's obligation to consummate such transaction, and are not
applicable to PSD's right to post-Closing indemnification. Following the
Closing, PSD's right to indemnification by CCI shall be determined exclusively
pursuant to Article Twelve which shall govern PSD's right to indemnification
independently from, and without regard to, the conditions of PSD's obligation to
close and such that PSD could potentially have a post-Closing right to
indemnification under Article Twelve for certain circumstances that would not
have excused PSD's obligation to close because such circumstances were
insufficient to result in a failure of PSD's conditions to Closing.
ARTICLE NINE
CLOSING
Section 9.1 Closing. The closing of the transactions contemplated by
this Agreement (the "Closing") shall take place at the offices of Xxxxx
Xxxxxxxxx Xxxxxxx & Xxxxxxxx, P.C., 0000 Xxxxxxxx Xxxxx, 000 Xxxxxxxx Xxxxxx,
Xxxxxx, Xxxxx 00000, at 10:00 a.m., local time, on the last Business Day of the
month during which (i) all Material Required PSD Consents of Governmental
Authorities, (ii) all Material Required CCI Consents of Governmental Authorities
and (iii) all other consents, approvals or authorizations of Governmental
Authorities with respect to the consummation of the transactions contemplated by
this Agreement, including without limitation the expiration or termination of
all waiting periods under the HSR Act (the "Closing Condition") shall have been
obtained or waived by the party or parties entitled to make such waiver, but in
no event shall the
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Closing occur on a date which is less than ten days after such Closing Condition
has been satisfied or waived (in any event, the "Closing Date"), unless
otherwise provided by the mutual agreement, in writing, of Merger Sub, PSD and
CCI, and in no event later than the first anniversary of the date hereof (the
"Termination Date"). If, as of the time designated for the Closing, the Closing
cannot be effected, then the parties to this Agreement shall be released from
all obligations under this Agreement other than obligations arising from a
breach or default under this Agreement and except that Articles Eleven, Twelve
and Thirteen shall continue in full force and effect as to the parties hereto.
Section 9.2 Deliveries and Actions by PSD. PSD shall deliver to CCI the
following items, and PSD shall take the following actions, at the Closing.
(a) Consents. PSD shall deliver to CCI at Closing all of the
Material Required PSD Consents, other than (i) those relating to the Boulder
City Consent if not obtained prior to the Closing and (ii) those which the
parties have waived as conditions to Closing in accordance with Articles Seven
and Eight.
(b) Delivery of PSD Stock Certificates. PSD shall deliver or
cause to be delivered to CCI at Closing the originals of all of the stock
certificates representing all of the issued and outstanding shares of PSD Class
A Common Stock, PSD Class B Common Stock and PSD Preferred Stock.
(c) BellSouth Pay-Off Letter. PSD shall cause to be delivered
to CCI at least two Business Days prior to Closing a pay-off letter from
BellSouth in form reasonably satisfactory to CCI relating to the pay-off of the
BellSouth Indebtedness at Closing.
(d) Termination of BellSouth Option. PSD will cause to be
delivered to CCI evidence reasonably satisfactory to CCI that the BellSouth
Option Agreement has been terminated.
(e) Termination of PSD Shareholder Agreements. PSD shall
deliver, and cause all other parties to the First PSD Shareholders Agreement,
Second PSD Shareholders Agreement, and Third PSD Shareholders Agreement to
deliver, an agreement terminating all of such agreements.
(f) CCTV Bank Pay-Off Letter. PSD shall cause to be delivered
to CCTV and CCI at least two Business Days prior to Closing a pay-off letter
from the Administrative Agent and
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the CCTV Senior Lenders in form reasonably satisfactory to CCI relating to the
pay-off of the CCTV Bank Debt at Closing.
(g) Deliveries and Actions Related to Formation Agreement and
Pledge Agreements. PSD will cause to be delivered to CCI evidence reasonably
satisfactory to CCI that the agreements referenced in items A.1 and A.3-A.8 on
Schedule 3.6(a)(ii) have been terminated.
(h) Intentionally omitted.
(i) Termination of CCTV Management Agreement. PSD shall cause
CCTV and the Manager to execute and deliver at the Closing a termination
agreement in the form of Exhibit H to this Agreement terminating the CCTV
Management Agreement.
(j) Certificates/Articles of Incorporation, Certified Bylaws
and Certificates of Existence and Good Standing for the PSD Entities. PSD shall
deliver to CCI at Closing (i) copies of the certificates/articles of
incorporation, and all amendments thereto, of each of the PSD Entities certified
within five Business Days prior to Closing by the Secretary of State of the
State in which such entity is incorporated, (ii) copies of the bylaws of each of
the PSD Entities certified by the respective Secretary or Assistant Secretary of
each such PSD Entity as being correct, complete and in full force and effect on
the Closing Date, and (iii) certificates of existence and good standing for each
of the PSD Entities dated within five Business Days of the Closing Date issued
by the Secretary of State of the State in which each such entity is
incorporated.
(k) PSD's Closing Certificate. PSD shall deliver to CCI at
Closing a certificate of an executive officer of PSD certifying, without
personal liability (i) as to the incumbency and signatures of the officers of
PSD who executed this Agreement and PSD's Related Agreements on behalf of PSD,
(ii) as to the adoption of resolutions of the board of directors of PSD being
correct, complete and in full force and effect on the Closing Date (though not
necessarily dated as of the Closing Date), authorizing (A) the execution and
delivery of this Agreement and PSD's Related Agreements, and (B) the performance
of the obligations of PSD hereunder and thereunder, (iii) as to PSD's bylaws and
all amendments thereto as being correct, complete and in full force and effect
on the Closing Date, and (iv) that the conditions to CCI's obligations to
consummate the transactions contemplated by this Agreement set forth in Sections
7.3 and 7.4 have been satisfied.
(l) PSD's FCC Counsel's Opinion. PSD shall cause to be
delivered to CCI at Closing PSD's FCC Counsel's Opinion.
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(m) PSD's Counsel's Opinion. PSD shall cause to be delivered
to CCI at Closing PSD's Counsel's Opinion.
(n) Termination of CCTV Consulting Agreement. PSD shall cause
Consultant and CCTV to execute and deliver to CCI at Closing a termination
agreement in the form of Exhibit I to this Agreement terminating the CCTV
Consulting Agreement.
(o) Employment Letters. At the Closing, PSD will cause Xxxxx
X. Xxxxxxxxx to execute and deliver the letter of employment in the form
attached hereto as Exhibit K-1, and Xxxxxx Xxxxxxxxx to execute and deliver the
letter of employment in the form attached hereto as Exhibit K- 2 (collectively,
the "Employment Letters").
(p) Registration Rights Agreement. At the Closing, PSD shall
cause the Greenspun Shareholders to execute and deliver a registration rights
agreement in the form attached hereto as Exhibit L (the "Registration Rights
Agreement").
(q) First Offer Agreement. At the Closing, PSD shall cause the
Greenspun Shareholders to execute and deliver a first offer agreement in the
form attached hereto as Exhibit M (the "First Offer Agreement").
(r) Agreements Not to Compete. At the Closing, PSD shall cause
(i) Manager, Xxxxxxx X. Xxxxxxxxxx, Xxxxx X. Xxxxxxxx, Xxxxxxx X. Xxxxxxx,
Xxxxxx X. Xxxx and Xxxxxx X. Xxxxxx to each execute and deliver an agreement not
to compete in the form attached hereto as Exhibit N-1, and (ii) each Greenspun
Shareholder, Xxxxx X. Xxxxxxxxx, Xxxxxx Xxxxxxxxx, Xxxxxxx X. Xxxxxxxxx, Xxxxx
Xxxx and Xxxxx Fine to each execute and deliver an agreement not to compete in
the form attached hereto as Exhibit N-2 (collectively, the "Agreements Not to
Compete").
(s) Distribution of PVI Non-CCTV Assets. If and to the extent
PVI and PSD have not distributed to the stockholders of PSD and Coditel prior to
Closing all of the PVI Non-CCTV Assets, immediately prior to the Closing PVI and
PSD shall distribute to the stockholders of PSD and Coditel, as dividends, all
remaining PVI Non-CCTV Assets immediately prior to the Closing on the Closing
Date.
(t) Redemption or Repurchase of PVI Shares. PSD shall deliver
to CCI instruments and documents reasonably satisfactory to CCI evidencing the
redemption or repurchase of all PVI Shares owned by Coditel.
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(u) Resignations. PSD shall deliver letters from each director
and officer of the PSD Entities, pursuant to which each such Person shall (i)
resign from all positions held with any PSD Entity effective as of or prior to
the Closing and (ii) release the PSD Entities from all claims against them or
their assets, whether arising under contract, tort law or otherwise (other than
amounts due and unpaid under any employment agreements or any other rights to
which any of them are entitled under any Benefit Plans), and whether arising out
of such person's association with the PSD Entities as an officer, director or
employee or otherwise.
(v) Indemnity Escrow. At the Closing, PSD shall cause the
Manager to execute and deliver to CCI the Indemnity Escrow Agreement as provided
in Section 12.11.
(w) At the Closing, PSD shall cause the Manager and the
Greenspun Shareholders to execute and deliver to CCI the Custodial Agreement.
(x) Further Assurances. At the Closing PSD shall execute and
deliver, or use commercially reasonable efforts to cause to be executed and
delivered, to CCI such further instruments and documents, in form and content
reasonably satisfactory to counsel for CCI, as may be reasonably necessary or
appropriate to more effectively consummate the transactions contemplated by this
Agreement.
Section 9.3 Deliveries by CCI. CCI shall deliver the following items,
and CCI shall take the following actions, at the Closing.
(a) Arrangements Relating to Indemnity Escrow. At the Closing,
CCI shall (i) execute and deliver to Manager and the Escrow Agent the Indemnity
Escrow Agreement as provided in Section 12.11, and (ii) fund the Indemnity
Escrow Deposit in accordance with Section 2.7.
(b) Merger Consideration. CCI shall deliver to the PSD
Shareholders by wire, interbank or intrabank transfer of immediately available
funds to the PSD Shareholders in accordance with their written wiring
instructions provided by PSD to CCI at least two Business Days prior to the
Closing, the cash amounts as provided in Section 2.3, CCI shall deliver
certificates representing the shares of CCI Class A Common Stock and CCI
Preferred Stock to be issued to the PSD Shareholders as a result of the Merger
pursuant to Section 2.3 and CCI shall (i) deliver the amount of the True-Up Fund
to the Manager by wire, interbank or intrabank transfer of immediately available
funds in accordance with wire transfer instructions delivered to CCI by PSD at
least two
63
Business Days prior to the Closing Date as provided in Section 2.6, and (ii)
execute and deliver the Custodial Agreement to Manager and the Greenspun
Shareholders.
(c) Pay-Off of BellSouth Indebtedness; Release of BellSouth
Liens. CCI shall purchase Merger Sub preferred shares, having a liquidation
value in the amount of the BellSouth Indebtedness, for a purchase price equal to
the BellSouth Indebtedness, and CCI shall cause PSD to pay off the BellSouth
Indebtedness in full on the Closing Date, and shall use commercially reasonable
efforts to cause BellSouth to deliver to PSD and CCI on the Closing Date
evidence of the release of all Liens held by BellSouth with respect to any of
the assets or properties of the PSD Entities and any of the equity securities of
the PSD Entities.
(d) Pay-Off of CCTV Bank Debt; Release of CCTV Liens. CCI
shall directly pay off the CCTV Bank Debt in full on the Closing Date, and shall
use commercially reasonable efforts to cause the Administrative Agent and the
CCTV Senior Lenders to deliver to PSD and CCI on the Closing Date evidence of
the release of all Liens held by the Administrative Agent and the CCTV Senior
Lenders with respect to any of the assets or properties of any of the PSD
Entities and any of the equity securities of the PSD Entities.
(e) Closing Fees; Closing Bonuses; Other Expenses. CCI will
pay in full within five Business Days after the Effective Time the Closing Fees,
the Closing Bonuses and the expenses to be borne by PSD as provided in Section
13.6 in accordance with written instructions provided by PSD to CCI at least two
Business Days prior to the Closing.
(f) Certificates of Existence, Good Standing and
Qualification. CCI shall deliver to PSD at Closing a certified copy of the
certificate of incorporation and certificates of existence and good standing
with respect to CCI and Merger Sub, dated within five Business Days of the
Closing Date, issued by the Secretary of State of the State(s) of CCI's and
Merger Sub's incorporation and a certificate of authority and good standing with
respect to Merger Sub's qualification to conduct business as a foreign
corporation in Nevada, dated within five Business Days prior to the Closing
Date, issued by the Secretary of State of Nevada.
(g) CCI's Closing Certificate. CCI shall deliver to PSD at
Closing a certificate of an executive officer of CCI certifying without personal
liability (i) as to the incumbency and signatures of the officers of CCI who
execute this Agreement and CCI's Related Agreements on behalf of CCI, (ii) as to
the adoption of resolutions of the board of directors of CCI being correct,
complete and in full force and effect on the Closing Date (though not
necessarily dated as of the
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Closing Date), authorizing (A) the execution and delivery of this Agreement and
CCI's Related Agreements, and (B) the performance of the obligations of CCI
hereunder and thereunder, (iii) as to CCI's bylaws and all amendments thereto as
being correct, complete and in full force and effect on the Closing Date, and
(iv) that the conditions to PSD's obligations to consummate the transactions
contemplated by this Agreement set forth in Sections 8.3 and 8.4 have been
satisfied.
(h) Merger Sub's Closing Certificate. Merger Sub shall deliver
to PSD at Closing a certificate of an executive officer of Merger Sub certifying
without personal liability (i) as to the incumbency and signatures of the
officers of Merger Sub who execute this Agreement and Merger Sub's Related
Agreements on behalf of Merger Sub, (ii) as to the adoption of resolutions of
the board of directors of Merger Sub being correct, complete and in full force
and effect on the Closing Date (though not necessarily dated as of the Closing
Date), authorizing (A) the execution and delivery of this Agreement and Merger
Sub's Related Agreements, and (B) the performance of the obligations of Merger
Sub hereunder and thereunder, (iii) as to Merger Sub's bylaws and all amendments
thereto as being correct, complete and in full force and effect on the Closing
Date, and (iv) that the conditions to PSD's obligations to consummate the
transactions contemplated by this Agreement set forth in Sections 8.3 and 8.4
have been satisfied.
(i) CCI's Counsel's Opinion. CCI shall cause to be delivered
to PSD and the PSD Shareholders at Closing CCI's Counsel's Opinion.
(j) Employment Letters. At the Closing, Merger Sub will
execute and deliver the Employment Letters.
(k) Registration Rights Agreement. At the Closing, CCI will
execute and deliver the Registration Rights Agreement.
(l) First Offer Agreement. At the Closing, CCI will execute
and deliver the First Offer Agreement.
(m) Agreements Not to Compete. At the Closing, CCI will
execute and deliver the Agreements Not to Compete.
(n) Further Assurances. At the Closing CCI and Merger Sub
shall execute and deliver to PSD and the PSD Shareholders such further
instruments and documents, in form and
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content reasonably satisfactory to counsel for PSD, as may be necessary or
appropriate to more effectively consummate the transactions contemplated hereby.
Section 9.4 Waiver of Conditions. Any party may waive in writing any or
all of the conditions to its obligations under this Agreement, and the written
waiver of any such condition will constitute a waiver by such party of all
rights or remedies that such party may have or have had against the non-waiving
party regarding the specific subject matter of the condition so waived, except
that no such waiver of a condition will constitute a waiver by the waiving party
of any of its rights or remedies, at law or in equity, at the time such
condition is waived, as to the non-waiving party's breach of any representation,
warranty or covenant under this Agreement which has not been waived by the
waiving party.
ARTICLE TEN
TERMINATION
Section 10.1 Termination. (a) In General. This Agreement may be terminated
and the transactions contemplated hereby may be abandoned:
(i) at any time, by the mutual agreement of PSD, CCI
and Merger Sub;
(ii) by CCI in the event that PSD or any Greenspun
Shareholder is (A) in default in the performance of any of its
obligations under this Agreement if such obligation is qualified by
materiality, or in material default in the performance of any of its
obligations if such obligation is not qualified by materiality, (B) in
breach of its respective representations or warranties herein if such
representations and warranties are qualified by materiality, or in
material breach of its respective representations and warranties
herein, if such representations and warranties are not qualified by
materiality, where the breach of such representations and warranties
would result in the determination that Preclosing Claims (but for the
operation of Section 7.13(c) above) exceed $25,000,000, and in each
case if such breach is not cured or waived prior to the Closing by CCI
(so long as neither CCI nor Merger Sub is then itself in material
default in the performance of its respective obligations under this
Agreement or in material breach of its respective representations or
warranties herein);
(iii) by PSD in the event that CCI or Merger Sub is
(A) in default in the performance of any of its respective obligations
under this Agreement if such obligation is qualified by materiality, or
in material default in the performance of any of its obligations
66
if such obligation is not qualified by materiality, or (B) in breach of
its respective representations or warranties herein if such
representations and warranties are qualified by materiality, or in
material breach of its respective representations and warranties
herein, if such representations and warranties are not qualified by
materiality, where the breach of such representations and warranties
shall individually or in the aggregate constitute a CCI Material
Adverse Effect, and in each case if such breach is not cured or waived
prior to the Closing by PSD (so long as neither PSD nor any Greenspun
Shareholder is then itself in material default in the performance of
its respective obligations under this Agreement or in material breach
of its respective representations or warranties herein);
(iv) subject to the provisions of Section 6.8, by
CCI, if any of the conditions to the obligations of CCI and Merger Sub
set forth in Article Seven shall not have been satisfied or waived as
of 12:01 a.m. (Austin, Texas time) on the Termination Date, unless such
failure to fulfill such condition is the result of any breach of
representation or warranty of, or default in the performance of the
obligations of, CCI or Merger Sub contained in this Agreement;
(v) subject to the provisions of Section 6.8, by PSD,
if any of the conditions to the obligations of PSD set forth in Article
Eight shall not have been satisfied or waived as of 12:01 a.m. (Austin,
Texas time) on the Termination Date, unless such failure to fulfill
such condition is the result of any breach of representation or
warranty of, or default in the performance of the obligations of, PSD
or any PSD Shareholder contained in this Agreement; or
(vi) by CCI's delivery to PSD of written notice of
termination on or prior to May 26, 1998 in the event that PSD fails to
obtain and to deliver to CCI counterparts of the Voting Agreement
signed by each of the PSD Shareholders listed on Schedule 6.13 on or
prior to May 19, 1998.
(b) Remedies. In the event that CCI is entitled to terminate
this Agreement pursuant to Section 10.1(a) (ii), CCI shall further be entitled
to such rights and remedies, in addition to its termination rights stated in
Section 10.1(a)(ii), as are available to it at law or in equity, including,
without limitation, the remedy of specific performance. Notwithstanding the
foregoing, in the event of termination of this Agreement pursuant to Section
10.1(a)(ii)(B), CCI's sole remedy shall be the recovery of its out-of-pocket
costs incurred in connection with the transactions contemplated by this
Agreement, not to exceed $1,000,000. In the event that PSD is entitled to
67
terminate this Agreement pursuant to Section 10.1(a)(iii), PSD shall be further
entitled to such rights and remedies, in addition to its termination rights
stated in Section 10.1(a)(iii), as are available to it at law or in equity,
including, without limitation, the remedy of specific performance.
Notwithstanding the foregoing, in the event of termination of this Agreement
pursuant to Section 10.1(a)(iii)(B), PSD's sole remedy shall be the recovery of
its out-of-pocket costs incurred in connection with the transactions
contemplated by this Agreement, not to exceed $1,000,000.
ARTICLE ELEVEN
CONFIDENTIALITY AND PUBLIC STATEMENTS
Section 11.1 Confidential Information. Each of the parties hereto
acknowledges that prior to the Closing PSD would be irreparably damaged, and
following the Closing CCI would be irreparably damaged, if confidential
information concerning the business and affairs of the PSD Entities or the
Business were disclosed to or utilized on behalf of any Person except as
permitted under this Agreement. CCI and Merger Sub (with respect to the period
preceding the Closing), each covenants and agrees to and with the other that it
will not, at any time, directly or indirectly, without the prior written consent
of the other, make use of or divulge, or permit any of its Affiliates,
associates, directors, officers, partners, employees or agents to make use of or
divulge, to any Person any non-public information concerning the business or
financial or other affairs of, or any of the methods of doing business used by,
the PSD Entities, the Business, or each PSD Entity's respective Affiliates. PSD
acknowledges that CCI will need to disclose information regarding the PSD
Entities and the Business to its lenders and investors and potential lenders and
investors, and its and their respective advisors, and that disclosure to such
Persons shall not violate the confidentiality provisions set forth in this
Section 11.1. If for any reason the transactions contemplated by this Agreement
are not consummated, the parties hereto shall each return to any other party all
information received by it from such other party and all copies thereof.
Section 11.2 Public Statement and Press Releases. Neither PSD on the
one hand, nor CCI or Merger Sub, on the other hand, without the prior written
consent of the other, or except as required by law in the judgment of outside
legal counsel for such party or legal process, shall release any information
concerning this Agreement or the transactions contemplated by this Agreement, if
such release is intended for or is reasonably likely to result in public
dissemination thereof. CCI and Merger Sub each agrees that the discussion (to
the extent permitted under applicable securities laws) of the transactions
contemplated hereby by PSD with the PSD Entities' lenders, the PSD Entities
Affiliates (and their respective directors, officers, employees, partners and
shareholders), PSD's counsel or other professional advisors, and any Person
whose consent or waiver may be necessary
68
or desirable in order to consummate the transactions contemplated hereby, shall
not be deemed to be "intended for" or to "result in public dissemination," for
the purposes of the foregoing sentence. PSD agrees that the discussion (to the
extent required under applicable securities laws) of the transactions
contemplated hereby by CCI with CCI's lenders and shareholders, CCI's Affiliates
(and their respective directors, officers, employees, partners and
shareholders), CCI's counsel or other professional advisors, and any Person
whose consent or waiver may be necessary or desirable in order to consummate the
transactions contemplated hereby shall not be deemed to be "intended for" or to
"result in public dissemination," for the purposes of this Section 11.2.
Section 11.3 Injunctive Relief. The parties to this Agreement expressly
agree that, in addition to any other right or remedy the others may have, such
other party may seek and obtain specific performance of the covenants and
agreements set forth in or made pursuant to Sections 11.1 and 11.2 above and
temporary and permanent injunctive relief to prevent any breach or violation
thereof, and that no bond or other security may be required from such other
party in connection therewith.
Section 11.4 Survival. This Article Eleven will survive the termination
of this Agreement.
ARTICLE TWELVE
SURVIVAL OF REPRESENTATIONS
AND WARRANTIES; INDEMNIFICATION
Section 12.1 Survival of Representations and Warranties. All
representations and warranties made by PSD, the Greenspun Shareholders, CCI and
Merger Sub in this Agreement, any Related Agreement or in any certificate
delivered pursuant to this Agreement shall survive the Closing for a period of
12 months (the "Survival Period").
Section 12.2 Indemnity by PSD of CCI and Merger Sub. (a) In General.
Subject to the limitations in this Article Twelve, PSD shall indemnify, defend
and hold harmless CCI and Merger Sub, and their respective officers, directors,
Affiliates, controlling persons (if any), owners, employees, attorneys and
agents (the "CCI Indemnitees") against and in respect of any and all claims,
suits, actions and proceedings, and all losses, liabilities, damages and
reasonable expenses (including reasonable attorneys' fees), arising out of or
based upon (i) any and all misrepresentations or breaches of warranty or any
nonperformance or breach of any covenant or agreement of PSD contained in this
Agreement, its Related Agreements and its Schedules to this Agreement
(collectively, "PSD Breaches"), (ii) a Certificate of Obligation Claim and (iii)
any and all
69
misrepresentations or breaches of warranty of the Greenspun Shareholders
contained in this Agreement (collectively, "Greenspun Shareholder Breaches").
Any sums received from the Indemnity Escrow Deposit by the CCI Indemnitees shall
be deemed an adjustment to the Merger Consideration.
(b) Allocation of Indemnification Responsibility. Any sums
recovered from the Indemnity Escrow Deposit by the CCI Indemnitees as a result
of any Claims (including Preclosing Claims) arising from Greenspun Shareholder
Breaches shall, as among the shareholders of PSD, be allocated 100% against the
Greenspun Escrow Amount. Any sums recovered from the Indemnity Escrow Deposit by
the CCI Indemnities as a result of any Claims (including Preclosing Claims)
arising from PSD Breaches or a Certificate of Obligation Claim shall, as among
the shareholders of PSD, be allocated 76.2158% against the Greenspun Escrow
Amount and 23.7842% against the Minority Escrow Amount.
Section 12.3 Indemnity by CCI of PSD. Subject to the limitations of
this Article Twelve, CCI agrees to indemnify, defend and hold harmless PSD and,
with respect to post-Closing claims the Greenspun Shareholders and the Minority
Shareholders, and its and their respective officers, directors, Affiliates,
controlling persons (if any), employees, attorneys, agents and owners (the "PSD
Indemnitees") against and in respect of any and all claims, suits, actions and
proceedings, and all losses, liabilities, damages and reasonable expenses
(including reasonable attorneys' fees), arising out of or based upon any and all
misrepresentations or breaches of warranty or any nonperformance or breach of
any covenant or agreement of CCI or Merger Sub contained in this Agreement,
CCI's or Merger Sub's Related Agreements and CCI's or Merger Sub's Schedules to
this Agreement. Any indemnification payments made by CCI to the PSD Indemnitees
shall be deemed an adjustment to the Merger Consideration.
Section 12.4 Indemnification Procedures. In the event that any party
entitled to be indemnified under this Article Twelve (the "Indemnified Party")
has a claim or demand for indemnification under this Article Twelve that does
not involve a claim or demand being asserted against or sought to be collected
by a third party (a "Claim") against a party obligated to provide the indemnity
under this Article Twelve (the "Indemnifying Party"), the Indemnified Party
shall with reasonable promptness notify the Indemnifying Party of such Claim,
specifying the nature of such Claim and the amount or the good faith estimated
amount thereof to the extent then feasible. Following receipt of such notice
from the Indemnified Party of a Claim, the Indemnifying Party shall have 45 days
to make such investigation of the Claim as the Indemnifying Party deems
necessary or desirable. For the purposes of such investigation, the Indemnified
Party agrees to make available
70
to the Indemnifying Party and/or its authorized representative(s) the
information relied upon by the Indemnified Party to substantiate the Claim. If
the Indemnified Party and the Indemnifying Party agree at or prior to the
expiration of said 45-day period (or any mutually agreed upon extension thereof)
to the validity and amount of such Claim, the Indemnifying Party shall
immediately pay to the Indemnified Party the full amount of the Claim subject to
the terms of this Article Twelve. If the Indemnified Party and the Indemnifying
Party do not agree within said period (or any mutually agreed upon extension
thereof), the Indemnified Party may seek appropriate legal remedy.
Section 12.5 Indemnification Procedures for Third Party Claims. (a) In
General. The obligations and liabilities of the parties under this Agreement
with respect to, as a result of, or relating to, claims of third parties
(individually, a "Third Party Claim" and collectively, "Third Party Claims"),
shall be administered as provided in this Section.
(b) Notification of Third Party Claims; Assumption of Defense
by Indemnified Party. The Indemnified Party shall give the Indemnifying Party
prompt notice (but in no event later than 10 days prior to the time any response
to the asserted claim is required, unless the Indemnified Party has received
less than 10 days notice thereof prior to the required response time, in which
event such notice shall be delivered immediately upon receipt thereof) of any
Third Party Claim, and the Indemnifying Party may undertake the defense of that
claim by representatives chosen by it, which representatives shall be reasonably
satisfactory to the Indemnified Party; and the Indemnified Party shall extend
reasonable cooperation in the defense or prosecution thereof and shall furnish
such records, information and testimony and attend all such conferences,
discovery proceedings, hearings, trials, and appeals as may be reasonably
requested in connection therewith, subject to reimbursement by the Indemnifying
Party for actual reasonable out-of-pocket expenses incurred by the Indemnified
Party in connection therewith. Any such notice of a Third Party Claim shall
identify with reasonable specificity the basis for the Third Party Claim, the
facts giving rise to the Third Party Claim and the amount of the Third Party
Claim (or, if such amount is not yet known, a good faith estimate of the amount
of the Third Party Claim).
(c) Indemnified Party's Rights in Defense Not Assumed by
Indemnifying Party. If the Indemnifying Party, within 15 days after receipt of
any such notice of a Third Party Claim, fails to assume the defense thereof in
accordance with Section 12.5(b), the Indemnified Party shall (upon further
notice to the Indemnifying Party) have the right to undertake (at the reasonable
expense of the Indemnifying Party) the defense, compromise or settlement of the
Third Party Claim; provided, that the Indemnifying Party shall not be required
to pay the fees and expenses of more than one counsel employed by an Indemnified
Party with respect to any Third Party Claim.
71
(d) Right of Indemnifying Party to Settle Third Party Claims.
The Indemnifying Party shall have the right, in its sole discretion, to settle
any claim for monetary damages for which indemnification has been sought and is
available hereunder. Anything in this Section 12.5 to the contrary
notwithstanding, and except as provided in Section 12.8, (i) the Indemnifying
Party shall not, without the written consent of the Indemnified Party, settle or
compromise any Third Party Claim or consent to the entry of any judgment which
does not include as an unconditional term thereof the giving by the claimant or
the plaintiff to the Indemnified Party of an unconditional release from all
liability in respect of the Third Party Claim; and (B) if there is a reasonable
probability that a Third Party Claim may materially and adversely affect the
Indemnified Party other than as a result of money damages or other money
payments, the Indemnified Party shall have the right, at the reasonable cost and
expense of the Indemnifying Party, to participate in the defense of the Third
Party Claim (control of the defense to remain with the Indemnifying Party);
provided, that the Indemnifying Party shall not be required to pay the fees and
expenses of more than one counsel employed by an Indemnified Party with respect
to any Third Party Claim.
Section 12.6 Survival of Claims. Any indemnification to which the PSD
Indemnitees or the CCI Indemnitees may be entitled under this Article Twelve
shall be effective only if based on a claim asserted by CCI against PSD, or by
PSD against CCI, prior to the expiration of the Survival Period.
Section 12.7 Litigation Expenses. In the event of any litigation in
relation to this Agreement, the unsuccessful party, in addition to all other
sums that either party may be required to pay, will be required to pay
reasonable attorney's fees and court costs incurred by the successful party in
connection with such litigation.
Section 12.8 Right to Settle Tax Claims for Pre-Closing Periods.
Whenever and to the extent that any Taxing Governmental Authority asserts a
claim, makes an assessment or otherwise disputes an amount of Taxes of any PSD
Entity (or any successor or assign thereto) for which PSD may be liable under
this Article Twelve, the Manager (as agent for the Indemnifying Parties, other
than CCI and Merger Sub), at its cost and expense, shall have the right to
control any resulting proceedings and to determine whether and when to settle
any such claim, assessment or dispute; provided, however, that the Manager (i)
shall not have the right to settle any such claim, assessment or dispute in a
manner that adversely affects CCI without the prior consent of CCI, which
consent shall not be unreasonably withheld, and (ii) shall keep CCI fully
informed of the status of any such proceedings and provide CCI with copies of
all correspondence, filings and other documents relating to such proceedings. If
the Manager fails within a reasonable time after notice to commence the
72
defense of any such claim, assessment or dispute, the Indemnifying Parties
(other than CCI or Merger Sub) shall be bound by the results obtained by CCI,
the Surviving Corporation or their respective successors and assigns.
Section 12.9 Indemnification Threshold. Any other provisions of this
Article Twelve to the contrary notwithstanding, the PSD Indemnitees as one
party, and the CCI Indemnitees as the other party, shall not be entitled to
indemnification under this Article Twelve after Closing unless the aggregate
amount of claims for indemnification by such party exceeds $1,000,000 (the
"Indemnification Threshold"), in which event such party shall be entitled to
indemnification only for that portion of such claims in excess of the amount of
the Indemnification Threshold; provided, however, that claims by the CCI
Indemnitees against PSD arising out of or related to amounts payable under the
Brokers Agreement and (ii) amounts payable with respect to Preclosing Claims
shall not be subject to the foregoing Indemnification Threshold.
Section 12.10 Maximum Indemnification Liability. Any other provisions
of this Agreement to the contrary notwithstanding, PSD's aggregate liability
with respect to all claims under Article Twelve made after Closing shall be
limited to $25,000,000; provided, however, that such $25,000,000 limit shall not
apply to the Preclosing Claims, if any (which Preclosing Claims in no event
shall exceed $25,000,000) or the Certificate of Obligation Pre-Closing Claim
Reserve Amount, if any.
Section 12.11 Indemnity Escrow. To secure PSD's indemnification
obligations under this Article Twelve from and after the Closing, Manager (as
agent for the Greenspun Shareholders and the Minority Shareholders unless prior
to the Closing the Manager notifies the parties to this Agreement that it will
not act as agent on behalf of the Greenspun Shareholders and the Minority
Shareholders hereunder in which event the Greenspun Shareholders and holders of
a majority of the Minority Common Stock will name another party to act on behalf
of the Greenspun Shareholders and the Minority Shareholders hereunder), CCI and
Escrow Agent shall at the Closing enter into an indemnity escrow agreement (the
"Indemnity Escrow Agreement") in the form of Exhibit Q to this Agreement.
Anything in this Article Twelve to the contrary notwithstanding, the CCI
Indemnitees' right to indemnification under this Article Twelve from and after
the Closing shall be to and against (i) the principal portion of the Minority
Escrow Amount (but not the interest and earnings thereon which shall remain the
property of the Minority Shareholders) only, and (ii) the shares of CCI Common
Stock deposited by the Greenspun Shareholders pursuant to Section 2.7 (but not
the cash dividends declared on such CCI Common Stock, if any), and the CCI
Indemnitees shall neither have recourse to nor be entitled to recover as against
PSD, the Greenspun Shareholders or the Minority
73
Shareholders or their respective properties or assets for any claims of
indemnification under this Agreement from and after the Closing. For purposes of
any and all claims by the CCI Indemnitees pursuant to this Article 12 against
the Greenspun Escrow Amount, the shares of CCI Common Stock deposited on behalf
of the Greenspun Shareholders with the Escrow Agent at Closing shall, for
purposes of determining the number of such shares to be released from the Escrow
Agreement in order to satisfy such claims, shall be deemed to have the value
equal to the Average Closing Price, regardless of the actual market price of
such shares as of the date of any such claim(s).
Section 12.12 Exclusive Nature of Indemnification Remedy. The parties
agree that from and after the Closing their sole and exclusive remedy as against
each other with respect to any claims or damages made against or suffered or
incurred by them shall be their respective rights to indemnification under
Article Twelve, as limited by the provisions of such Article, and that after the
Closing and in the absence of fraud they otherwise shall have no recourse
against each other with respect to any such claims or damages under, with
respect to, relating to, or arising out of, this Agreement, the Exhibits and
Schedules to this Agreement, any certificates delivered by them pursuant to this
Agreement, or any other agreement or instrument executed or delivered pursuant
hereto or thereto.
ARTICLE THIRTEEN
MISCELLANEOUS
Section 13.1 Amendments; Waivers. This Agreement may only be amended
pursuant to a written agreement executed by all the parties to this Agreement,
and no waiver of compliance with any provision or condition of this Agreement
and no consent provided for in this Agreement shall be effective unless
evidenced by a written instrument executed by the party to this Agreement sought
to be charged with such waiver or consent; provided, however, that no amendment
or waiver of this Agreement shall be effective without the written consent of
Minority Shareholders who hold a majority of the Minority Common Stock. No
waiver of any term or provision of this Agreement shall be construed as a
further or continuing waiver of such term or provision or any other term or
provision.
Section 13.2 Entire Agreement. This Agreement, the Related Agreements
and the Exhibits and Schedules to this Agreement set forth the entire
understanding of the parties and supersedes any and all prior agreements,
memoranda, arrangements and understandings relating to the subject matter of
this Agreement. No representation, warranty, promise, inducement or statement of
intention has
74
been made by any party which is not contained in this Agreement, the Related
Agreements or Schedules or Exhibits to this Agreement and no party shall be
bound by, or be liable for, any alleged representation, promise, inducement or
statement of intention not contained herein or therein.
Section 13.3 Binding Effect: Assignment. This Agreement shall be binding
upon and inure to the benefit of the parties and their respective successors and
permitted assigns. This Agreement may not be assigned by any party to this
Agreement without the prior written consent of all of the other parties to this
Agreement.
Section 13.4 Construction: Counterparts. The Article, Section and
paragraph headings of this Agreement are for convenience of reference only and
do not form a part of this Agreement and do not in any way modify, interpret or
construe the intentions of the parties. The parties acknowledge that each of
them have reviewed and revised this Agreement and that the normal rule of
construction to the effect that any ambiguities are to be resolved against the
drafting party shall not be employed in the interpretation of this Agreement or
any amendments to this Agreement. To facilitate execution, this Agreement may be
executed in any number of counterparts as may be convenient or necessary, and it
shall not be necessary that the signatures of all parties hereto or thereto be
contained on any one counterpart hereof or thereof. Additionally, the parties
hereto agree that for purposes of facilitating the execution of this Agreement,
(i) the signature pages taken from separate individually executed counterparts
of this Agreement may be combined to form multiple fully executed counterparts
and (ii) a facsimile transmission shall be deemed to be an original signature.
All executed counterparts of this Agreement shall be deemed to be originals, but
all such counterparts taken together or collectively, as the case may be, shall
constitute one and the same Agreement.
Section 13.5 Notices. All notices and communications hereunder shall be
in writing and shall be deemed to have been duly given to a party when delivered
in person or sent by overnight delivery, telecopy or enclosed in a properly
sealed envelope, certified or registered mail (postage and certification or
registration prepaid) and addressed to the parties as provided in Exhibit J to
this Agreement. Any such notice will be deemed to be given when received, if
personally delivered, sent by overnight delivery or sent by telecopy (during the
recipient's normal business hours), and, if mailed, five days after deposit in
the United States mail, properly addressed, with proper postage affixed. Any
party may change its address for purposes of notice by giving notice in
accordance with the provisions of this Section 13.5.
Section 13.6 Expenses of the Parties. Except as may otherwise be provided
elsewhere in this Agreement, all expenses incurred by or on behalf of the
parties to this Agreement in connection
75
with the authorization, preparation and consummation of this Agreement,
including, without limitation, all fees and expenses of agents, representatives,
counsel and accountants employed by the parties to this Agreement in connection
with the authorization, preparation, execution and consummation of this
Agreement shall be borne solely by the party who shall have incurred the same.
Section 13.7 Governing Law and Venue. This Agreement shall be governed
by and construed and enforced in accordance with the Laws of the State of Nevada
applicable to contracts made and to be performed wholly within such State, and
without regard to the conflicts of laws principles of such State. Any suit
brought with respect to this Agreement, whether in contract, tort, equity or
otherwise, shall be brought in the state or federal courts sitting in Las Vegas,
Nevada, the parties hereby waiving any claim or defense that such forum is not
convenient or proper. Each party hereby agrees that any such court shall have in
personam jurisdiction over it, consents to service of process in any manner
authorized by Nevada law, and agrees that a final judgment in any such action or
proceeding shall be conclusive and may be enforced in other jurisdictions by
suit on the judgment or in any other manner specified by law.
Section 13.8 Further Actions. At any time and from time to time after
the Closing, each party hereto shall, at its own expense (except as otherwise
provided herein), take such actions and execute and deliver such documents as
may be reasonably necessary to effectuate the purposes of this Agreement.
Section 13.9 Gender, Tense, Etc. Where the context or construction
requires, all words applied in the plural shall be deemed to have been used in
the singular, and vice versa; the masculine shall include the feminine and
neuter, and vice versa; and the present tense shall include the past and future
tense, and vice versa.
Section 13.10 Severability. If any provision or any part of any
provision of this Agreement shall be void or unenforceable for any reason
whatsoever, then such provision shall be stricken and of no force and effect.
However, unless such stricken provision goes to the essence of the consideration
bargained for by a party, the remaining provisions of this Agreement shall
continue in full force and effect, and to the extent required, shall be modified
to preserve their validity.
Section 13.11 No Third-Party Rights. Nothing in this Agreement, whether
express or implied, is intended to confer any rights or remedies under or by
reason of this Agreement on any Persons other than the parties and their
respective successors and permitted assigns, nor is anything
76
in this Agreement intended to relieve or discharge the obligation or liability
of any third Persons to any party, nor shall any provisions give any third
Persons any right or subrogation over or action against any party.
Section 13.12 Agreement Regarding "Next Day Rule". The parties agree
that the payment of the BellSouth Contingent Interest Amount, the Closing
Bonuses and any other amounts properly allocable to the portion of the Effective
Date after the Merger shall be treated as occurring at the beginning of the day
following the Effective Date pursuant to Treasury Regulations Section 1.1502-
76(b)(1)(ii)(B); provided, however, for purposes of computing Working Capital
and for purposes of computing any indemnification obligations of PSD, the
deductions attributable to such payments will be treated as accruing on the
Effective Date and as being included in the Tax Return filed by PSD for the
period ending on the Effective Date.
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EXECUTED as of the date first above written.
XXX COMMUNICATIONS, INC.
By: /s/ Xxxxx X. Xxxxx
Name: Xxxxx X. Xxxxx
Title: Senior Vice President
XXX COMMUNICATIONS LAS VEGAS, INC.
By: /s/ Xxxx X. Xxxx
Name: Xxxx X. Xxxx
Title: Vice President
PRIME SOUTH DIVERSIFIED, INC.
By: /s/ Xxxxx X. Xxxxxxxx
Name: Xxxxx X. Xxxxxxxx
Title: Vice President
G.C. INVESTMENTS
By: /s/ Xxxxx Xxx Greenspun
Name: Xxxxx Xxx Greenspun
/s/ Xxxxxxx X. Xxxxxxxxx
XXXXXXX X. XXXXXXXXX, AS TRUSTEE OF
THE UNIFIED CREDIT TRUST CREATED
UNDER A DECLARATION OF TRUST DATED
DECEMBER 6, 1988
78
EXHIBITS AND SCHEDULES
INDEX
Pursuant to Item 601(b)(2) of Regulation S-K, the following exhibits and
schedules (other than Exhibit A) have been omitted. Xxx Communications, Inc.
will furnish supplementally to the Securities and Exchange Commission a copy of
any such omitted exhibit or schedule upon request.
Exhibits:
Exhibit A ---- Defined Terms
Exhibit B ---- Form of Certificate of Merger
Exhibit C ---- Form of Stockholders Consent
Exhibit D ---- Form of Rule 145 Affiliate Agreement
Exhibit E ---- Intentionally omitted
Exhibit F ---- Intentionally omitted
Exhibit G ---- Intentionally omitted
Exhibit H ---- Form of Termination of CCTV Management Agreement
Exhibit I ---- Form of Termination of CCTV Consulting Agreement
Exhibit J ---- Parties' Addresses for Notices
Exhibit K-1 ---- Form of Employment Letter for Xxxxx X. Xxxxxxxxx
Exhibit K-2 ---- Form of Employment Letter for Xxxxxx Xxxxxxxxx
Exhibit L ---- Form of Registration Rights Agreement
Exhibit M ---- Form of First Offer Agreement
Exhibit N-1 ---- Form of Prime Agreement Not to Compete
Exhibit N-2 ---- Form of Greenspun Agreement Not to Compete
Exhibit O ---- Form of Certificate of Designations
Exhibit P ---- Excluded Assets
Exhibit Q ---- Form of Indemnity Escrow Agreement
Exhibit R ---- BellSouth Waiver
Schedules:
Schedule 2.1(c) ---- Directors of Surviving Corporation
Schedule 3.2(a) ---- PSD's Qualifications; PSD's Organizational Documents
Schedule 3.2(b) ---- PSD's Authorized Capitalization
Schedule 3.2(c) ---- PSH's Authorized Capitalization
Schedule 3.2(d) ---- CCTV's Authorized Capitalization
Schedule 3.2(e) ---- HN's Authorized Capitalization
Schedule 3.2(f) ---- PVI's Capitalization; Ownership of PVI Shares
Schedule 3.2(g) ---- CTEL's Authorized Capitalization
Schedule 3.2(h) ---- PTEL's Authorized Capitalization and PTEL's CLEC License
Schedule 3.3 ---- PSD Consents
Schedule 3.4 ---- Financial Statements
79
Schedule 3.5 ---- Exceptions to No Material Adverse Changes
Representations
Schedule 3.6(a)(i) ---- List of Tangible Personal Property
Schedule 3.6(a)(ii) ---- List of Non-System Contracts
Schedule 3.6(a)(iii) ---- List of System Contracts
Schedule 3.6(a)(iv) ---- List of Franchises and System Rights
Schedule 3.6(a)(v) ---- List of all Intangible and Intellectual
Property, Including Investment Instruments
(all PSD Entities)
Schedule 3.6(a)(vi) ---- CCTV's and HN's Rate Structures
Schedule 3.6(a)(vii) ---- CCTV's and HN's Programming (by tier)
Schedule 3.6(a)(viii) ---- Plant Miles of the Cable System
Schedule 3.6(a)(ix) ---- Number of Dwellings and Commercial Premises
Passed
Schedule 3.6(a)(x) ---- Bandwidth Capacity(ies) of the Cable System
Schedule 3.6(a)(xi) ---- Number of Channels Activated
Schedule 3.6(b) ---- Status of Franchises, System Contracts,
Non-System Contracts and System Rights
Schedule 3.7(a) ---- Existing Liens (all PSD Entities)
Schedule 3.7(b) ---- Condition of Tangible Personal Property
Schedule 3.8 ---- Litigation (all PSD Entities)
Schedule 3.11(b) ---- Description of Rate Regulatory Status
(CCTV and HN)
Schedule 3.12 ---- Exceptions to Taxes/Tax Returns
Representations (all PSD Entities)
Schedule 3.13 ---- List of All Performance or Other Bonds
(all PSD Entities)
Schedule 3.14(a) ---- Real Property (all PSD Entities)
Schedule 3.15 ---- List of Insurance (all PSD Entities)
Schedule 3.16 ---- List of Other Required Assets
Schedule 3.17 ---- Competitors and Overbuilds (CCTV and HN)
Schedule 3.21 ---- Reorganization
Schedule 3.24 ---- Bank Accounts; Powers of Attorney
Schedule 3.25 ---- Employee, Officer and Director Information
Schedule 3.26 ---- Employee Benefits
Schedule 3.29 ---- Information Regarding Investment Interests
Schedule 5.3 ---- CCI's Required Consents and Filings
Schedule 5.6 ---- CCI's and Merger Sub's Authorized
Capitalization
Schedule 6.2 ---- Exceptions to PSD's Negative Covenants
Schedule 6.9 ---- PVI Non-CCTV Assets
Schedule 6.13 ---- Voting Agreement Signatures Needed
Schedule 7.12 ---- 1998 Budgeted Operating Cash Flow of PSD
80
Exhibit A (continued)
EXHIBIT A
Definitions
"Accountants" is defined in Section 6.4.
"Administrative Agent" is defined below in the definition of CCTV
Credit Agreement.
"Affiliates" means any Person directly or indirectly controlling,
controlled by, or under common control with, the Person with respect to whom the
term "Affiliate" is used; and provided, that the Manager shall not be deemed to
be an Affiliate of any PSD Entity by virtue of the existence of its existing
management agreement with CCTV.
"Agreement" means this Agreement and Plan of Merger among CCI, Merger
Sub, PSD and the Greenspun Shareholders, and all the Exhibits and Schedules
hereto, as amended from time to time.
"Agreements Not to Compete" is defined in Section 9.2(r).
"Alternative Transaction" means any transaction that could result in
the transfer of control over, or ownership of, the Operating Assets that would
be inconsistent with the obligations of PSD under this Agreement, or any other
transaction that would be inconsistent with the obligations of PSD under this
Agreement, including but not limited to (a) any merger or consolidation of one
or more of PSD, PSH, HN or CCTV in which another Person or group of Persons
acquire fifty percent (50%) or more of the equity interests of one or more of
PSD, PSH, HN or CCTV or the surviving entity, as the case may be, (b) any offer
for equity interests of one or more of PSD, PSH, HN or CCTV which, if
consummated, would result in a Person or group of Persons (other than the
stockholders of PSD as of the date of this Agreement) owning fifty percent (50%)
or more of one or more of PSD, PSH, HN or CCTV, or (c) any sale or other
disposition of all or substantially all the Operating Assets.
"Audited Balance Sheet" is defined in Section 3.4.
"Audited Financial Statements" is defined in Section 3.4.
"Average Closing Price" per share of CCI Class A Common Stock means the
sum of the Closing Prices (as defined below) per share of CCI Class A Common
Stock for the last ten Trading Days (as defined below) immediately preceding the
second Trading Day prior to the date of this Agreement, divided by ten. (Such
price is thus determined on a nonweighted basis without regard to the number of
CCI Class A Common Stock sold on any Trading Day.) The term "Trading Days" means
days on which CCI Class A Common Stock are actually sold on the New York Stock
Exchange; and the term "Closing Price" means the price at which the last sale of
CCI Class A Common Stock is made on the New York Stock Exchange (regular way),
as shown on the Composite Tape of the New York Stock Exchange.
-1-
Exhibit A (continued)
"Basic Subscribers" means the sum of (i) the number of all active
subscribers to the Cable System receiving the lowest level of television service
that may be subscribed to by such subscribers, who are billed for such service
at a monthly rate equal to the published residential rate card rate, plus (ii)
the number of Equivalent Basic Subscribers, in each case determined as of the
most recent end-of-month billing cycle cut-off and reporting date.
"BellSouth" means BellSouth Enterprises, Inc., a Georgia corporation.
"BellSouth Contingent Interest Amount" means the amount of "Contingent
Interest" due and payable to BellSouth pursuant to Section 2.3 of the BellSouth
Credit Agreement by reason of the transaction contemplated by this Agreement.
"BellSouth Credit Agreement" means that certain Credit Agreement dated
December 17, 1993 between BellSouth and PSD, as modified, amended, supplemented
or restated.
"BellSouth Indebtedness" means the aggregate amount of all principal,
accrued and unpaid interest, prepayment premiums, penalties and other fees or
charges related thereto, the BellSouth Contingent Interest Amount and any and
all other amounts owed from time to time by PSD to BellSouth under the BellSouth
Credit Agreement.
"Xxxx South Option" means the "Subsequent Option" as that term is
defined in the BellSouth Option Agreement.
"BellSouth Option Agreement" means that certain Option Agreement dated
as of December 17, 1993 among the stockholders of PSD and BellSouth.
"BellSouth Waiver" means the waiver of BellSouth attached hereto as
Exhibit R.
"Benefit Plans" means any retirement, incentive or welfare plans or
arrangements or any other employee benefit plans, including but not limited to
employee benefit plans defined in Section 3(3) of ERISA, to which any PSD Entity
or any Affiliate of any PSD Entity contributes or to which any PSD Entity or any
Affiliate of any PSD Entity sponsors, maintains or otherwise is bound for the
benefit of current and former employees of the Business and any other plan or
compensation arrangement, whether written or unwritten, that provides to
employees, former employees, officers, directors and shareholders of the
Business any compensation or other benefits, whether deferred or not, in excess
of base salary or wages, including without limitation any bonus or incentive
plan, stock rights plan, stay bonuses or Closing Bonuses arrangement, deferred
compensation arrangement, life insurance, stock purchase plan, severance pay
plan and any other employee fringe benefit plan.
"Boulder City Consent" is defined in Section 6.8(b).
-2-
Exhibit A (continued)
"Brokers" and "Broker Agreements" are defined in Section 3.10.
"Business" means, collectively, (i) CCTV's provision of cable
television and related services to its subscribers and other customers via the
Cable System and (2) the HN Business.
"Business Day" means each Monday, Tuesday, Wednesday, Thursday and
Friday which is not a day on which national banking institutions in the city of
Atlanta, Georgia are authorized or obligated by law or executive order to be
closed.
"Cable System" means CCTV's cable television systems located in the Las
Vegas, Nevada metropolitan area, which provides cable television and other
services to residential and commercial customers in the City of Las Vegas,
Nevada, the City of North Las Vegas, Nevada, the City of Xxxxxxxxx, Nevada,
Boulder City, Nevada, the Las Vegas Paiute Colony and certain unincorporated
areas of Xxxxx County, Nevada, who subscribe to such services.
"Capitalized Lease Obligations" means (without duplication) that
portion of any obligation of a PSD Entity as lessee under a lease which at the
time would be required to be capitalized on the balance sheet of such lessee in
accordance with GAAP.
"CCI" is defined in the first paragraph of this Agreement.
"CCI Class A Common Stock" means the Class A Common Stock, $1.00 par
value per share, of CCI.
"CCI Common Share Number" is defined in Section 2.3(c).
"CCI Indemnitees" is defined in Section 12.2.
"CCI Material Adverse Effect" means with respect to CCI a material
adverse change in the financial condition or financial results of operations of
CCI and its Subsidiaries, taken as a whole, or the occurrence of an event which
could result in a material adverse change in the financial results of operations
or in the financial condition of CCI and its Subsidiaries, taken as a whole,
other than any change arising out of matters of a general economic nature or
matters affecting the cable television, broadband distribution or programming
industries generally including without limitation (i) competition arising from
new or existing technology or caused by or arising from other multiple channel
distribution services or systems and from litigation, legislation, rule making
or regulations, or (ii) conditions or changes which affect the prevailing
interest rates available to businesses involved in the cable television industry
or which affect the prevailing resale valuation or the method of determining
such valuations of businesses involved in the cable television industry.
-3-
Exhibit A (continued)
"CCI Preferred Share Number" is defined in Section 2.3(c).
"CCI Preferred Stock" means the Series A Convertible Preferred Stock of
CCI authorized to be issued by the Board of Directors of CCI and having the
rights set forth in the Certificate of Designations attached hereto as Exhibit
O.
"CCI Preferred Stock Value" means the dollar amount equal to 20% of the
Merger Consideration.
"CCI Required Consents and Filings" is defined in Section 5.3.
"CCI SEC Reports" is defined in Section 5.8.
"CCI's Counsel's Opinion" is defined in Section 8.6.
"CCTV" means Community Cable TV, a Nevada corporation and a
wholly-owned Subsidiary of PSH.
"CCTV Bank Debt" means the aggregate amount of all principal, accrued
and unpaid interest, prepayment premiums, penalties and other fees or charges
related thereto, accrued and unpaid fees and any and all other amounts owed from
time to time by CCTV to the Administrative Agent, the CCTV Senior Lenders and
any other party under the CCTV Credit Agreement and the Loan Documents (as that
term is defined in the CCTV Credit Agreement).
"CCTV Consulting Agreement" means that certain Amended and Restated
Consulting Agreement dated as of December 17, 1993 between CCTV and Consultant,
as amended, modified, supplemented or restated.
"CCTV Credit Agreement" means that certain Amended and Restated Loan
Agreement dated as of March 27, 1998 among CCTV, such agents and lenders as are
party thereto (collectively, the "CCTV Senior Lenders") and Toronto Dominion
(Texas), Inc., as administrative agent for such Banks (the "Administrative
Agent"), as modified, amended, supplemented or restated.
"CCTV Management Agreement" means that certain Amended and Restated
Management Agreement dated December 17, 1993 between CCTV and the Manager, as
amended, modified, supplemented or restated.
"CCTV Plan" is defined in Section 6.16(a).
"CCTV Senior Lenders" is defined above in the definition of CCTV Credit
Agreement.
-4-
Exhibit A (continued)
"CCTV Shares" is defined in Section 3.2(d).
"Certificate of Merger" is defined in Section 2.1(a).
"Certificate of Obligation" is identified as item A.4(af) on Schedule
3.6(a)(iii).
"Certificate of Obligation Claim" is defined in Section 2.8.
"Certificate of Obligation Pre-Closing Claim Reserve Amount" is
defined in Section 2.8.
"Claim" is defined in Section 12.4.
"CLEC Licenses" is defined in Section 3.2(h).
"Closing" is defined in Section 9.1.
"Closing Bonuses" is defined in Section 2.2(a).
"Closing Condition" is defined in Section 9.1.
"Closing Date" is defined in Section 9.1.
"Closing Fees" means the sum of (i) the amount of the payment
($2,500,000) due Times Mirror Cablevision, Inc. under that certain Stock
Purchase Agreement dated March 31, 1986 by and among Times Mirror Cablevision,
Inc., Xxxxxx X. Xxxxxxxxx, G.C. Associates and an affiliate (as defined
therein), as amended by that certain Amendment dated June 27, 1986, by reason of
the transaction contemplated by this Agreement, and (ii) any and all amounts due
under the Broker Agreements.
"Code" means the Internal Revenue Code of 1986, as currently in effect.
"Coditel" means Coditel Invest BV.
"Communications Act" means the Communications Act of 1934, as
currently in effect.
"Consultant" means Greenspun, Inc., a Nevada corporation.
"CTEL" means Community Tel, a Nevada corporation and a wholly-owned
Subsidiary of CCTV.
"CTEL Shares" is defined in Section 3.2(g).
-5-
Exhibit A (continued)
"Custodial Agreement" is defined in Section 6.18.
"DGCL" means the Delaware General Corporation Law.
"DOJ" means the Department of Justice.
"Effective Date" is defined in Section 2.1(a).
"Effective Time" is defined in Section 2.1(a).
"Employment Letters" is defined in Section 9.2(o).
"Equivalent Basic Subscribers" means subscribers to the Cable System
receiving basic service under bulk billing arrangements which provide for
pricing at a rate that is not equal to the published residential rate card rate,
including multi-unit residential complexes, hospitals, commercial accounts, bars
and taverns, but excluding hotels and motels. The number of Equivalent Basic
Subscribers shall be determined by dividing (i) the monthly aggregate amount
billed for basic and preferred cable television service as of the most recent
end-of-month billing cycle cut-off immediately preceding the date such
determination is to be made, by (ii) the published residential rate card rate in
effect for basic and preferred cable television service as of the date such
determination is to be made.
"ERISA" means the Employee Retirement Security Act of 1974, as amended.
"Escrow Agent" means Chase Bank of Texas, National Association, Austin,
Texas or such other escrow agent as PSD and CCI shall mutually select.
"Exchange Act" means the Securities and Exchange Act of 1934, as
amended.
"Excluded Assets" means (i) all programming contracts of Prime II
Management, Inc., the Manager and their Affiliates (and accounts receivable
arising thereunder) which relate to the provision of programming services to
cable television systems managed by the Manager other than the Cable System
(even if they also relate to the provision of programming to the Cable System),
all of which shall have been terminated with respect to the Cable System
effective immediately prior to the Effective Time, (ii) except to the limited
extent set forth in Section 5.5, the name or trade names "Prime" and "Prime
Cable" and "ExpressNet" and any similar or related trade names, trademarks,
service marks and logos, and adaptations, variations and derivations thereof,
(iii) computer software and data files resident on computer systems used in the
Business, which computer software and data files are part of the Manager's wide
area network, which shall be removed from
-6-
Exhibit A (continued)
such computers contemporaneously with the Closing, (iv) the assets and
properties described in Exhibit P to this Agreement, and (v) the PVI Non-CCTV
Assets.
"Expiring Franchises" is defined in Section 6.7(d)(ii).
"FAA" means the Federal Aviation Administration.
"FCC" means the Federal Communications Commission.
"Final" means action which shall not have been reversed, stayed,
enjoined, set aside, annulled or suspended; with respect to which no timely
request for stay, petition for rehearing, appeal or certiorari or sua sponte
action of the Governmental Authority with comparable effect shall be pending;
and as to which the time for filing any such request, petition, appeal,
certiorari or for the taking of any such sua sponte action by the Governmental
Authority has expired.
"Final Report" is defined in Section 2.5(b).
"Financial Statements" is defined in Section 3.4.
"First Offer Agreement" is defined in Section 9.2(q).
"First PSD Shareholders Agreement" means that certain Prime South
Diversified, Inc. Shareholders Agreement (Agreement Effective at Closing) dated
December 17, 1993 among CCTV, HNGP, Inc., Manager, BellSouth, PSD, PSH and all
of the stockholders of PSD.
"Franchises" is defined in Section 3.6(a)(iv).
"Franchising Authorities" means those Governmental Authorities issuing,
and having jurisdiction over, the Franchises.
"FTC" means the Federal Trade Commission.
"GAAP" is defined in Section 3.4.
"G.C. Investments" means G.C. Investments, a Nevada limited liability
company.
"Governmental Authority" means any of the following: (a) the United
States of America, (b) any state, commonwealth, territory or possession of the
United States of America and any political subdivision thereof (including
counties, municipalities and the like), and (c) any agency, authority or
instrumentality of any of the foregoing, including any court, tribunal,
department, bureau, commission or board.
-7-
Exhibit A (continued)
"Greenspun Agent" is defined in Section 12.2(b).
"Greenspun Cash Consideration" is defined in Section 2.3(c).
"Greenspun Common Stock" is defined in Section 2.3(c).
"Greenspun Consideration" means 76.2158% of the Merger Consideration.
"Greenspun Escrow Amount" is defined in Section 2.7(b).
"Greenspun Indemnitors" means, collectively, Xxxxx X.Xxxxxxxxx, Xxxxxx
Xxxxxxxxx, Xxxxxxx X. Xxxxxxxxx, Xxxxx Xxxx and Xxxxx Fine.
"Greenspun Shareholders" means, collectively, G.C. Investments and
Xxxxxxx X. Xxxxxxxxx, as Trustee of the Unified Credit Trust created under a
Declaration of Trust dated December 6, 1988.
"Hazardous Substances" is defined in Section 3.14(d).
"HN" means Hospitality Network, Inc., a Nevada corporation and a
wholly-owned Subsidiary of CCTV.
"HN Business" means HN's provision of in-room video entertainment and
interactive services to gaming hotels and resorts located in 19 states and the
Bahamas.
"HN Plan" is defined in Section 6.16(a).
"HN Shares" is defined in Section 3.2(e).
"HSR Act" is defined in Section 6.3.
"HSR Reports" is defined in Section 6.3.
"HSR Rules" is defined in Section 6.3.
"Indebtedness for Borrowed Money" means, at any particular time, with
respect to any PSD Entity (without duplication), all indebtedness of such PSD
Entity for borrowed money or on account of advances to such PSD Entity, in
respect of which such PSD Entity is liable or evidenced by any bond, debenture,
note or other similar instrument issued by such PSD Entity, including all
principal, accrued and unpaid interest, prepayment premiums, penalties and other
fees or charges related
-8-
Exhibit A (continued)
thereto, and any Capitalized Lease Obligations but excluding in any event,
intercompany indebtedness owing from a PSD Entity to one or more other PSD
Entity.
"Indemnification Threshold" is defined in Section 12.6.
"Indemnified Party" is defined in Section 12.4.
"Indemnifying Party" is defined in Section 12.4.
"Indemnity Escrow Agreement" is defined in Section 12.11.
"Indemnity Escrow Deposit" is defined in Section 2.7(b).
"Interim Financial Statements" is defined in Section 6.11.
"Investment Interests" is defined in Section 3.29(a).
"knowledge" of any Person of or with respect to any matter means actual
awareness or knowledge of such matter. References to the knowledge of PSD (and
similar phrases) shall mean the knowledge of Xxxxx X. Xxxxxxxxx, Xxxxxxx X.
Xxxxxxxxxx, Xxxxx X. Xxxxxxxx, Xxxxxxx X. Xxxxxxx, Xxxxxxxx Xxxxx, Xxxxxx X.
Xxxx, Xxxxxx X. Xxxxxx, Xxxxxx Xxxx, manager of CCTV's Cable System, and Xxxxx
Xxxxx, general manager of the HN Business.
"Leased Real Property" is defined in Section 3.14(a).
"Legal Requirement" is any statute, ordinance, code, law, rule,
regulation, order or other requirement, standard or procedure enacted, adopted
or applied by any Governmental Authority, including, but not limited to,
judicial decisions applying common law or interpreting any other Legal
Requirement.
"Liens" means any lien, security interest, adverse claim or other
encumbrance of any nature whatsoever.
"Loss Determination" is defined in Section 6.4.
"Manager" means Prime II Management, L.P., a Delaware limited
partnership.
"Material Adverse Effect" means with respect to the PSD Entities a
material adverse change in the financial condition or financial results of
operations of the PSD Entities, taken as a whole, or the occurrence of an event
which could result in a material adverse change in the financial results of
operations or in the financial condition of the PSD Entities, taken as a whole,
other than any
-9-
Exhibit A (continued)
change arising out of matters of a general economic nature or matters affecting
the cable television industry generally including without limitation (i)
competition arising from new or existing technology or caused by or arising from
other multiple channel distribution services or systems and from litigation,
legislation, rule making or regulations, or (ii) conditions or changes which
affect the prevailing interest rates available to businesses involved in the
cable television industry or which affect the prevailing resale valuation or the
method of determining such valuations of businesses involved in the cable
television industry.
"Material Required PSD Consents" is defined in Section 3.3.
"Merger" is defined in the Background paragraphs of this Agreement.
"Merger Consideration" is defined in Section 2.2.
"Merger Sub" is defined in the first paragraph of this Agreement.
"Minority Common Stock" is defined in Section 2.3(b).
"Minority Escrow Amount" is defined in Section 2.7(a).
"Minority Shareholders" means all holders of PSD Class A Common Stock
and PSD Class B Common Stock other than the Greenspun Shareholders.
"Minority Shareholder Consideration" means 23.7842% of the Merger
Consideration.
"Multiemployer Plan" means a plan, as defined in ERISA Section 3(37),
to which any PSD Entity or any Affiliate of any PSD Entity has contributed, is
contributing or is required to contribute for the benefit of current and former
employees of the Business.
"Net Income" shall mean, as applied to any Person for any period, the
aggregate amount of net income of such Person, after taxes and extraordinary
items, for such period as determined in accordance with GAAP and as set forth in
PSD's unaudited or audited financial statements.
"Net Loss" shall mean, as applied to any Person for any period, the
aggregate amount of net loss of such Person, after taxes and extraordinary
items, for such period as determined in accordance with GAAP and as set forth in
PSD's unaudited or audited financial statements.
"1998 Capital Expenditures Amount" means the dollar amount equal to the
total amount of capital expenditures budgeted for the PSD Entities for that
portion of fiscal year 1998 commencing on January 1, 1998 and ending on the
Closing Date (such amount being as set forth in Schedule
-10-
Exhibit A (continued)
7.12), less actual capital expenditures for that portion of fiscal year 1998
commencing on January 1, 1998 and ending on the Closing Date; which amount shall
in no event be less than $0.
"1999 Capital Expenditures Amount" shall mean (X) the total capital
expenditures for CCTV and HN made during 1999 through the Closing Date, less (Y)
the sum of (i) in the case of CCTV, $40.00 multiplied by the number of Basic
Subscribers as of December 31, 1998, and (ii) in the case of HN, $2.25,
multiplied by the number of hotel rooms served by HN as of December 31, 1998,
and the sum of the amounts determined as provided in clauses (i) and (ii) shall
then be multiplied by a fraction, the numerator of which is the number of days
elapsed from January 1, 1999 through the Closing Date and the denominator of
which is 365.
"Non-System Contracts" is defined in Section 3.6(a)(ii).
"Operating Assets" shall mean (i) all of CCTV's and HN's properties,
assets, privileges, rights, interests, claims and good will, real and personal,
tangible and intangible, of every type and description, including CCTV's and
HN's leasehold interests in leased property (but excepting the Excluded Assets
and any assets disposed of by CCTV or HN prior to the Closing in the ordinary
course of business and not in violation of this Agreement), which are used or
held for use in connection with the operation of the Cable System and the
Business, now in existence or hereafter acquired by CCTV or HN prior to the
Closing, including, without limitation, those assets described in Section 3.6.
"Operating Cash Flow" shall mean, as applied to PSD, on a consolidated
basis, in respect of any fiscal period, the sum of (a) the remainder of (i) Net
Income or Net Loss, as the case may be, for such fiscal period, minus, (ii) to
the extent included in the calculation of Net Income or Net Loss, as the case
may be, (1) extraordinary income and gains from the sale of assets (and the
taxes associated therewith), (2) interest income, (3) equity in income of
unconsolidated subsidiaries, (4) any prior year adjustments that serve to
increase Net Income or decrease Net Loss, (5) adjustments to inventory and
investment valuation reserves that serve to increase Net Income or decrease Net
Loss, in each case for such fiscal period, plus (b) the sum of (1) interest
expense and fees, all as determined in accordance with GAAP, (2) income taxes
(including deferred income taxes), (3) extraordinary losses and losses from the
sale of assets (net of tax effect), (4) depreciation, (5) amortization, (6) any
prior year adjustments that serve to reduce Net Income or increase Net Loss, (7)
equity in losses of unconsolidated subsidiaries, (8) adjustments to inventory
and investment valuation reserves that serve to reduce Net Income or increase
Net Loss, (9) other non-cash expenses deducted in determining such Net Income
except to the extent that any such item will require a cash payment in the
future, (10) management and consulting fees and expenses paid or accrued under
the CCTV Management Agreement and the CCTV Consulting Agreement, respectively,
(11) costs and expenses related to any "late fee" litigation, (12) payments made
or accrued (including fees, expenses, interest and penalties) in connection with
the settlement of issues arising under the audits conducted by local franchising
authorities that have been disclosed to CCI on Schedule 3.6(b) and
-11-
Exhibit A (continued)
(12) the minority interest in the Net Income of consolidated Subsidiaries, all
as determined in accordance with GAAP.
"Other Required Assets" is defined in Section 3.16.
"Permitted Liens" means those liens (i) disclosed in Schedule 3.7(a),
and (ii) landlord's liens and liens for property taxes not delinquent, statutory
liens and zoning restrictions, easements, rights-of-way or other restrictions on
the use of the Leased Real Property, provided that such liens and restrictions
were incurred either prior to the time CCTV or HN, as the case may be acquired
an interest in the Leased Real Property or in the ordinary course of the
business of the Cable System and that they do not, individually, or in the
aggregate, materially interfere with CCTV's or HN's operation of the Business as
currently operated.
"Permitted Stock Restrictions" means restrictions on transfer of shares
of capital stock imposed by the Franchises and the Communications Act and the
rules and regulations of the FCC thereunder and applicable securities or blue
sky laws.
"Person" means an individual, corporation, partnership, limited
liability company, trust or unincorporated organization, or a government or any
agency or political subdivision thereof.
"Preclosing Claim" is defined in Section 7.13(b).
"Preclosing Indemnification Notice" is defined in Section 7.13(b).
"Preclosing Secured Debt" is defined in Section 2.1.
"Preferred Shareholders" means all holders of PSD Preferred Stock.
"Preliminary Report" is defined in Section 2.5(a).
"Prime Agent" is defined in Section 12.2(b).
"Prime Cable Plan" is defined in Section 6.16(a).
"PSD" means Prime South Diversified, Inc., a Delaware corporation which
is owned by the Minority Shareholders and the Greenspun Shareholders.
"PSD Class A Common Stock" means the Class A Common Stock, par value
$.01 per share, of PSD.
-12-
Exhibit A (continued)
"PSD Class B Common Stock" means the Class B Common Stock, par value
$.01 per share, of PSD.
"PSD Consents" is defined in Section 3.3.
"PSD Entities" means PSD, PSH, PVI, CCTV, HN, CTEL and PTEL.
"PSD Entities 401(k) Plans" is defined in Section 6.16.
"PSD Indemnitees" is defined in Section 12.3.
"PSD Preferred Stock" means the Class II 8% Preferred Stock, par value
$.01 per share, of PSD.
"PSD" Shares" is defined in Section 3.2(b).
"PSD Shareholders" means, collectively, the Greenspun Shareholders, the
Minority Shareholders and the Preferred Shareholders.
"PSD's Counsel's Opinion" is defined in Section 7.7.
"PSD's FCC Counsel's Opinion" is defined in Section 7.6.
"PSH" means Prime South Holdings, Inc., a Delaware corporation and a
wholly-owned, direct and indirect, Subsidiary of PSD.
"PSH Shares" is defined in Section 3.2(c).
"PTEL" means PrimeTel of Nevada, a Nevada corporation and a
wholly-owned Subsidiary of CCTV.
"PTEL Shares" is defined in Section 3.2(h).
"PVI" means Prime Venture I,Inc., a Delaware corporation and a
Subsidiary of PSD.
"PVI Non-CCTV Assets" is defined in Section 6.9.
"PVI Shares" is defined in Section 3.2(b).
"Registration Rights Agreement" is defined in Section 9.2(p).
-13-
Exhibit A (continued)
"Related Agreements" is defined in Sections 3.2(a), 4.2 and 5.2.
"Rule 145 Affiliates" is defined in Section 6.14.
"SEC" means the Securities and Exchange Commission.
"Second PSD Shareholders Agreement" means that certain Prime South
Diversified, Inc. Shareholders Agreement [Agreement Effective Upon Closing of
Initial Option] dated December 17, 1993 among CCTV, HNGP, Inc., Manager,
BellSouth, PSD, PSH and all of the stockholders of PSD.
"Securities Act" means the Securities Act of 1933, as amended.
"Share Value" means the dollar amount that results from dividing the
Merger Consideration by the aggregate number of shares of PSD Class A Common
Stock and PSD Class B Common Stock issued and outstanding immediately prior to
the Effective Time.
"Stockholders Consent" is defined in Section 6.13.
"Subsidiary" shall mean, as to any Person, any other Person of which at
least 50% of the equity and voting interests are owned, directly or indirectly,
by such first Person.
"Survival Period" is defined in Section 12.1.
"Surviving Corporation" means the surviving corporation of the Merger.
"System Contracts" is defined in Section 3.6(a)(iii).
"System Rights" is defined in Section 3.6(a)(iv).
"Tangible Personal Property" is defined in Section 3.6(a)(i).
"Target Working Capital" is defined in Section 2.2(b).
"Taxes" is defined as all taxes, charges, fees, levies, charges,
imposts, duties, withholdings or other assessments including, without
limitation, income, withholding, capital, excise, employment, occupancy,
property, ad valorem, sales, transfer, recording, documentary, registration,
motor vehicle, franchise, use and gross receipts taxes, imposed by the United
States or any state, county, local government or any subdivision thereof. Such
terms shall also include any interest, penalties, fines or additions
attributable to such assessments.
-14-
"Tax Return" is defined as any return, report, information return or
other document (including any related or supporting information) filed or
required to be filed with any federal, state or local taxing authority in
connection with the determination, assessment, collection, administration or
imposition of any Taxes.
"Termination Date" is defined in Section 9.1.
"Third Party Claim" is defined in Section 12.5.
"Third PSD Shareholders Agreement" means that certain Prime South
Diversified, Inc. Shareholders Agreement [Agreement Effective Upon Closing of
Subsequent Option] among G.C. Investments, Inc., Xxxxxxx X. Xxxxxxxxx as Trustee
of the Unified Credit Trust, BellSouth, PSD, PSH and CCTV.
"TNLLC" means Telecommunications of Nevada, L.L.C., a Delaware limited
liability company.
"TNLLC Interest" is defined in Section 3.2(g).
"True-Up Fund" is defined in Section 2.6.
"Unaudited Balance Sheet" is defined in Section 3.4.
"Voting Agreement" means the Voting Agreement, dated the date hereof,
by and between CCI, on the one hand, and the PSD Shareholders, on the other
hand.
"Working Capital" is defined in Section 2.2(b).
-15-
