Exhibit 2.10
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STOCK PURCHASE AGREEMENT
BY AND AMONG
XXXXXXX X. XXXXXXX,
XXXX X. XXXXXXX
and
TRUSTS UNDER THE WILL DATED JUNE 3, 1982 OF
XXXXX X. XXXXXXX, DECEASED,
SELLERS
AND
MEDIACOM LLC,
BUYER
DATED AS OF MAY 25, 1999
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TABLE OF CONTENTS
STOCK PURCHASE AGREEMENT.....................................................................................1
ARTICLE I
DEFINITIONS.............................................................................................1
ARTICLE II
SALE AND PURCHASE OF SHARES ............................................................................7
2.1 Sale and Purchase of Shares.......................................................8
2.2 Payment of Purchase Price.........................................................8
2.3 Subscriber Adjustment.............................................................8
2.4 Working Capital Adjustment........................................................8
2.5 Excluded Assets Tax Adjustment....................................................9
2.6 Launch Support Payment Adjustment.................................................9
2.7 Further Adjustment................................................................9
2.8 Adjustments Procedure............................................................10
2.9 Expenses; Sales and Transfer Taxes...............................................10
ARTICLE III
CLOSING DATE;CERTAIN TRANSACTIONS TO BE EFFECTED AT CLOSING............................................11
3.1 Closing Date.....................................................................11
3.2 Certain Transactions to be Effected at Closing...................................11
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF SELLERS..............................................................12
4.1 Organization and Qualification...................................................12
4.2 Business of the Company..........................................................13
4.3 Articles and By-laws.............................................................13
4.4 Capitalization of the Company....................................................13
4.5 Sellers'Authority................................................................13
4.6 Authority and Validity...........................................................14
4.7 Consents and Approvals: No Violation............................................14
4.8 Title............................................................................15
4.9 Real Property....................................................................15
4.10 Financial Statements.............................................................16
4.11 Legal Proceedings................................................................16
4.12 Certain Employment and Employee Benefit Matters..................................17
4.13 Characteristics of the Systems...................................................17
4.14 Finders; Brokers and Advisors....................................................18
4.15 Tax Matters......................................................................19
4.16 Equipment........................................................................19
4.17 Governmental Permits; Contracts..................................................19
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4.18 Insurance........................................................................20
4.19 Hazardous Substances and Environmental Matters...................................20
4.20 Accounts Receivable..............................................................21
4.21 Systems Compliance...............................................................21
4.22 Intangibles......................................................................23
4.23 No Other Consents................................................................23
4.24 No Undisclosed Liabilities.......................................................23
4.25 Liabilities to Subscribers.......................................................23
4.26 Restoration......................................................................23
4.27 Condition and Transfer of Tangible Property......................................24
4.28 Inventory........................................................................24
4.29 Overbuilds.......................................................................24
4.30 Certain Programming Arrangements and Relationships...............................24
4.31 Indebtedness.....................................................................24
4.32 Books and Records................................................................24
4.33 Banking Facilities...............................................................25
4.34 Powers of Attorney and Suretyships...............................................25
4.35 No Agreements among Sellers and the Company......................................25
4.36 Disclosure.......................................................................25
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF BUYER................................................................25
5.1 Organization and Qualification...................................................25
5.2 Authority and Validity...........................................................25
5.3 No Breach or Violation...........................................................26
5.4 Litigation.......................................................................26
5.5 Finders; Brokers and Advisors....................................................26
ARTICLE VI
ADDITIONAL COVENANTS...................................................................................27
6.1 Access to Premises and Records...................................................27
6.2 Continuity and Maintenance of Operations.........................................27
6.3 Employee Matters.................................................................30
6.4 Consents.........................................................................30
6.5 HSR Notification.................................................................30
6.6 Notification of Certain Matters..................................................30
6.7 Risk of Loss; Condemnation.......................................................30
6.8 Adverse Changes..................................................................31
6.9 No Solicitation..................................................................31
6.10 Forms 394........................................................................31
6.11 Title Matters....................................................................32
6.12 Phase I Study....................................................................32
6.13 Monthly Financial Statements.....................................................32
6.14 Confidentiality..................................................................33
6.15 Covenant Not to Compete..........................................................34
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6.16 Public Announcements..............................................................34
6.17 Excluded Assets...................................................................35
6.18 Audited Financial Statements......................................................35
6.19 Midcontinent Agreement............................................................35
ARTICLE VII
CONDITIONS PRECEDENT TO OBLIGATIONS OF BUYER............................................................35
7.1 HSR Act...........................................................................35
7.2 Governmental or Legal Action......................................................35
7.3 Accuracy of Representations and Warranties........................................36
7.4 Performance of Agreements.........................................................36
7.5 No Material Adverse Change........................................................36
7.6 Consents..........................................................................36
7.7 Transfer Documents................................................................36
7.8 Opinions of Counsel...............................................................36
7.9 Discharge of Encumbrances.........................................................36
7.10 Additional Documents and Acts.....................................................36
7.11 Certificates......................................................................37
7.12 Termination of Management Agreement...............................................37
7.13 Office Space at Worthington and Yankton Properties................................37
7.14 Equivalent Basic Subscribers......................................................37
ARTICLE VIII
CONDITIONS PRECEDENT TO OBLIGATIONS OF SELLERS..........................................................37
8.1 HSR Act...........................................................................37
8.2 Governmental or Legal Actions.....................................................37
8.3 Accuracy of Representations and Warranties........................................38
8.4 Performance of Agreements.........................................................38
8.5 Opinion of Buyer's Counsel........................................................38
8.6 Additional Documents and Acts.....................................................38
8.7 Certificates......................................................................38
ARTICLE IX
INDEMNITY...............................................................................................38
9.1 Survival of Representations and Warranties........................................38
9.2 Sellers'Indemnity.................................................................38
9.3 Buyer's Indemnity.................................................................40
9.4 Remedies Cumulative; Right to Offset..............................................41
ARTICLE X
TERMINATION.............................................................................................41
10.1 Conditions for Termination........................................................41
10.2 No Liability Upon Certain Terminating Events......................................41
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ARTICLE XI
LIABILITY IN THE EVENT OF A BREACH......................................................................42
11.1 Default by Buyer..................................................................42
11.2 Default by Sellers................................................................42
ARTICLE XIINOTICES...........................................................................................43
12.1 Notices...........................................................................43
ARTICLE XIIIMISCELLANEOUS....................................................................................44
13.1 Entire Agreement..................................................................44
13.2 Successors and Assigns............................................................44
13.3 Arbitration.......................................................................44
13.4 Captions..........................................................................45
13.5 Counterparts......................................................................45
13.6 Governing Law.....................................................................45
13.7 Sellers'Knowledge.................................................................45
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LIST OF SCHEDULES
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Schedule 1.1 Franchise Areas
Schedule 2.2 Purchase Price Allocation
Schedule 2.7 Further Adjustment
Schedule 4.7 Exceptions to No Conflict with authority documents; Consents
Schedule 4.8 List of UCC
Schedule 4.9 List of all Real Property
Schedule 4.11 Legal Proceedings
Schedule 4.12 List of Xxxxxx Co. employees
Schedule 4.13 Description of Systems
Schedule 4.15 Taxes being contested
Schedule 4.16 Equipment
Schedule 4.17 Governmental Permits and Contracts
Schedule 4.18 Insurance Policies
Schedule 4.21 Exceptions to Systems Compliance
Schedule 4.22 Intangibles material to operation of Systems
Schedule 4.23 Consents with respect to Governmental Permits
Schedule 4.24 Liabilities of Company
Schedule 4.29 Overbuilds
Schedule 4.30 Exclusive Programming arrangements
Schedule 4.33 Banking and Safety Deposit facilities
Schedule 4.34 Powers of Attorney or Suretyships
Schedule 4.35 Agreements between Sellers and the Company
Schedule 6.13 Form of Monthly Financial Statements
Schedule 6.15 Exceptions to Covenant not to Compete
Schedule 6.17 Excluded Assets
Exhibit A Escrow Agreement
Exhibit B Form of Opinion of Sellers' Counsel
Exhibit C Form of Opinion of FCC Counsel
Exhibit D Form of Opinion of Buyer's Counsel
STOCK PURCHASE AGREEMENT
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This STOCK PURCHASE AGREEMENT (the "Agreement") is made and entered into this
25th day of May, 1999, by and among Xxxxxxx X. Xxxxxxx ("Xxxxxxx"), Xxxx X.
Xxxxxxx ("Xxxx") and Trusts created under the Will dated June 3, 1982 of Xxxxx
X. Xxxxxxx, deceased, for the benefit of Xxxxxxx X. Xxxxxxx and Xxxx X. Xxxxxxx,
(the "Trust", and jointly, severally and collectively with Xxxxxxx and Kara,
"Sellers") and MEDIACOM LLC, a New York limited liability company ("Buyer").
R E C I T A L S:
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1. Xxxxxxx owns 13.3336 shares of the Common Stock of Xxxxxxx
Communications Corporation, a Minnesota corporation (the "Company"); Kara owns
13.3336 shares of the Common Stock of the Company; and the Trust owns 53.3328
shares of the Company (the shares of Common Stock owned by Xxxxxxx, Xxxx and the
Trust are hereinafter collectively referred to as the "Shares").
2. The Company owns and operates Systems (as hereinafter defined) in
and around the communities of Yankton and Vermillion, South Dakota, Worthington
and Luverne, Minnesota and Orange City and Alton, Iowa.
3. Sellers desire to sell, and Buyer desires to purchase, the Shares
on the terms and conditions set forth in this Agreement.
NOW, THEREFORE, in consideration of the promises and the respective
agreements hereinafter set forth, the parties agree as follows:
ARTICLE 1
DEFINITIONS
"Xxxxxx Co." shall have the meaning set forth in the definition of
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Phantom Equity Interests.
"Accounts Receivable" shall mean, as of the Closing Date, Equivalent
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Basic Subscriber accounts receivable of the Company, determined in accordance
with GAAP, representing amounts owed to the Company in connection with its
operation of the Systems in the ordinary course of business.
"Affiliate" shall mean, with respect to any Person, any other Person
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controlling, controlled by or under common control with such Person, with
"control" for such purpose meaning the possession, directly or indirectly, of
the power to direct or cause the direction of the management
and policies of a Person, whether through the ownership of voting securities or
voting interests, by contract or otherwise.
"Assets" shall mean all properties, privileges, rights, interests and
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claims, real and personal, tangible and intangible and mixed, of every type and
description that are owned, leased, used or held for use in the Business or in
which the Company has any right, title or interest or in which the Company
acquires any right, title or interest on or before the Closing Date, including
but not limited to Accounts Receivable, Governmental Permits, Intangibles,
Contracts, Equipment, and Real Property, all cash and cash equivalents and notes
receivable, but excluding the Excluded Assets and any Assets disposed of by the
Company prior to the Closing as permitted by this Agreement.
"Business" shall mean the cable television business and any other
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business conducted by the Company through the Systems in the Franchise Areas.
"Business Day" shall mean any day other than Saturday, Sunday or a day
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on which banking institutions in New York, New York are required or authorized
to be closed.
"Buyer" shall have the meaning set forth in the preamble to this
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Agreement.
"Xxxxxxx" shall have the meaning set forth in the preamble to this
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Agreement.
"Closing" shall mean the consummation of the transactions contemplated
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by this Agreement, as described in Article III.
"Closing Date" shall have the meaning set forth in Section 3.1.
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"Closing Period Subchapter S Year" shall have the meaning set forth in
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Section 2.5.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
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"Communications Act" shall mean the Communications Act of 1934, as
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amended, and the rules and regulations thereunder as from time to time in
effect.
"Company" shall have the meaning set forth in the recitals to this
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Agreement.
"Company Paid Tax Schedule" shall have the meaning set forth in
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Section 2.5.
"Confidential Parties" shall have the meaning set forth in Section
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6.14.
"Consents" shall mean any registration or filing with, consent or
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approval of, notice to, waiver or action by any Person or Governmental Authority
required to permit the transfer of the Shares to Buyer or to permit Sellers to
perform any of their other obligations under this Agreement, as set forth on
Schedule 4.7.
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"Contracts" shall mean all contracts, agreements and leases (other
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than those that are Governmental Permits or Excluded Assets), to which the
Company is a party or that pertain to the ownership, operation or maintenance of
the Assets or the Business.
"Copyright Act" shall mean the Copyright Revision Act of 1976, as
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amended.
"Current Assets" shall have the meaning set forth in Section 2.4.
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"Disapproved Matters" shall mean those title exceptions disclosed on
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the Preliminary Title Report (other than Permitted Encumbrances) which, in
Buyer's reasonable judgment, have an adverse impact on the Real Property owned
by the Company or Buyer's intended use thereof.
"Employees" shall have the meaning set forth in Section 4.12.
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"Encumbrance" shall mean any mortgage, lien, security interest,
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security agreement, conditional sale or other title retention agreement, lease,
consignment or bailment given for security purposes, limitation, pledge, option,
charge, assessment, restrictive agreement, restriction, encumbrance, adverse
interest, trust, constructive trust, attachment, claim, restriction on transfer
or any exception to or defect in title or other ownership interest (including
but not limited to reservations, rights of way, possibilities of reverter,
encroachments, easements, rights of entry, restrictive covenants, leases and
licenses).
"Equipment" shall mean all electronic devices, trunk and distribution
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coaxial and optical fiber cable, amplifiers, power supplies, conduit, vaults and
pedestals, grounding and pole hardware, subscribers' devices (including
converters, encoders, transformers behind television sets and fittings) headend
hardware (including origination, earth stations, transmission and distribution
systems), test equipment, vehicles and all other tangible personal property
owned, used or held for use by the Company as described on Schedule 4.16.
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"Equivalent Basic Subscribers" shall mean as of the date of
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determination, (i) the number of residential households that subscribe to basic
cable (exclusive of secondary outlets and courtesy accounts) which pay the
standard rate for basic cable in the Systems without discount, each of which has
paid in full without discount at least one monthly xxxx generated in the
ordinary course of business, none of which is pending disconnection for any
reason, and none of which is, as of the date of determination, delinquent in
payment for services for more than 60 days (provided, that a customer's account
shall not be considered past due as a result of unpaid amounts not exceeding
$5.00 in the more than 60 days aging category); plus (ii) the number of
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equivalent bulk subscribers (determined by dividing the aggregate dollar monthly
amount collected from bulk/commercial accounts for basic and expanded cable in
the Systems by the average monthly rate for both basic and expanded basic cable
in effect in the Systems), each of which has paid in full without discount at
least one monthly xxxx generated in the ordinary course of business, none of
which is pending disconnection for any reason, and none of which is, as of the
date of determination, delinquent in payment for services for more than 60 days
(provided that a customer's account shall not be considered past due as a result
of unpaid amounts not exceeding $5.00 in the more than 60 days aging category);
provided that there shall be excluded from the definition of Equivalent Basic
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Subscribers any subscriber which has been obtained within the twelve month
period prior to Closing by offers made, promotions conducted or discounts given
outside the ordinary course of business or any subscriber who comes within the
definition of Equivalent Basic Subscribers because its account has been
compromised or written off within the twelve month period prior to Closing,
other than in the ordinary course of business consistent with past practice for
reasons such as service interruptions, but not for the purpose of making it
qualify as an Equivalent Basic Subscriber.
"Escrow Agent" shall mean The Chase Manhattan Bank.
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"Escrow Agreement" shall mean the Escrow Agreement, to be entered into
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among Buyer, Sellers and the Escrow Agent at the Closing, in the form annexed
hereto as Exhibit A.
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"ERISA" shall mean The Employee Retirement Income Security Act of
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1974, as amended.
"Excluded Assets" shall have the meaning set forth in Section 6.17.
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"Excluded Assets Tax Liability" shall have the meaning set forth in
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Section 2.5.
"Excluded Assets Tax Schedule" shall have the meaning set forth in
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Section 2.5.
"FCC" shall mean the Federal Communications Commission.
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"Final Adjustments Certificate" shall have the meaning set forth in
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Section 2.8.
"Financial Statements" shall have the meaning set forth in Section
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4.10A.
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"First Right" shall have the meaning set forth in Schedule 4.7.
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"Forms 394" shall have the meaning set forth in Section 6.10.
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"Franchise Areas" shall mean those areas in which the Company is
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authorized under one or more Governmental Permits issued by the applicable
franchising or licensing authorities to provide cable television service to
subscribers located in such areas through the ownership and operation of the
Systems, as set forth on Schedule 1.1.
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"GAAP" shall mean generally accepted accounting principles as in
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effect in the United States of America, consistently applied.
"Governmental Authority" shall mean any of the following: (a) the
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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, board, arbitrator or panel of arbitrators.
4
"Governmental Permits" shall mean all franchises, authorizations,
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permits, licenses, easements, registrations, leases, variances and similar
rights obtained from any Governmental Authority which authorize or are issued to
the Company or are required in connection with the operation of the Business, as
set forth on Schedule 4.17.
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"Hazardous Substance" shall have the meaning set forth in Section
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4.19.
"HSR Act" shall have the meaning set forth in Section 6.5.
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"Information" shall have the meaning set forth in Section 6.14.
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"Initial Adjustments Certificate" shall have the meaning set forth in
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Section 2.8.
"Intangibles" shall mean all general intangibles, including but not
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limited to subscriber lists, claims (excluding any claims relating to Excluded
Assets), patents, copyrights and goodwill, if any, owned, used or held for use
by the Company.
"Kara" shall have the meaning set forth in the preamble to this
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Agreement.
"Launch Support Payments" shall have the meaning set forth in Section
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2.6.
"Launch Support Payment Adjustment" shall have the meaning set forth
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in Section 2.6.
"Legal Requirement" shall mean any statute, ordinance, code, law,
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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.
"Liabilities" shall have the meaning set forth in Section 2.4.
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"Midco" shall have the meaning set forth in Section 6.19.
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"Monthly Financial Statements" shall have the meaning set forth in
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Section 6.13.
"Permitted Encumbrances" shall mean the following: (a) liens for
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taxes, assessments and governmental charges not yet due and payable; (b) zoning
laws and ordinances and similar Legal Requirements; (c) rights reserved to any
Governmental Authority to regulate the affected property; (d) as to leased Real
Property, interests of lessors and Encumbrances affecting the interests of the
lessors; and (e) the Encumbrances imposed by the Governmental Permits listed on
Schedule 4.17.
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"Person" shall mean any natural person, corporation, partnership,
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trust, unincorporated organization, association, limited liability company,
Governmental Authority or other entity.
5
"Phantom Equity Agreement" shall have the meaning set forth in the
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definition of Phantom Equity Interests.
"Phantom Equity Interests" shall mean the interests in the Company
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held by Xxxxxx Company ("Xxxxxx Co.") and the payments payable to Xxxxxx Co.
pursuant to that certain Phantom Equity Amendment to Management Agreement dated
November 15, 1989 among the Company, the Sellers, and Xxxxxx Co., as amended by
that certain First Amendment to Phantom Equity Amendment to Management Agreement
(the "Phantom Equity Agreement").
"Preliminary Title Report" shall mean a commitment for an ALTA
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1987/1992 owner's policy for title insurance with respect to the land owned by
the Company committing such title company to insure good and marketable title to
said land, free and clear of all Encumbrances (other than Permitted
Encumbrances).
"Purchase Price" shall mean the sum to be paid by Buyer for the Shares
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in the amount of Sixteen Million Five Hundred Thousand Dollars ($16,500,000), as
adjusted in accordance with the terms hereof.
"Rate Regulation Rules" shall mean the FCC rules currently in effect
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implementing the cable television rate regulation provisions of the
Communications Act.
"Real Property" shall mean all Assets consisting of interests in real
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property (including but not limited to, to the extent applicable, improvements,
fixtures and appurtenances), including both fee and leasehold interests, as set
forth on Schedule 4.9.
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"Required Consents" shall mean the Consents designated as such on
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Schedule 4.7.
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"Required Subscribers" shall mean (i) 14,450, if the Closing Date
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occurs in the month of June, 1999; (ii) 14,400, if the Closing Date occurs in
the month of July, 1999; (iii) 14,300, if the Closing Date occurs in the month
of August, 1999; (iv) 14,350 if the Closing Date occurs in the month of
September, 1999, and (v) 14,400, if the Closing Date occurs after September,
1999.
"Retained Escrow Amount" shall have the meaning set forth on Schedule
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4.7.
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"Sellers" shall have the meaning set forth in the preamble to this
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Agreement.
"Shares" shall have the meaning set forth in the recitals to this
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Agreement.
"Study" shall mean a Phase I environmental study, including an
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asbestos survey, of all Real Property owned by the Company.
"Subscriber Adjustment" shall have the meaning set forth in Section
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2.3.
"Systems" shall mean the cable television reception and broadband
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distribution systems operated in the conduct of the Business, consisting of one
or more headends, subscriber
6
drops and associated electronic and other equipment which are, or are capable of
being, operated as an independent system without interconnection with other
systems, and which provide cable television service and related services to the
respective Franchise Areas.
"Tax Return" shall mean any return, report, information return or
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other document (including any related or supporting information) filed or
required to be filed with any Taxing Authority in connection with the
determination, assessment, collection, administration or imposition of any
Taxes.
"Taxes" or "Tax" shall mean all taxes, charges, fees, liens, levies,
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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 or foreign government or any subdivision
thereof. Such term shall also include any interest, penalties, fines or
additions attributable to such assessments.
"Taxing Authority" shall mean any Federal, state, local or foreign
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governmental body or political subdivision with the power to impose Taxes.
"Transaction Documents" shall mean this Agreement, together with the
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Schedules and Exhibits hereto, and each other instrument, document, certificate
and agreement required or contemplated to be executed and delivered hereunder
and thereunder.
"Transfers" shall have the meaning set forth in Section 2.5.
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"Trust" shall have the meaning set forth in the preamble to this
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Agreement.
"Working Capital Adjustment" shall have the meaning set forth in
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Section 2.4.
"Year 2000 Compliant" means that the Systems and their components,
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will operate accurately and in the manner intended, including, without
limitation, with respect to the accurate processing of date/time data
(including, but not limited to, calculating, comparing and sequencing), from,
into and between the twentieth and twenty-first centuries, and the years 1999
and 2000 and leap year calculations.
ARTICLE II
SALE AND PURCHASE OF SHARES
2.1 Sale and Purchase of Shares. Subject to the terms and conditions
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hereof on the Closing Date, Sellers agree to sell, transfer, convey, assign and
deliver to Buyer, and Buyer agrees to purchase, good title, free and clear of
Encumbrances, to the Shares, in consideration of the payment by Buyer to the
Sellers of the Purchase Price.
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2.2 Payment of Purchase Price. The Purchase Price to be paid for the
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Shares shall, subject to the terms and conditions contained herein, be paid by
Buyer as follows:
On the Closing Date, the Purchase Price, plus or minus the Working Capital
Adjustment, minus the Excluded Assets Tax Liability, minus the Subscriber
Adjustment, if any, minus the Launch Support Payment Adjustment, if any, minus
the Retained Escrow Amount, if any, and plus or minus any other adjustments to
be made as of the Closing Date pursuant to this Agreement shall be paid by Buyer
to Sellers by wire transfer in clearinghouse funds available and credited to an
account or accounts of Sellers pursuant to the wire instructions to be delivered
by Sellers to Buyer no later than three (3) Business Days prior to the Closing
Date, and the Retained Escrow Amount, if any, shall be paid by Buyer to the
Escrow Agent by wire transfer in clearinghouse funds. The Purchase Price shall
be allocated among the Sellers as set forth on Schedule 2.2 hereto.
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2.3 Subscriber Adjustment. The Purchase Price shall be decreased by the
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amount, if any, equal to the product of (i) $1,500 multiplied by (ii) the number
by which the Equivalent Basic Subscribers as of the Closing Date is less than
the Required Subscribers (the "Subscriber Adjustment"). For purposes of this
Agreement, the number of Equivalent Basic Subscribers as of the Closing Date
shall be determined by the quotient of (i) the sum of the Equivalent Basic
Subscribers as of the end of each calendar month in 1999 preceding the month in
which the Closing occurs divided by (ii) the number of calendar months in 1999
preceding the month in which the Closing occurs.
2.4 Working Capital Adjustment. The Purchase Price shall be (i)
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increased by the amount by which the Current Assets of the Company as of the
Closing Date exceed the Liabilities of the Company as of the Closing Date or
(ii) decreased by the amount by which the Liabilities of the Company as of the
Closing Date exceed the Current Assets of the Company as of the Closing Date, in
each case determined in accordance with GAAP (the "Working Capital Adjustment").
For purposes of the Agreement, "Current Assets" shall mean:
(a) Cash and cash equivalents;
(b) Prepaid expenses relating to the Assets and the operation of the
Business;
(c) An amount equal to the sum of (i) 100% of the face amount of
Accounts Receivable which have been outstanding for no more than 30 days as of
the Closing Date; (ii) 90% of the face amount of Accounts Receivable which have
been outstanding for more than 30 days but no more than 60 days as of the
Closing Date and (iii) 0% of the face amount of Accounts Receivable which have
been outstanding more than 60 days as of the Closing Date. For purposes of
determining the amount of time an Account Receivable has been "outstanding",
the monthly billing statements of the Business shall be deemed to be due and
payable on the first day of the month during which the service for which such
billing statements relate is provided.
"Liabilities" shall mean all liabilities or obligations (direct or
indirect, absolute, fixed, contingent or otherwise) of the Company as of the
Closing Date, including, but not limited to,
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accounts payable, accrued liabilities, accrued expenses, prepaid income, debt,
customer deposits and prepayments and Taxes (including Taxes relating to or
otherwise arising out of transfers or distributions of Excluded Assets, to the
extent that the Purchase Price has not been reduced under Section 2.5 on account
of such Taxes).
2.5 Excluded Assets Tax Adjustment. The Purchase Price shall be
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reduced by the amount of Taxes and liabilities for Taxes incurred by the Company
in connection with sales and other transfers at or prior to the Closing
(collectively the "Transfers") of Excluded Assets (the "Excluded Assets Tax
Liability"), other than the actual amount of Taxes directly paid by Sellers
prior to the Closing Date with respect to Transfers of Excluded Assets. The
Excluded Assets Tax Liability shall equal the excess of (i) the Company's
aggregate liability for Taxes for its short taxable year which ends on or
immediately prior to the Closing Date (the "Closing Period Subchapter S Year"),
over (ii) the aggregate amount of liability for Taxes to which the Company would
have been subject for the Closing Period Subchapter S Year had the Company not
Transferred any Excluded Assets during that period.
Within 15 business days prior to the Closing and together with the
Initial Adjustment Certificate referred to in Section 2.8A, Sellers shall
deliver to Buyer a schedule (the "Company-Paid Tax Schedule") of all Taxes
directly paid by the Company and/or Sellers with respect to transfers of
Excluded Assets, accompanied by receipts or other supporting documentation.
2.6 Launch Support Payment Adjustment. The Purchase Price shall be
---------------------------------
decreased payments ("Launch Support Payments") received by Sellers or the
Company as an inducement to the Company to enter into any programming contracts
divided by (2) the total number of months that the applicable programming is
required to be offered pursuant to a programming contract, multiplied by (ii)
the number of months after the Closing that the applicable programming is
required to be offered (the "Launch Support Payment Adjustment").
2.7 Further Adjustment. The Purchase Price may be increased subject to
------------------
and in accordance with the terms and conditions set forth on Schedule 2.7.
------------
2.8 Adjustments Procedure
---------------------
A. The Initial Adjustment Certificate. No later than fifteen (15)
----------------------------------
Business Days prior to the Closing Date, Sellers shall deliver to Buyer Sellers'
Certificate estimated as of the Closing Date ("Initial Adjustment Certificate")
setting forth the number and calculation of Equivalent Basic Subscribers and all
adjustments including the Subscriber Adjustment, if any, Working Capital
Adjustment, the Excluded Assets Tax Liability and the Launch Support Payment
Adjustment, proposed to be made at the Closing as of the Closing Date. Prior to
Closing, Sellers shall provide Buyer with copies of all books and records as
Buyer may reasonably request for purposes of verifying the Initial Adjustment
Certificate and shall consult with Buyer's accountants and other
representatives, but without limiting Sellers' obligations hereunder to certify
the Initial Adjustment Certificate.
9
At the Closing, all adjustments will be made on the basis of the Initial
Adjustment Certificate, provided Buyer has not given notice to Sellers that, in
Buyer's opinion, any of the proposed adjustments are materially incorrect. If
Buyer gives notice that, in its opinion, any of the proposed adjustments are
materially incorrect, and if the parties have not been able to resolve the
matter prior to the Closing Date, any disputed amounts shall be paid by the
party to be charged with a disputed adjustment, into escrow, and shall be held
by the Escrow Agent in accordance with the Escrow Agreement until the Closing
Adjustments are finally determined pursuant to Section 2.8B, at which time
Sellers and Buyer shall deliver a joint written notice to the Escrow Agent
setting forth appropriate instructions as to the disposition from escrow of such
disputed amounts deposited thereunder, in accordance with the Escrow Agreement.
B. Trueup of Adjustments. As soon as practicable after the Closing
---------------------
Date, and in any event within one hundred twenty (120) days after the Closing
Date, Buyer shall deliver to Sellers a final calculation calculated as of the
Closing Date, of all adjustments to be made as of the Closing Date including the
Subscriber Adjustment, if any, the Working Capital Adjustment, and the Excluded
Assets Tax Liability and the Launch Support Payment Adjustment, together with
such supporting documentation as Sellers may reasonably request, (the "Final
Adjustment Certificate"), which shall evidence in reasonable detail the nature
and extent of each calculation. The Final Adjustment Certificate shall be final
and conclusive unless objected to by Sellers in writing within thirty (30) days
after delivery. Any such objection shall state, in reasonable detail, the nature
of the objection. Sellers and Buyer shall attempt jointly to reach agreement as
to the amount of all adjustments within forty-five (45) days after receipt by
Buyer of such written objection by Sellers, which agreement, if achieved, shall
be binding upon the parties to this Agreement and not subject to dispute or
review. If Sellers and Buyer cannot reach agreement as to the amount of the
closing adjustments within such forty-five (45) day period, Sellers and Buyer
agree to submit promptly any disputed adjustment to Ernst & Young, or, if such
firm is unable or unwilling to so act, such other nationally recognized
independent public accounting firm as shall be agreed by Sellers and Buyer. Such
firm shall render a decision resolving the disputed matters within sixty (60)
days following submission thereto (or as soon thereafter as reasonably
practicable). The determination of such firm shall be final and binding upon the
parties and not subject to dispute or review. The fees and expenses of such firm
shall be paid one-half by Sellers and one-half by Buyer. Any amounts due Buyer
or Sellers for closing adjustments shall be paid by the party owing such amount
(or, to the extent disputed amounts are held by the Escrow Agent, shall be paid
by the Escrow Agent pursuant to joint written instructions of Buyer and Sellers
in accordance with such final resolution) not later than five (5) Business Days
after such amounts shall have become final and conclusive.
2.9 Expenses; Sales and Transfer Taxes. Whether or not the transactions
----------------------------------
contemplated by this Agreement shall be consummated, Sellers and Buyer shall pay
their own expenses (including, without limitation, attorneys and accountants
fees and disbursements) incident to this Agreement and the transactions
contemplated hereby. Notwithstanding the foregoing, Sellers shall bear and pay
all transfer, sales, purchase, use or similar taxes arising out of the
transactions contemplated by this Agreement and any filing or recording or
similar fees payable in connection with any instruments contained herein.
10
ARTICLE III
CLOSING DATE;
CERTAIN TRANSACTIONS TO BE EFFECTED AT CLOSING
3.1 Closing Date. Subject to the satisfaction or waiver of all
------------
conditions to Closing set forth in this Agreement, the Closing will be held on a
date designated by Buyer by written notice to Sellers, which date shall be not
more than 15 Business Days after all of the conditions to Closing contained in
this Agreement (other than those acts to be performed at the Closing) shall have
been satisfied or waived (the "Closing Date") provided, that if Buyer fails to
deliver such notice to Sellers, the Closing Date shall be on the fifteenth
Business Day after all conditions to Closing contained in this Agreement (other
than those acts to be performed at the Closing) shall have been satisfied or
waived. The Closing shall occur at 10:00 A.M. eastern standard time on the
Closing Date established in accordance with this Agreement, at the offices of
Xxxxxxxxx Xxxxxx Xxxxxxxx Xxxxxx & Xxxxxx, P.C., 000 Xxxxx Xxxxxx, Xxx Xxxx, Xxx
Xxxx 00000. The Closing shall be effective as of 12:01 a.m. on the Closing Date.
3.2 Certain Transactions to be Effected at Closing. Subject in each
----------------------------------------------
case to the terms and conditions contained in this Agreement, the following
steps shall be taken concurrently at the Closing, except as otherwise expressly
stated:
A. Sellers shall execute and/or deliver, or cause to be executed and/or
delivered, to Buyer the following:
(i) Certificates in negotiable form, with signatures guaranteed by a
commercial bank, representing all of the Shares;
(ii) The favorable opinions dated as of the Closing Date as set forth in
Section 7.8 hereof;
(iii) The resignations of all officers and directors of the Company
effective as of the Closing Date;
(iv) Sellers' Certificate as to the fulfillment of the conditions set
forth in Sections 7.2, 7.3, 7.4, 7.5 and 7.9;
(v) A Title Insurance binder from a responsible title insurance company
of a policy committing to insure without material exception as to the title of
each parcel of owned Real Property;
(vi) A certificate as of a recent date from the appropriate office of the
states of Minnesota, South Dakota, Iowa and of each other jurisdiction in which
the Company is qualified to do business, as to the due formation or
qualification and the good standing of the Company;
(vii) The Escrow Agreement duly executed by Sellers;
11
(viii) Such further instruments and documents and do such other acts and
things as may be required or as Buyer may reasonably request in order to
effectuate the transactions contemplated by this Agreement.
B. At the Closing, Buyer shall execute and/or deliver, or cause to be
executed and/or delivered, to Sellers the following:
(i) By wire transfer, the Purchase Price plus or minus any amount as
necessary to reflect adjustments thereto as set forth in Section 2.2;
(ii) The favorable opinion dated as of the Closing Date as set forth in
Section 8.5 hereof;
(iii) Buyer's certificate as to the fulfillment of the conditions set
forth in Sections 8.2, 8.3 and 8.4;
(iv) Resolutions of a manager of Buyer duly authorizing the execution,
delivery and performance of this Agreement;
(v) The Escrow Agreement duly executed by Buyer; and
(vi) Such further instruments and documents and do such other acts and
things as may be required or as Sellers may reasonably request in order to
effectuate the transactions contemplated by this Agreement.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF SELLERS
Sellers, jointly and severally, hereby represent and warrant to Buyer,
which representations and warranties, together with all other representations
and warranties of Sellers in this Agreement, shall be true and correct as of the
Closing Date as if expressly restated on said date.
4.1 Organization and Qualification. The Company is a corporation, duly
------------------------------
organized, validly existing and in good standing under the laws of the State of
Minnesota. The Company has all requisite power and authority to own, lease and
use the Assets as they are currently owned, leased and used and to conduct the
Business. The Company is duly qualified or licensed to do business and is in
good standing under the laws of South Dakota and Iowa and in each other
jurisdiction where the Assets owned by the Company are located or the Business
of the Company is conducted, except any such jurisdiction where the failure to
be so qualified or licensed and in good standing would not have a material
adverse effect on any of the Company, the Assets, the System or the Business, on
the validity, binding effect or enforceability of this Agreement and each other
Transaction Document to which it is a party, or on the ability of Sellers to
perform their obligations under this Agreement and each other Transaction
Document to which they are a party.
12
4.2 Business of the Company. Since October 1, 1995, the Company has not
-----------------------
conducted the Business through, and at Closing none of the Assets will be held
or owned by, any subsidiary, Affiliate or other entities. At the Closing the
Company will have no subsidiaries.
4.3 Articles and By-laws. Sellers have heretofore delivered to Buyer true
--------------------
and accurate copies of the Company's Certificate of Incorporation and all
amendments thereto, certified by the Secretary of State of Minnesota on March
25, 1999, and the by-laws of the Company certified by the Secretary of the
Company, neither of which have since been changed, modified or recinded.
4.4 Capitalization of the Company. The authorized capital stock of the
-----------------------------
Company consists of 1,000 shares of common stock, par value of $0.10 per share,
80 of which are issued and outstanding. Sellers own, and the Shares represent,
all of the issued and outstanding shares of the Company. All of the issued and
outstanding shares of the Company are validly issued, fully paid and non-
assessable. Except as set forth above and except for the Phantom Equity
Interests, there are no outstanding: (a) securities convertible into or
exchangeable for the Company's capital stock; (b) options, warrants or other
rights to purchase or subscribe to capital stock of the Company; or (c)
contracts, commitments, agreements, understandings or arrangements of any kind
relating to the issuance of the shares of the Company, any such convertible or
exchangeable securities or any such options, warrants or rights.
4.5 Sellers' Authority. (a) Sellers represent and warrant that (i) they
------------------
are the owners of the Shares; (ii) all of the Shares are duly authorized, fully
paid and non-assessable; (iii) there are no options, warrants or commitments
relating to the Shares except for the Phantom Equity Interests; and (iv) there
are no contracts, commitments, agreements, arrangements, understandings or
restrictions to which any Seller is a party, or by which any Seller is bound,
relating to any of the Shares except for the Phantom Equity Agreement. Sellers
further represent and warrant that Sellers have no option, warrant or other
right to acquire additional shares of the Company, and that all of the Shares
are owned and held by Sellers free and clear of any Encumbrance. Sellers further
represent and warrant that upon consummation of the transactions contemplated by
this Agreement, Buyer will receive good and marketable title to the Shares.
(b) Sellers further represent and warrant that Kara and Xxxxxxx have
the right and capacity to execute, deliver and perform this Agreement, and the
transactions contemplated hereby constitute their valid and binding agreement,
enforceable against them in accordance with the terms hereof.
(c) Sellers further represent and warrant that Xxxxx Xxxxxx is the
only trustee under the Trust required to execute this Agreement; that Xxxxx
Xxxxxx has the full power and due authority to execute and deliver this
Agreement and to consummate the transactions contemplated hereby on behalf of
the Trust. Upon the signing and delivery of this Agreement, this Agreement will
be legally binding upon the Trust enforceable against the Trust in accordance
with all of its terms and provisions.
13
4.6 Authority and Validity. Sellers have full power and authority to
----------------------
execute and deliver this Agreement and each other Transaction Document to which
they are a party and to consummate the transactions contemplated by this
Agreement and each other Transaction Document to which they are a party. The
execution and delivery of this Agreement and each other Transaction Document,
and the consummation of the transactions contemplated by this Agreement and each
other Transaction Document by Sellers have been duly and validly authorized by
all necessary action on the part of Sellers. This Agreement has been, and each
of the other Transaction Documents to which Sellers are a party will be on or
prior to the Closing, duly and validly executed and delivered by Sellers and
constitutes, and this Agreement and each of the other Transaction Documents to
which they are a party will constitute, on or prior to the Closing, a valid and
binding obligation of Sellers, enforceable against each of the Sellers in
accordance with their respective terms.
4.7 Consents and Approvals: No Violation.
-------------------------------------
A. Except for (i) the Consents and (ii) filings, waivers, approvals,
actions, authorizations, qualifications and consents which, if not made or
obtained, would not, individually or in the aggregate, have a material adverse
effect on any of the Company, the Assets, the Systems, the Business, Sellers
ability to perform their obligations under this Agreement or any of the other
Transaction Documents to which they are a party or, to the best of Sellers'
knowledge, Buyer's ability to cause the Company to conduct the Business after
the Closing in substantially the same manner in which it is currently conducted
by the Company, no consent, waiver, approval, action or authorization of, or
filing, registration or qualification with, any Governmental Authority is
required to be made or obtained by any of the Sellers or the Company in
connection with the execution, delivery and performance by Sellers of this
Agreement or any of the other Transaction Documents to which they are a party.
B. Except for the Consents and the matters covered by the exceptions in
clause (ii) of Section 4.7A, the execution, delivery and performance of the
------------
Transaction Documents by Sellers do not and will not: (i) violate or conflict
with any provision of the Will dated June 3, 1982 of Xxxxx X. Xxxxxxx (the
"Will") or the trusts created thereunder, or the Company's certificate of
incorporation or by-laws; (ii) violate any Legal Requirement; or (iii) (A)
violate, conflict with, or constitute a breach of or default under (without
regard to requirements of notice, passage of time or elections of any Person),
(B) permit or result in the termination, suspension or modification of, (C)
result in the acceleration of (or give any Person the right to accelerate) the
performance of Sellers or the Company under, or (D) result in the creation or
imposition of any Encumbrance under, any Contract or any other instrument
evidencing any of the Assets or any instrument or other agreement to which
Sellers or the Company are a party or by which Sellers or the Company or any of
the Assets are bound or affected, except such violations, conflicts, breaches,
defaults, terminations, suspensions, modifications, and accelerations referenced
in clauses (ii) and (iii) above which would not, individually or in the
aggregate, have a material adverse effect on any of the Company, the Assets, the
Systems, the Business, or Sellers' ability to perform its obligations under the
Transaction Documents to which they are a party or, to the best of Sellers'
knowledge, Buyer's ability to cause the Company to conduct the Business after
the Closing in substantially the same manner in which it is currently conducted
by the Company.
14
4.8 Title.
-----
A. At Closing, the Assets will be free and clear of any Encumbrances,
except Permitted Encumbrances. Except as set forth on Schedule 4.8, the Company
has not signed any Uniform Commercial Code financing statement or any security
agreement or mortgage or similar agreement authorizing any Person to file any
financing statement or claim any security interest or lien with respect to any
of the Assets. Except as set forth on Schedule 4.8, the Company owns all
------------
tangible personal properties which are necessary to permit the operation of the
Systems by Buyer in substantially the same manner as currently operated and all
such properties are included within the Assets free and clear of all
Encumbrances.
B. At the Closing the Company will have no properties or assets other than
the Assets used or held for use in the Business, and the Assets include all
Equipment, Contracts, Governmental Permits and other property and assets
necessary for the conduct of the Business in the ordinary course of business in
substantially the same manner as conducted prior to the Closing Date.
4.9 Real Property. Schedule 4.9 sets forth a list and description of all
------------- ------------
Real Property owned, leased, occupied or used by the Company, and is true,
complete and accurate in all material respects. The Company has, or will have at
Closing, title in fee simple, or shall hold the leasehold interests in the case
of leaseholds, to all Real Property including Real Property hereafter acquired,
in each case free and clear of any Encumbrances, except for Permitted
Encumbrances. At the Closing, the Company shall have (i) good and marketable fee
simple title to all owned Real Property free and clear of any and all
Encumbrances (except for Permitted Encumbrances), and (ii) its leasehold
interests in and to all leased Real Property free and clear of any and all
Encumbrances (except for Permitted Encumbrances). There are not pending or, to
the best of Sellers' knowledge, threatened, any condemnation actions or special
assessments or any pending proceedings for changes in the zoning with respect to
such Real Property or any part thereof and neither Sellers nor the Company has
received any notice of the desire of any public authority or other entity to
take or use any Real Property or any part thereof. All structures on the Real
Property are structurally sound and in good operating condition and repair
(reasonable wear and tear excepted). Each parcel of Real Property has access
(either direct or by an easement included among the Assets) to all public roads,
utilities, and other services necessary for the operation of the relevant System
with respect to such parcel. The Company has complied with all notices or orders
to correct violations of Legal Requirements issued by any Governmental Authority
having jurisdiction against or affecting any of the Real Property. All leases
and subleases pursuant to which any of the Real Property is occupied or used are
set forth on Schedule 4.9 and such leases and subleases are valid, subsisting,
------------
binding and enforceable in accordance with their respective terms and there are
no existing defaults thereunder or events that with notice or lapse of time or
both would constitute defaults thereunder. The Company has not nor, to the best
of Sellers' knowledge, has any other party to any contract, lease or sublease
relating to any Real Property given or received notice of termination, and, to
the best of Sellers' knowledge, subject to the receipt of any necessary
Consents, the consummation of the transactions contemplated by this Agreement
will not result in any such termination. The Company is not nor will it be, as a
result of the transactions contemplated by this Agreement, with the giving of
notice or the passage of time or both, in breach of any provision of any
contract, lease or sublease relating to any Real Property. All easements,
rights-of-way and other rights which are
15
necessary for the Company's current use of any Real Property are valid and in
full force and effect, and neither Sellers nor the Company has received any
notice with respect to the termination or breach of any of such easements,
rights-of-way or other similar rights.
4.10 Financial Statements.
--------------------
A. Sellers have delivered to Buyer correct and complete copies of the
Company's (i) audited balance sheets and related statements of income, changes
in stockholder's equity and statements of cash flows for the years ended
December 31, 1997 and December 31, 1998, including the detail supporting such
financial statements and (ii) unaudited balance sheets and related statements of
operations, for the three-month period ended March 31, 1999, including the
detail supporting such financial statements (collectively, the "Financial
Statements"). The Financial Statements (i) have been prepared in accordance
with the books and records of the Company and (ii) fairly present the financial
condition and the results of operations and cash flows of the Company as of and
for the respective periods ended on such dates, all in conformity with GAAP
consistently applied throughout such periods, with no material difference
between such financial statements and the financial records maintained by the
Company. Sellers have delivered to Buyer correct and complete copies of all
material filings made to Governmental Authorities with respect to the Systems
for the years 1996, 1997, 1998 and 1999 to date.
B. Since December 31, 1998, (i) the Business has been operated only in the
ordinary course; (ii) except as disclosed on Schedule 4.29, there has been no
-------------
material adverse change in, and no event has occurred which, individually or in
the aggregate, could result in any material adverse change in the business,
operations, prospects, financial condition, or results of operations of the
Business, other than changes affecting the United States economy in general or
the cable television industry in general; (iii) other than the transfer of the
Excluded Assets, there has been no sale, assignment or transfer of any material
assets or properties related to the Systems, or any theft, damage, removal of
property, destruction or casualty loss which might be expected to materially
adversely affect the Company, the Business or the Systems; (iv) there has been
no amendment or termination of any Governmental Permit or any Contract material
to the conduct of the Business; (v) there has been no waiver or release of any
right or claim of the Company against any third party; (vi) there has been no
material labor dispute or union activity with respect to or by the Company's
employees which affects the operation of the Systems; and (vii) there has been
no agreement by the Company to take any of the actions described in the
preceding clauses (i) through (vi), except as contemplated by this Agreement.
4.11 Legal Proceedings. Except as set forth on Schedule 4.11, there is no
----------------- -------------
judgment or order outstanding, or any action, suit, arbitration, proceeding,
controversy or investigation by or before any Governmental Authority pending, or
to the best of Sellers' knowledge, threatened, involving or affecting the
Company, the Systems, the Assets or the Business, which, if adversely
determined, would have a material adverse effect on the Company, the Systems,
the Assets or the Business or would impair the ability of Sellers to perform
their obligations under this Agreement or any of the other Transaction Documents
to which they are a party. The Company is not in default or violation, and no
event or condition exists which, with notice or lapse of time or both, could
16
become or result in a default under or a violation of, any judgment or order of
any Governmental Authority.
4.12 Certain Employment and Employee Benefit Matters. The Company has no
-----------------------------------------------
employees and all persons conducting the Business of the Company are employees
of Xxxxxx Co. (the "Employees") pursuant to that certain Management Agreement
dated January 12, 1987 between Yankton Cable TV, Ltd., Canton Cable TV, Ltd.,
Xxxxxxxxxx Cable TV, Ltd., the Company and Xxxxxx Co. Accordingly, the Company
has no, and no action or event has occurred that would cause the Company to have
any, liabilities under ERISA or similar laws with respect to employee benefit
plans of the Company regarding employees of the Business. There are no unions
representing Employees and no labor disputes pending between the Company and any
of the Employees. The Company and Abbot Co. have complied in all respects with
all Legal Requirements relating to the employment of labor, including any
provisions thereof relating to wages, hours, collective bargaining and the
payment of social security and other Taxes, and the Company is not liable for
any arrears of wages or any Taxes or penalties for failure to comply with any of
the foregoing. Schedule 4.12 sets forth the names, job descriptions and present
-------------
annual rates of compensation, including the length of time such Employee has
been with Xxxxxx Co., whether such Employee is full-time or part-time, any bonus
or other direct or indirect compensation and employee benefits, of all personnel
of Xxxxxx Co., and any employment agreements, commitments, arrangements or
understandings, written or oral, affecting such personnel. Sellers and Xxxxxx
Co. shall indemnify and hold the Company and Buyer harmless from and against any
and all loss, cost, expense, liability and claims brought against the Company
and/or Buyer by an Employee of Xxxxxx Co. and/or an employee conducting the
business of the Company as a result of such employment, an ERISA claim or
otherwise.
4.13 Characteristics of the Systems.
------------------------------
A. The Systems include (prior to the Yankton rebuild) approximately 279
but not more than 300 miles of energized cable plant, of which approximately 200
but not more than 215 miles are of underground construction, and includes
approximately 21,000 "homes passed" by energized cable. As used herein "homes
passed" shall mean a house or other residential unit that can be legally
serviced by the Systems by using no more than 150 feet of drop cable. The
average number of Equivalent Basic Subscribers for the four (4) months ended
April 30, 1999 is not less than 14,571. There are no pending complaints by
Equivalent Basic Subscribers or other users of the Systems, other than such
complaints as are received from time to time in the ordinary course of business.
B. Schedule 4.13 sets forth accurately and completely the following
-------------
information as of February 28, 1999, with respect to the Systems:
(1) a description of the Systems' physical plant, including with
reasonable detail, headend trunk line and feeder cable, transmitting and
receiving equipment and capacity and other electronic equipment;
(2) an inventory of equipment and supplies on hand, including without
limitation converters, accurate and complete in all material respects;
17
(iii) the approximate number of Equivalent Basic Subscribers;
(iv) a listing of all communities included within the Franchise Areas;
(v) basic, pay, audio and ancillary services offered, all rates
charged currently and for the prior three (3) years for each such service
or package or tier of services and the number of subscribers to each such
service or package or tier of services paying each such rate and all
benchmark rates for the Systems;
(vi) all broadcast and nonbroadcast programming carried by each
System, the channel capacity of each System, the station or signals
carried, with a breakdown as to each signal as between satellite and off-
air reception, current channel and frequencies utilized (including Systems
radius and designated coordinates reported to the FCC);
(vii) installation charges, where applicable;
(ix) a description in reasonable detail of all present marketing
programs, policies and practices, the Company's past practices with respect
to marketing programs, policies and practices, and programs and policies
which are expected to be implemented prior to the Closing Date and all rate
increases proposed to be implemented (including dates of implementation)
prior to the Closing Date;
(xii) a description of all present customer service policies,
practices and procedures;
(x) all FCC call signals and licenses, including, but not limited to,
business radios, earth stations and microwave;
(xi) a description of all repair, manufacturing, assembly and equipment
enhancement activities engaged in by the Company;
(xii) all retransmission agreements and must carry elections required in
the operation of the Systems; and
(xiii) detailed maps of the Systems.
4.14 Finders; Brokers and Advisors. Except for the engagement of Xxxxxxx &
-----------------------------
Associates, with respect to which Sellers shall have sole responsibility for the
payment of all amounts owed, neither Sellers nor the Company have employed any
financial advisor, broker or finder or incurred any liability for any financial
advisory, brokerage, finder's or similar fee or commission in connection with
the transactions contemplated by this Agreement and Sellers have no knowledge of
notice of any claim or basis for any claim for payment of, or any unpaid
liability to any Person for any fees or commissions or like payments with
respect to the negotiations leading to this Agreement or the consummation of any
of the transactions contemplated by this Agreement.
18
4.15 Tax Matters.
-----------
A. The Company has as of the date hereof, and will have as of the Closing
Date, timely filed in proper form all Tax Returns and all other reports that are
required to be filed as of the date hereof, or which are required to be filed on
or before the Closing Date, as the case may be, and all such Tax Returns were
prepared in good faith and are accurate and complete in all material respects,
and, to the best of Sellers' knowledge, there is no basis for assessment of any
addition to any Taxes shown thereon. Except as set forth on Schedule 4.15, all
-------------
Taxes due or payable by the Company on or before the date hereof or the Closing
Date, as the case may be, (including any Taxes, liabilities or amounts owing
resulting from liability of the Company as the transferee of the assets of, or
successor to, any other corporation or entity or resulting by reason of the
Company having been a member of any group of corporations filing a consolidated,
combined or unitary Tax Return) have been or will be timely paid, except to the
extent any such Taxes (as set forth as of the date hereof on Schedule 4.15) are
--------------
being contested in good faith by appropriate proceedings by the Company and for
which adequate reserves for any disputed amounts shall have been established in
accordance with GAAP. Except as set forth on Schedule 4.15, as of the date
-------------
hereof, there has been no Tax examination, audit, proceeding or investigation of
the Company, or with respect to the assets, the Systems or the Business, by any
relevant Taxing Authority, and the Company does not have any outstanding Tax
deficiency or assessment. Except as set forth on Schedule 4.15, there are no
-------------
pending or, to the best of Sellers' knowledge, threatened actions, audits,
examinations, proceedings or investigations by any relevant Taxing Authority
with respect to the Company, the Assets, the Systems or the Business. There is
no outstanding request for an extension of time within which to pay any Taxes
with respect to the Company, the Assets, the Systems or the Business. There has
been no waiver or extension of any applicable statute of limitations for the
assessment or collection of any Taxes with respect to the Company, the Assets,
the Systems or the Business. Xxxxxx Co. has withheld and paid in a timely
manner to all relevant Taxing Authorities all payments for withholding Taxes,
unemployment insurance and other amounts required to be withheld and paid.
4.16 Equipment. Schedule 4.16 contains a list of all Equipment used or held
--------- -------------
for use by the Company in the operation of the Business. Except as set forth on
Schedule 4.16, the Equipment is and will be at Closing in good operating
-------------
condition and repair (reasonable wear and tear excepted) and fit for the purpose
it is being used.
4.17 Governmental Permits; Contracts.
-------------------------------
A. Schedule 4.17 contains a complete list of all Governmental Permits and
-------------
a complete list of all Contracts. Each Governmental Permit and Contract is in
full force and effect, binding and enforceable in accordance with its terms, and
is valid under and complies in all respects with all applicable Legal
Requirements. Except as set forth on Schedule 4.17, the Company is the
-------------
authorized legal holder of all Governmental Permits. Except as set forth on
Schedule 4.17, neither the Company nor to the best of Sellers' knowledge, any
-------------
other party to any Governmental Permit or Contract is in default thereunder or
has given or received notice of termination, cancellation, dispute or default
or, to the best of Sellers' knowledge, has taken any action inconsistent with
the continuance of any Governmental Permit or Contract. Except for Contracts
shown as oral contracts
19
and described in all material respects on Schedule 4.17, true, correct and
-------------
complete copies of each Governmental Permit and Contract have been delivered to
Buyer and its representatives, and with respect to those Governmental Permits
and Contracts executed after the date hereof, copies will be delivered to Buyer
promptly following such execution and in any event prior to the Closing Date.
B. No approval, application, filing, registration, consent or other action
of any Governmental Authority is required to enable the Company to take
advantage of the rights and privileges intended to be conferred by any
Governmental Permits, except for approvals, applications, filings,
registrations, consents or other actions that (if not made or obtained) could
not have an adverse effect on the Company. None of the Sellers nor the Company
has received any notice from the granting Governmental Authority with respect to
any breach of any covenant under, or any default with respect to, any
Governmental Permits, which default has not been cured.
4.18 Insurance. The Company has in force policies of insurance with respect
---------
to the Company, the Assets and the Business and all bonds required to be
obtained by the Company with respect to the Business, including without
limitation all bonds required by Governmental Permits and Contracts, as set
forth on Schedule 4.18. All insurance policies are adequate, in accordance with
-------------
prevailing cable industry practices, to insure fully, less standard deductibles,
against all risks to which the Company and the Assets are exposed in the
operation and conduct of the Business. At no period of time did the Company lack
any such insurance coverage. Schedule 4.18 is true, complete and accurate and
-------------
the insurance policies and bonds referred to therein are in full force and
effect (free from any right of termination on the part of the insurance carriers
or bonding agencies), and neither Sellers nor the Company has received any
notice of non-renewal or cancellation of such insurance policies or bonds. The
Company will maintain such insurance policies and bonds in full force and effect
up to and including the Closing Date, and will furnish Buyer evidence thereof.
All claims, if any, made against the Company which are covered by insurance are
listed on Schedule 4.18 and are being defended by the insurers. To the best of
-------------
Sellers' knowledge, there is no basis upon which any insurance carriers may
disclaim coverage under any of the insurance policies referred to on Schedule
--------
4.18.
----
4.19 Hazardous Substances and Environmental Matters. (i) The Real Property
----------------------------------------------
is free of all asbestos containing building materials susceptible to becoming
airborne; (ii) there has been no reportable quantity of any Hazardous Substance
on the Real Property which remains on the Real Property, except for such
substances that are in such amounts (which are not of a reportable quantity
under any applicable environmental laws) and of the type typically (A) found in
commercial cleaning products or standard office supplies of businesses similar
to the Business or (B) used by cable system operators in the operation and
maintenance of vehicles, nor has any reportable quantity under applicable legal
requirements of any Hazardous Substance been released into, on, over or under
the Real Property; (iii) the Company is, and has been, in compliance with all
Legal Requirements relating to the environment with respect to the Assets and
the operation of the Business and the Systems; (iv) the Business is capable of
continued operation in compliance with all Legal Requirements relating to the
environment; (v) no Hazardous Substances have been treated, stored or disposed
of on, under or in the Real Property, except for such substances that are in
such amounts and of the type typically (A) found in commercial cleaning products
or standard office supplies of businesses similar to the Business or (B) used by
cable system operators in the operation
20
and maintenance of vehicles; and (vi) none of the Sellers nor the Company has
received any notice from any Governmental Authority indicating that the Real
Property or any real property adjacent thereto has been or may be placed on any
federal or state "Superfund" or "Superlien" list. For these purposes, the term
"Hazardous Substances" includes any substance heretofore or hereafter designated
as "hazardous" or "toxic," including, without limitation, petroleum and
petroleum related substances, or having characteristics identified as
"hazardous" or "toxic" under any Legal Requirement including, without
limitation, the Comprehensive Environmental Response Compensation and Liability
Act of 1980, 42 U.S.C. Section 9601, et seq., the Resource Conservation and
------
Recovery Act, 42 U.S.C. Section 6901, et seq., the Federal Water Pollution
------
Control Act, 33 U.S.C. Section 1247, et seq., the Clean Air Act, 42 U.S.C.
------
Section 2001, et seq., and the Community Right to Know Act, 42 U.S.C. Section
-- ---
11001, et seq., all as amended.
-- ---
4.20 Accounts Receivable. The Accounts Receivable have not been assigned to
-------------------
or for the benefit of any other Person. The Accounts Receivable reflected in the
Financial Statements and Monthly Financial Statements and all Accounts
Receivable arising after the dates thereof up to and including the Closing Date
(to the extent not heretofore or theretofore collected) arose and will arise
from bona fide transactions in the ordinary course of business and the Accounts
Receivable are, and will be, fully collectible, less allowance for doubtful
accounts.
4.21 Systems Compliance.
------------------
A. The Company and the Systems are in compliance with all applicable Legal
Requirements, including without limitation, the Communications Act, the
Copyright Act, and the rules and regulations of the FCC and the United States
Copyright Office, including, without limitation, rules and laws governing
Systems registration, use of aeronautical frequencies and signal carriage, equal
employment opportunity, cumulative leakage index testing and reporting, signal
leakage, and subscriber privacy. Without limiting the generality of the
foregoing and except as set forth in Schedule 4.21 hereto:
-------------
(i) the Franchises Areas have been registered with the FCC;
(ii) all of the annual performance tests on the Systems required under
the rules and regulations of the FCC have been performed and the results of
such tests demonstrate satisfactory compliance with the applicable
requirements being tested in all material respects;
(iii) the Systems concurrently meet or exceed the technical standards
set forth in the rules and regulations of the FCC, including, without
limitation, the leakage limits contained in 47 C.F.R. Section
76.605(a)(11);
(iv) the Systems are being operated in compliance with the provisions
of 47 C.F.R. Sections 76.610 through 76.619 (mid-band and super-band signal
carriage), including 47 C.F.R. Section 76.611 (compliance with the
cumulative signal leakage index);
(v) where required, appropriate authorizations from the FCC have been
obtained for the use of all aeronautical frequencies in use in the Systems
and the Systems are presently
21
being operated in compliance with such authorizations (and all required
certificates, permits and clearances from governmental agencies, including
the Federal Aviation Administration, with respect to all towers, earth
stations, business radios and frequencies utilized and carried by the
Systems have been obtained); and
(vi) all notices to subscribers of the Systems required by the rules
and regulations of the FCC have been provided.
B. All notices, statements of account, supplements and other documents
required under Section 111 of the Copyright Act and under the rules of the
Copyright Office with respect to the carriage of off-air signals by the Systems
have been properly completed and duly filed, and the proper amount of copyright
fees have been paid on a timely basis, and the Systems qualify for the
compulsory license under Section 111 of the Copyright Act.
C. The carriage of all television station signals (other than satellite
super stations) by the Systems are permitted by valid retransmission consent
agreements or by must-carry elections by broadcasters.
D. The Company is in compliance with its obligations with regard to
protecting the privacy rights of any past or present customers of the Systems.
E. The Assets are adequate and sufficient for all of the current
operations of such Systems.
F. Except as set forth on Schedule 4.29, the Systems are not subject to
-------------
effective competition as of the date hereof.
G. No Governmental Authority has notified the Company of its application
to be certified to regulate rates with respect to the Systems as provided in 47
C.F.R. Section 76.910.
H. No Governmental Authority has notified the Company that it has been
certified and has adopted regulations required to commence regulation with
respect to the Systems as provided in 47 C.F.R. Section 76.910(c)(2).
I. Except to the extent that a Governmental Authority regulates rates
pursuant to the Rate Regulation Rules, the Systems may continue to charge their
current rates in compliance with the Communications Act and the Rate Regulation
Rules.
J. The Systems are otherwise in material compliance with the
Communication Act and the Rate Regulation Rules.
K. No reduction of rates or refunds to subscribers is required hereunder.
22
L. The Company is in compliance with its obligations under 47 C.F.R. Part
17 concerning the construction, marking and lighting of antenna structures used
by the Company in connection with the operation of the Systems.
M. To the best of Sellers' knowledge, the Systems, including, without
limitation, all computer hardware, software and embedded micro controllers in
non-computer equipment involved in the Systems, are Year 2000 Compliant as of
the date hereof; provided, however, that if any components of the Systems is not
Year 2000 Compliant as of the date hereof the Company or the Sellers shall cause
the Systems to be Year 2000 Compliant prior to the Closing Date. Sellers shall
deliver to Buyer at the Closing evidence that the Systems are Year 2000
Compliant in the form of written confirmation from the appropriate manufacturer
or services of the applicable Systems component.
4.22 Intangibles. The Company owns or possesses royalty free licenses or
-----------
other rights to use all Intangibles necessary to the operation of the Business
as presently conducted without any conflict with, or infringement of, the rights
of others. There is no claim pending or, to the best of Sellers' knowledge,
threatened with respect to any such Intangibles. Schedule 4.22 contains a true,
-------------
correct and complete list of all Intangibles which are material to the operation
of the Systems.
4.23 No Other Consents. The Company has obtained and is in compliance
-----------------
with all consents, approvals, authorizations, waivers, orders, licenses,
certificates, permits and franchises from, and has made all filings with, any
Governmental Authority and other Persons required for the operation of the
Systems as presently operated, all of which are in full force and effect and
enforceable in accordance with their respective terms and comply with all
applicable Legal Requirements. Except as set forth on Schedule 4.23, no consent,
-------------
authorization, approval, waiver, order, license, certificate or permit of or
from or declaration or filing with any Governmental Authority or other Person is
necessary to preclude any cancellation, suspension, termination or as
reformation of any Governmental Permit or Contract.
4.24 No Undisclosed Liabilities. Except as and to the extent set forth on
--------------------------
Schedule 4.24, the Company does not have any liability or obligation (direct or
--------------
indirect, absolute, fixed, contingent or otherwise) which was not reflected or
reserved on the Financial Statements or Monthly Financial Statements (including
but not limited to liability for Taxes for periods prior to or as of the
Closing Date), and the Company has not incurred any such liability or obligation
since the last day of the last Monthly Financial Statement, other than in the
ordinary course of business.
4.25 Liabilities to Subscribers. There are no obligations or liabilities to
--------------------------
subscribers of the Systems except with respect to (i) prepayments or deposits
made by such subscribers as set forth in the Financial Statements or Monthly
Financial Statements or, since the last day of the Monthly Financial Statements
incurred in the ordinary course of business consistent with past practices and
(ii) the obligation to supply services to subscribers in the ordinary course of
business in accordance with and pursuant to the terms of the Governmental
Permits.
4.26 Restoration. No property of any Person has been damaged, destroyed,
-----------
disturbed or removed in the process of construction or maintenance of the
Systems, which has not been, or will
23
not be, prior to the Closing, repaired, restored or replaced, and as to which an
adequate reserve has not been established by the Company.
4.27 Condition and Transfer of Tangible Property. The tangible personal
-------------------------------------------
property of the Company has been installed, operated and maintained in all
respects in accordance with the requirements of (i) all applicable Governmental
Permits and Contracts and (ii) technical standards and Legal Requirements of any
Governmental Authority or regulatory authorities. The Systems are or shall be
at Closing capable of delivering in the ordinary course of business to all
subscribers cable television services (including a visual transmission) in
compliance with all applicable Governmental Permit requirements.
4.28 Inventory. The Company has, and at the Closing will have, an inventory
---------
of spare parts and other materials relating to the Systems of the type and
nature and maintained at a level consistent with past practices and otherwise in
accordance with cable Systems industry practices.
4.29 Overbuilds. Except as set forth in Schedule 4.29, (i) no construction
---------- -------------
programs have been undertaken, or to Sellers' knowledge, are proposed or
threatened to be undertaken, by any municipality or other cable television,
multichannel multipoint distribution Systems or multipoint distribution Systems
provider or operator in any Franchise Area served by the Systems; and (ii) no
franchise or other application or request of any person is pending or to
Sellers' knowledge, threatened or proposed which relates to, or which could
adversely affect the Systems. Except as set forth on Schedule 4.29 the Company
-------------
is not, nor is an Affiliate of the Company, a party to any agreement restricting
the ability of a third party to operate cable television Systems in the
Franchise Areas.
4.30 Certain Programming Arrangements and Relationships. Except as set forth
--------------------------------------------------
on Schedule 4.30, the Company is not a party to any programming contract with
-------------
any Person providing for any exclusive arrangement with respect to the provision
of programming to the Company or the Systems. Except as set forth on Schedule
--------
4.30, neither the Company nor any of its Affiliates has any affiliation with
----
(other than on a third party basis), equity interest in, profit participation
in, contractual right to acquire any such interest or participation, or any
other relationship with any Person that provides programming to the Systems.
The Company has not entered into any arrangement with any community groups or
similar third parties restricting or limiting the types of programming which may
be shown on the Systems.
4.31 Indebtedness. The Company is not in default with respect to any term
------------
or condition of any instrument, agreement or arrangement pursuant to which any
person has borrowed any money, incurred any indebtedness (including capitalized
leases or as guarantor or surety) or established any line of credit which
represents a liability (or contingent liability) of the Company.
4.32 Books and Records. All business records of the Company are complete in
-----------------
all material respects. The minute books of the Company contain a complete and
accurate record of all meetings of its board of directors and shareholders. The
books of account of the Company have been and are kept complete and current.
24
4.33 Banking Facilities. Schedule 4.33 attached hereto is a list of each
------------------
bank and safety deposit facility in which the Company has an account or safety
deposit box, and the names of all persons authorized to draw thereon or to have
access thereto.
4.34 Powers of Attorney and Suretyships. Except as set forth in Schedule
---------------------------------- --------
4.34 hereto, the Company has no presently effective powers of attorney, nor has
----
any obligation or liability, either actual, accrued, accruing or contingent, as
guarantor, surety, cosigner, indorser, comaker, indemnitor or otherwise with
respect to any obligation of any person, corporation, partnership, joint
venture, association, organization or other entity.
4.35 No Agreements among Sellers and the Company. Except as set forth in
-------------------------------------------
Schedule 4.35 hereto, as of the date hereof, there exists no agreements, written
-------------
or oral, by and among the Sellers and the Company with respect to the Business,
the Assets or otherwise.
4.36 Disclosure. No representation or warranty by Sellers contained in this
----------
Agreement (including the exhibits and schedules hereto), and no statement
contained in any document, certificate or other instrument furnished to Buyer by
or on behalf of Sellers pursuant hereto contains or will contain any untrue
statement of a material fact or omits or will omit to state a material fact
necessary in order to make the statements contained herein or therein not
misleading. Except for matters affecting the cable television generally, there
is no fact known to any of the Sellers which could materially adversely affect
the Company, the Systems or the Assets which has not been set forth in the
Agreement, or the Schedules attached hereto.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer hereby represents and warrants to Sellers as follows, which
representations and warranties, together with all other representations and
warranties of Buyer in this Agreement, shall be true and correct as of the
Closing Date as if expressly restated on said date:
5.1 Organization and Qualification. Buyer is a limited liability company
------------------------------
duly formed validly existing and in good standing under laws of the State of New
York. Buyer has all requisite power and authority to carry on its business as
currently conducted and to own, lease, use and operate its assets. Buyer is duly
qualified or licensed to do business and is in good standing under the laws of
each jurisdiction where the assets owned by it are located and its business is
conducted, except any such jurisdiction where the failure to be so qualified or
licensed and in good standing would not have a material adverse effect on its
ability to perform its obligations hereunder and consummate the transactions
contemplated hereby.
5.2 Authority and Validity. Buyer has full power and authority to execute
----------------------
and deliver this Agreement and each other Transaction Document to which it is a
party and to consummate the transactions contemplated by this Agreement and each
other Transaction Document to which it is a party. The execution and delivery of
this Agreement and each other Transaction Document to which Buyer is a party and
the consummation of the transactions contemplated by this Agreement
25
and each other Transaction Document to which it is a party have been duly and
validly authorized by all necessary action on the part of Buyer. This Agreement
has been, and each of the other Transaction Documents to which Buyer is a party
will be on or prior to the Closing, duly and validly executed and delivered by
Buyer and constitutes, and this Agreement and each of the other Transaction
Documents to which it is a party will constitute on or prior to the Closing, a
valid and binding obligation of Buyer, enforceable against Buyer in accordance
with their respective terms.
5.3 No Breach or Violation.
----------------------
A. Except for (i) any consents that will be obtained or waived on or prior
to the Closing Date, (ii) filings and consents which, if not made or obtained,
would not have a material adverse effect on Buyer's ability to perform its
obligations under this Agreement and (iii) any Required Consents to the transfer
to Buyer of any of the Governmental Permits, no consent, waiver, approval or
authorization of, or filing, registration or qualification with, any
Governmental Authority is required to be made or obtained by Buyer in connection
with the execution, delivery and performance of this Agreement or any of the
other Transaction Documents to which it is a party.
B. Except with respect to any consents or filings covered by the
exceptions in clauses (i)-(iii) of Section 5.3A, the execution, delivery and
------------
performance of this Agreement and the other Transaction Documents to which Buyer
is a party do not and will not: (i) violate or conflict with any provision of
Buyer's operating agreement or articles of organization; (ii) violate any Legal
Requirement; or (iii) violate, conflict with or constitute a breach of or
default under (without regard to requirements of notice, passage of time or
elections of any Person), any material contract, agreement, arrangement,
commitment or plan to which Buyer is a party or by which Buyer or any of its
assets is bound or affected, except such violations, conflicts, breaches,
defaults, terminations, suspensions, modifications, and accelerations as would
not, individually or in the aggregate, have a material adverse effect on Buyer's
ability to perform its obligations under this Agreement.
5.4 Litigation.
----------
A. There are no claims, actions, suits, proceedings or investigations
pending or, to the best of Buyer's knowledge, threatened, in any court or before
any Governmental Agency, or before any arbitrator, by or against or affecting or
relating to Buyer or any of its Affiliates which, if adversely determined, would
restrain or enjoin the consummation of the transactions contemplated by this
Agreement and the other Transaction Documents to which Buyer is a party or
declare unlawful the transactions or events contemplated by this Agreement and
the other Transaction Documents to which Buyer is a party or cause any of such
transactions to be rescinded.
B. There are no judgments, injunctions, orders or other judicial or
administrative mandates outstanding against or affecting Buyer or any of its
Affiliates which would hinder or delay the consummation of the transactions
contemplated by this Agreement or the other Transaction Documents to which Buyer
is a party.
5.5 Finders; Brokers and Advisors. Buyer has not employed any financial
-----------------------------
advisor, broker or finder or incurred any liability for any financial advisory,
brokerage, finder's or similar fee or
26
commission in connection with the transactions contemplated by this Agreement
and Buyer is not aware of any claim or basis for any claim for payment of, or
any unpaid liability to any Person for any fees or commissions or like payments
with respect to the negotiations leading to this Agreement or the consummation
of any of the transactions contemplated by this Agreement, except with respect
to the obligations of Sellers referred to in Section 4.14.
ARTICLE VI
ADDITIONAL COVENANTS
6.1 Access to Premises and Records. Between the date of execution and
------------------------------
delivery of this Agreement and the Closing Date, Sellers will, and will cause
the Company to, give Buyer and its representatives, during normal business hours
and with reasonable prior notice, access to the books and records, contracts and
commitments of the Company, the Business and to the Assets and will furnish to
Buyer and its representatives such information regarding the Company, the
Business and the Assets as Buyer may from time to time reasonably request.
Without limiting the generality of the foregoing, Buyer shall have access to all
documents information, books, records and employees necessary to permit Buyer to
verify, to its reasonable satisfaction, the representations and warranties of
the Sellers contained herein, including without limitation that (i) all offset
frequencies relating to the Systems are in place, and (ii) the Systems is
otherwise in compliance with all applicable Legal Requirements, in each case to
the extent represented and warranted in Section 4.21, and Buyer shall be
------------
permitted to conduct (if it so desires) a signal leakage xxxxxxx and follow up
and such other tests as Buyer shall deem necessary to verify the foregoing.
Sellers shall give Buyer prompt written notice of (i) any material adverse
change in the condition of any of the Company, the Assets or the Systems or any
material change in any of the information contained in the representations and
warranties of Sellers or information otherwise furnished to Buyer which occurs
after the date hereof and (ii) any claim, action, investigation or proceeding
threatened in writing or initiated relating to any rate then being charged by
the Company for any service provided by the Systems or the carriage of or
failure to carry any television broadcast signal. During such period, Sellers
and the Company shall consult with Buyer and keep Buyer fully informed at all
times regarding any hearings or developments relating to any such claim, action,
investigation or proceeding. No such furnishing of information to Buyer and no
investigation by Buyer shall affect Buyer's right to rely on, or Sellers'
liability with respect to, any representation or warranty made in this
Agreement.
6.2 Continuity and Maintenance of Operations. Except as specifically
----------------------------------------
permitted or required by this Agreement or by any Legal Requirement, Sellers
shall cause the Company to, and the Company shall:
A. Operate the Business in the ordinary course consistent with past
practices, including without limitation, its billing, promotional and marketing
practices and preserve any beneficial business relationships with customers,
suppliers, employees, Governmental Authorities and others having business
dealings with the Company relating to the Business;
27
B. Maintain the Assets, including the plant and Equipment related thereto,
in good operating condition (normal wear and tear excepted), and implement any
capital expenditures required in connection with such maintenance;
C. Maintain all bonds and casualty and liability insurance relating to the
Systems as in effect on the date of this Agreement;
D. Keep all of its business books, records and files relating to the
Systems in the ordinary course of business in accordance with past practices,
and pay, consistent with past practices ( but in all events within 60 days), all
accounts payable and other debts, liabilities and obligations relating to the
Systems;
E. Continue to implement its procedures for disconnection and
discontinuance of service to System subscribers whose accounts are delinquent in
accordance with those in effect on the date of this Agreement;
F. Not sell, transfer or assign any Assets, other than the Excluded Assets
or on an arms-length basis in the ordinary course of business consistent with
past practices;
G. Not permit the amendment or cancellation of any of the Governmental
Permits, Contracts or any other contract or agreement which materially affects
or is applicable to the Systems or the Business;
H. Except as otherwise agreed by Buyer and Sellers, not enter into any
contract or commitment for the acquisition of goods or services relating to the
Systems or the Business, the performance of which will not be completed by the
Closing Date or involving an expenditure in excess of $5,000;
I. Not take or omit to take any action that would cause Sellers to be in
breach of any of its representations or warranties in this Agreement;
J. Maintain inventories of equipment, cable and supplies at normal levels
consistent with past practice and good industry standards;
K. Not increase the compensation or change any benefits available to
director, officer or employees of the Company except as required pursuant to
existing written agreements or except in the ordinary course of business
consistent with past practice;
L. Report and write off Accounts Receivable in accordance with past
practices;
M. Withhold and pay when due all Taxes relating to employees of the
Business, the Assets, the Business and/or the Systems;
N. Not create, assume or permit to exist any Encumbrance (other than
Permitted Encumbrances) on any of the Assets, other than those Encumbrances
existing on the date hereof;
28
O. Maintain service quality of the Systems at a level at least consistent
with past practices;
P. File with the FCC all reports required to be filed under applicable
FCC rules and regulations, and otherwise comply with all Governmental Permits
and Legal Requirements with respect to the Systems;
Q. Not implement any new marketing program, policy or practice other than
as described on Schedule 4.13, or implement any rate change, retiering or
repackaging;
R. Not increase the channel capacity of the Systems;
S. Not make any change in its Articles of Incorporation or By-laws;
T. Not make any change in its authorized or issued capital stock,
including treasury stock;
U. Not grant any option, authorize or issue any warrant, scrip or
subscription right to make any call, or make any redemption or commitment of any
nature with respect to its authorized or issued stock including treasury stock;
V. Provided such payments or distributions would not result in the
failure to comply with the other provisions of this Section 6.2, not declare,
set aside or pay any dividend or make any other distribution with respect to its
stock in excess of $50,000 per month;
W. Not enter into any collective bargaining, bonus, stock-option, profit-
sharing, compensation, pension, welfare, retirement, employment or similar
agreement except where required by Law or approved by Buyer;
X. Not lend any money or, other than with respect to draws on existing
lines of credit of the Company, borrow any money;
Y. Except as otherwise agreed by Buyer and Sellers, not make or contract
for any capital expenditures the aggregate costs of which shall exceed
$10,000.00;
Z. Not implement any rate increases without the prior written consent of
Buyer;
AA. Expend approximately $3,100,000 to complete the two-way 750MHz
upgrade of the Yankton Cable TV system (which consists of approximately 110
miles) in accordance with the specifications detailed in the Offering Memorandum
prepared and delivered to Buyer by Xxxxxxx and Associates; provided that at the
Closing, the Purchase Price will be increased to reflect the costs of: (i) the
fiber run to Xxxxxxxxxx; (ii) equipping the new headend building between Yankton
and Xxxxxxxxxx; (iii) replacing drops; and (iv) wrecking-out the old
distribution plant, as agreed by Buyer and Sellers.
29
BB. Effect and facilitate the transfer of the Shares and the transition of
the operation of the Company and The Systems to Buyer as contemplated by this
Agreement.
6.3 Employee Matters. The Company will continue to conduct its business
----------------
through Employees engaged by Xxxxxx pursuant to the Management Agreement. Prior
to the Closing Xxxxxx will make available to Buyer those Employees currently
engaged to operate the Business for interviews by Buyer with respect to possible
employment by Buyer for the operation of the Business after the Closing. Buyer
may offer employment to such of the Employees as Buyer shall determine upon such
terms and conditions as Buyer may establish in its sole discretion.
6.4 Consents.
--------
Sellers will use commercially reasonable efforts to obtain, at their own
cost and expense as soon as practicable, and Buyer shall use commercially
reasonable efforts to cooperate with the Sellers, a reasonably requested, to
obtain the Consents, in form and substance reasonably satisfactory to Buyer;
provided that "commercially reasonable efforts" for this purpose (i) shall not
require Sellers or Buyer to undertake extraordinary or unreasonable measures to
obtain such approvals and consents, including, without limitation, the
initiation or prosecution of legal proceedings or the payment of fees in excess
of normal and usual filing and processing fees and (ii) shall not require Buyer
to agree to any change in any Contract or Governmental Permit as a condition to
obtaining any Consent, the effect of which is to make such Contract or
Governmental Permit more burdensome to Buyer.
6.5 HSR Notification. As soon as practicable after the execution of this
----------------
Agreement and if required by applicable Legal Requirements, Sellers and Buyer
will each complete and file, or cause to be completed and filed, any
notification and report required to be filed under the Xxxx-Xxxxx-Xxxxxx
Antitrust Improvements Act of 1976, as amended (the "HSR Act"). Each of the
parties will take any additional action that may be necessary, proper or
advisable, will cooperate to prevent inconsistencies between their respective
filings (including the exchange of drafts) and will furnish to each other such
necessary information and reasonable assistance as the other may reasonably
request in connection with its preparation of necessary filings or submissions
under the HSR Act. Buyer and Sellers shall use commercially reasonable efforts
(including the filing of a request for early termination) to obtain the early
termination of the waiting period under the HSR Act. The HSR Act filing fee
shall be paid equally by the parties.
6.6 Notification of Certain Matters. Each party will promptly notify the
-------------------------------
other of any fact, event, circumstance or action the existence or occurrence of
which would cause any of such party's representations or warranties under this
Agreement not to be true and correct in any material respect.
6.7 Risk of Loss; Condemnation.
--------------------------
A. Sellers will bear the risk of any loss or damage to the Company, the
Assets, the Systems and the Business resulting from fire, theft or other
casualty at all times prior to the Closing. If any such loss or damage is so
substantial as to prevent normal operation of any portion of the
30
Systems within five days after the occurrence of the event resulting in such
loss or damage, Sellers shall immediately notify Buyer of that fact and Buyer,
at any time within ten days after receipt of such notice, may elect by written
notice to Sellers either (i) to waive such defect and proceed toward
consummation of the acquisition of the Shares in accordance with this Agreement
or (ii) to terminate this Agreement. If Buyer elects to consummate the
acquisition of the Shares notwithstanding such loss or damage and does so, at
Buyer's election there will be an adjustment in the Purchase Price to be paid
for the Shares under Article II on account of such loss or damage for the amount
of such loss or damage in excess of all insurance proceeds paid or payable to
the Company as a result of the occurrence of the event causing such loss or
damage.
B. If, prior to the Closing, any portion of any of the Systems is taken
or condemned as a result of the exercise of the power of eminent domain, or if a
Governmental Authority having such power informs Sellers, the Company, or Buyer
that it intends to condemn any portion of any System (such event being referred
to herein, in either case, as a "Taking"), then Buyer may terminate this
Agreement. If Buyer does not so elect to terminate this Agreement then if the
Closing occurs, Buyer shall have the sole right, in the name of the Company, if
Buyer so elects, to negotiate for, claim, contest and (if the Closing occurs)
receive all damages with respect to the Taking.
6.8 Adverse Changes. Sellers shall promptly notify Buyer in writing any
---------------
of materially adverse developments affecting the Company, the Assets, the
Business or the Systems which, to the best of Sellers' knowledge, shall have
occurred during the period from the date hereof through the Closing Date,
including, without limitation, (a) any damage, destruction, loss (whether or not
covered by insurance) or other event materially affecting any of the Company,
the Assets, the Systems or the Business, (b) any notice of violation, forfeiture
or complaint under any Governmental Permits, or (c) anything which, if not
corrected prior to the Closing Date, will prevent Sellers from fulfilling any
condition to Closing described herein.
6.9 No Solicitation. Between the date of this Agreement and the Closing
---------------
Date, Sellers shall not, and shall cause the Company's, officers, directors,
employees, agents and representatives (including, without limitation, Xxxxxxx &
Associates, any investment banker, attorney or accountant retained by Sellers or
the Company) not to, initiate, solicit or encourage, directly or indirectly, any
inquiries or the making of any proposal with respect to the Shares, the Company,
the Assets, the Systems or the Business, engage in any negotiations concerning,
or provide to 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 a purchase and sale of all or substantially all of the Shares,
the Company, the Assets, the Systems or the Business.
6.10 Forms 394. If required, promptly after the date of this Agreement,
---------
Sellers and Buyer shall, each at its own expense, prepare and file properly
prepared Applications for Franchise Authority Consent to Assignment or Transfer
of Control or Cable Television Franchise FCC 394 ("Forms 394") with the local
Government Authorities that have issued franchises to the Company, and shall
file all additional information required by such franchises or applicable local
Legal Requirements or that the Governmental Authorities deem necessary or
appropriate in connection
31
with their consideration of the request of Sellers or Buyer that such authority
approve of the transfer of the Franchises and the Shares.
6.11 Title Matters. Within twenty (20) days after the execution of this
-------------
Agreement, Sellers shall, at their expense, commission a qualified title company
to prepare and provide the Preliminary Title Report with respect to the Real
Property owned by the Company, and Sellers shall promptly provide a copy of the
Preliminary Title Report to Buyer, together with complete copies of all
documents relating to the title exceptions referred to in the Preliminary Title
Report. Buyer shall have the right, within thirty (30) Business Days of Buyer's
receipt of the Preliminary Title Report, to notify Sellers, in writing, of any
Disapproved Matters. Buyer's failure to raise Disapproved Matters within such
time period shall constitute a waiver of the Disapproved Matters. Any title
exception shown in the Preliminary Title Report and not objected to by Buyer
within such time period shall be deemed a Permitted Encumbrance. Prior to the
Closing, Sellers shall, at their expense, remove or cause to be removed all the
Disapproved Matters or, in the alternative, obtain title insurance in the form
satisfactory to Buyer insuring against the effect of such Disapproved Matters.
Sellers shall notify Buyer within seven (7) Business Days after receipt of
Buyer's notice of Disapproved Matters whether Sellers intend to remove the same.
If Sellers so notify Buyer, Buyer may elect (i) to terminate this Agreement, or
(ii) to waive such Disapproved Matters, in which event Buyer shall receive a
credit at the Closing in the amount, of the cost to the Disapproved Matters.
6.12 Phase I Study. Buyer may, at its option and at its own expense,
-------------
have Phase I environmental site assessments and asbestos studies (the
"Environmental Reports" of any of the Real Property performed by one or more
---------------------
reputable environmental firms designated by Buyer. If environmental conditions
are uncovered as a result of obtaining such Environmental Reports and (i)
remediation of such conditions is required by any Legal Requirement or such
conditions, if not remediated, would reasonably be expected to subject Buyer or
the Company to fines or penalties as a result of such conditions violating any
Legal Requirement or (ii) Sellers' representations and warranties in Section
4.19 are breached, then Buyer may elect either to terminate this Agreement, or
to consummate the transactions contemplated hereby subject to an adjustment to
the Purchase Price in the amount of the cost of such remedial action.
6.13 Monthly Financial Statements. Between the date of execution and
----------------------------
delivery of this Agreement and the Closing Date, Sellers shall deliver to Buyer
within thirty (30) days after the end of each calendar month, unaudited
financial reports ("Monthly Financial Statements") in the form customarily
prepared by the Company as set forth in Schedule 6.13 with respect to the
-------------
Company, the Business and the System and other information with respect to the
Company, the Business and Systems (including, without limitation, capital
expenditures, reports setting forth the revenue and cash flow of the Company,
the Business and the Systems for each month and year-to-date, subscriber
information for Basic Subscribers and Bulk Units, disconnect requests, miles of
plant, homes passed and such other information as Buyer may reasonably request
which is in the form customarily prepared by the Company, beginning as soon as
practicable after the date of this Agreement). Such financial statements and
information requested shall present fairly and accurately the financial
condition and results of operations of the Company, the Business and the Systems
for the period then ended and as of such dates and be prepared in accordance
with GAAP consistently applied through the periods specified subject to normal
year end adjustments.
32
6.14 Confidentiality. (a) The parties hereto, together with Xxxxxx Co.,
---------------
it employees and Xxxxx Xxxxxx, shall not, directly or indirectly, disclose or
furnish to any Person any confidential or proprietary documents, information or
data of the other party, whether written or oral, and furnished to such party,
its employees, agents, lenders, accountants, representatives, advisors or
consultants ("Confidential Parties") in the course of the negotiation of this
Agreement or in connection with or relating to the transactions contemplated by
this Agreement, the Assets, or the Systems (the "Information"). Each party will
hold and use all reasonable efforts to cause its respective Confidential Parties
to hold in strict confidence all of the Information, and will not, without the
prior written consent of the other party, (i) use the Information for any
purpose other than in connection with the transactions contemplated by this
Agreement or in any proceeding, litigation or arbitration in respect thereof; or
(ii) release or disclose any Information to any other person, except to such
Confidential Parties. Notwithstanding the foregoing, the following will not
constitute a part of the Information for the purposes of this Section:
(i) information that a party can show was known by it or any of its
respective Confidential Parties prior to the disclosure thereof by the
other party;
(ii) information that is or becomes generally available to the
public other than as a result of a disclosure directly or indirectly by the
party or any of its respective Confidential Parties in breach of this
Section 6.14;
(iii) information that is independently developed by such party or
any of its respective Confidential Parties; or
(iv) information that is or becomes available to such party on a non-
confidential basis from a source other than the other party or any of its
respective Confidential Parties, provided that such source is not known by
the party receiving the Information to be bound by any obligation or
confidentiality in relation thereto.
(b) From and after the Closing Date, Sellers, together with Abbot Co.,
its employees and Xxxxx Xxxxxx, shall not, directly or indirectly, disclose or
furnish to any Person any confidential or proprietary documents, information or
data, whether written or oral, relating to or in connection with the Company,
the Systems or the Business (the "Confidential Information"), other than
information that is or becomes generally available to the public other than as a
result of a disclosure, directly or indirectly, by any such parties in breach of
this Section 6.14(b) and other than as required by law.
(c) In the event any of Buyer, Sellers, Xxxxxx Co., or/and Xxxxx Xxxxxx
is requested or required pursuant to any judicial or regulatory proceeding or
other Governmental Authority to disclose any Information or Confidential
Information, such of Buyer, Sellers, Xxxxxx Co., or/and Xxxxx Xxxxxx shall
provide the others parties with prompt notice thereof, so that the other parties
may seek a protective order or other appropriate remedy and/or waive compliance
with the provisions of Section 6.14(a). In the event that such protective order
or other remedy is not obtained and such party has not waived compliance with
the provisions of Section 6.14(a), and such of Buyer, Sellers, Xxxxxx Co.,
or/and Xxxxx Xxxxxx is legally required to disclose the Information or
33
Confidential Information to any tribunal, court, regulatory authority or agency
or third party claimant, that portion of the Information or Confidential
Information which such of Buyer, Seller, Xxxxxx Co., or/and Xxxxx Xxxxxx is
legally required to disclose may be disclosed, provided, however, that such of
Buyer, Sellers, Xxxxxx Co., or/and Xxxxx Xxxxxx will exercise commercially
reasonable best efforts (at no cost or penalty to such of Buyer, Sellers, Xxxxxx
Co., or/and Xxxxx Xxxxxx) to obtain reliable assurances that confidential
treatment will be accorded to such Information or Confidential Information.
(d) The provisions of this Section 6.14 shall survive the Closing.
6.15 Covenant Not to Compete. The term "Covenantors" as used in this
-----------------------
Section 6.15 shall be defined to mean each of the Sellers, Xxxxxx Co., Xxxxx
Xxxxxx, and all corporations, firms and entities controlled by any or any
combination of them.
A. Each of the Sellers, Xxxxxx Co. and Xxxxx Xxxxxx covenants and agrees
for himself, herself and itself, that for a period of five years after Closing
(or such period as allowed by law if less than five years), neither such
Covenantor nor any corporation, firm or other entity controlled by such
Covenantor (alone or in combination with any other covenantor) will or be
involved with the cable television business, data service, media or
telecommunications business within a 50-mile radius of the Franchise Areas
except as otherwise disclosed on Schedule 6.15 attached hereto. Notwithstanding
-------------
anything contained herein, the ownership of passive securities of any company
which is "publicly held" and which do not constitute more than one percent (1%)
of the voting rights or equity interest of such entity shall not constitute a
violation of this covenant.
B. Each of the Sellers and Xxxxxx agrees that in the event that any
Covenantor commits a breach or threatens to commit a breach of any of the
provisions of Sections 6.14 or 6.15, Buyer shall have the right and remedy to
have the provisions of this Section 6.15 specifically enforced by any court
having jurisdiction, it being acknowledged and agreed that any such breach could
cause immediate irreparable injury to Buyer and that money damages would not
provide an adequate remedy at law for any such breach or threatened breach. Such
right and remedy shall be in addition to, and not in lieu of, any other rights
and remedies including damages available to Buyer at law or in equity.
C. If any of the provisions of or covenants contained in this Section 6.15
are hereafter construed to be wholly or to any extent invalid or unenforceable
in any jurisdiction, the same shall be deemed automatically modified to the
minimum extent necessary to make such provision or covenant enforceable, and the
same shall not affect the remainder of the provisions to the extent not invalid
or unenforceable in such jurisdiction or the enforceability thereof without
limitation in any other jurisdiction.
D. The provisions of this Section 6.15 shall survive the Closing.
6.16 Public Announcements. Prior to the Closing Date, all notices to third
--------------------
parties and other publicity relating to the transaction contemplated by this
Agreement shall be jointly planned and agreed to by Sellers and Buyer unless
otherwise required by law; provided, however, that Sellers
-------- -------
34
may, from time to time advise its lenders and Buyer may, from time to time,
advise its members and lenders, with respect to this Agreement and the
transactions contemplated by this Agreement without the consent of the other.
Sellers shall not unreasonably refuse requests by Buyer, once approval of the
Governmental Authorities to the transfer of the franchises is granted, to insert
in invoices to the Company's subscribers, at Buyer's expense, subscriber
educational material concerning the transaction contemplated by this Agreement.
6.17 Excluded Assets. No less than 30 days prior to the Closing Date,
---------------
the Sellers shall cause the Company to, and the Company shall sell and transfer
or assign all of its right title, and interest in and to the Excluded Assets
more fully described on Schedule 6.17 attached hereto.
6.18 Audited Financial Statements. Either before of after the Closing,
----------------------------
at Buyer's request and expense, Sellers shall cause the Company's present
external auditors to assist Buyer in the preparation of audited financial
statements for the Company for the three-year period prior to the Closing.
6.19 Midcontinent Agreement. At or prior to the Closing, and subject to
----------------------
the Agreement of Midcontinent Cable Systems Co. of South Dakota ("Midco")
Sellers shall assume all of the obligations of the Company under and pursuant to
that certain Asset Purchase Agreement dated as of March 29, 1999 by and between
Midco and the Company and the transactions contemplated thereby.
ARTICLE VII
CONDITIONS PRECEDENT TO OBLIGATIONS OF BUYER
The obligations of Buyer under this Agreement are subject to the
satisfaction at or prior to the Closing of each of the following conditions, any
one or more of which may be waived by Buyer, in its sole direction.
7.1 HSR Act. If required under applicable Legal Requirements, all
-------
filings required under the HSR Act shall have been made and the applicable
waiting period shall have expired or been earlier terminated without the receipt
of any objection or the commencement or threat of any litigation by a
Governmental Authority of competent jurisdiction to restrain the consummation of
the transactions contemplated by this Agreement.
7.2 Governmental or Legal Action. No action, suit or proceeding shall be
----------------------------
pending or threatened by any Governmental Authority or other Person and no Legal
Requirement shall have been enacted, promulgated or issued or deemed applicable
to any of the transactions contemplated by this Agreement by any Governmental
Authority or other Person that would (a) prohibit Buyer's ownership or operation
of the Company, the Systems, the Business or the Assets or require Buyer to
divest itself of the Company, the Systems or any of the Assets after the Closing
Date, (b) result in the imposition of material damages against Buyer or any of
its Affiliates in connection with the consummation of the transactions
contemplated by this Agreement or (c) prevent or make illegal the consummation
of the transactions contemplated by this Agreement.
35
7.3 Accuracy of Representations and Warranties. The representations and
------------------------------------------
warranties of Sellers contained in this Agreement shall be true and correct in
all material respects as of the date of this Agreement and as of the Closing
Date, with the same effect as though made on and as of the Closing Date.
7.4 Performance of Agreements. Sellers shall have performed in all
-------------------------
material respects all obligations and agreements and complied or caused to be
complied with all covenants and conditions required by this Agreement to be
performed or complied with by them at or prior to the Closing Date.
7.5 No Material Adverse Change. During the period from the date of this
--------------------------
Agreement through and including the Closing Date, there shall not have occurred
any material adverse change in the business, prospects, Assets, financial
condition or operations of the Company, other than any change arising out of
matters of a general economic nature or matters affecting the cable television
industry (national or regional) generally, and the Company shall not have
sustained any material loss or damage to the Assets or any of the Systems,
whether or not insured, that materially affects its ability to conduct the
Business in a manner consistent with past practice.
7.6 Consents. Sellers shall have delivered to Buyer evidence, in form
--------
and substance reasonably satisfactory to Buyer, that all the Required Consents
have been obtained or given, and the criteria set forth on Schedule 4.7 shall
------------
have been satisfied.
7.7 Transfer Documents. Sellers shall have delivered to Buyer customary
------------------
instruments of transfer sufficient to convey good and marketable title to the
Shares in accordance with the terms of this Agreement and otherwise in form and
substance satisfactory to Buyer and its counsel, together with such other
documents as described in Section 3.2.A.
7.8 Opinions of Counsel. Buyer shall have received the opinions of (a)
-------------------
Xxxxxx, Xxxxxxx & Xxxxxxxxx, LLP, counsel for Sellers and the Company, dated the
Closing Date, substantially in the form of Exhibit B attached hereto and (b)
---------
Xxxx, Raywid and Xxxxxxxxx, FCC counsel for the Company, dated the Closing Date,
substantially in the form of Exhibit C attached hereto.
---------
7.9 Discharge of Encumbrances. Sellers shall have caused the Company to
-------------------------
secure the termination or removal of all Encumbrances of any nature on the
Assets, other than Permitted Encumbrances. Sellers shall have made all payments
to Xxxxxx Co. in respect of and as required pursuant to the Phantom Equity
Agreement and the Management Agreement.
7.10 Additional Documents and Acts. Sellers shall have delivered or
-----------------------------
caused to be delivered to Buyer all other documents required to be delivered
pursuant to this Agreement and done or caused to be done all other acts or
things reasonably requested by Buyer to evidence compliance with the conditions
set forth in this Article VII.
36
7.11 Certificates. Sellers shall have furnished Buyer with such other
------------
certificates of Sellers and others, dated as of the Closing Date, to evidence
compliance with the conditions set forth in this Article VII, as may be
reasonably requested by Buyer.
7.12 Termination of Management Agreement. The Management Agreement shall
-----------------------------------
be terminated effective as of the Closing Date.
7.13 Office Space at Worthington and Yankton Properties.
--------------------------------------------------
Sellers shall, or shall cause such of the Company's current affiliates
which own such property at and after the Closing to, enter into an agreement as
of the Closing Date pursuant to which the Company shall be entitled to continue
to occupy certain office space at the buildings located in Worthington and
Yankton (which are included in the Excluded Assets) for a period of no less than
seven (7) years from the Closing Date at no cost to Buyer or the Company other
than maintenance and utilities for the space occupied and insurance on the
contents, and the owner of such property shall be and remain responsible for all
other costs and expenses including repairs, taxes and insurance (other than
insurance on the Company's contents).
7.14 Equivalent Basic Subscribers. The number of Equivalent Basic
----------------------------
Subscribers as of the Closing Date shall be not less than 13,000.
ARTICLE VIII
CONDITIONS PRECEDENT TO OBLIGATIONS OF SELLERS
The obligations of Sellers under the Agreement are subject to the
satisfaction, at or prior to the Closing Date, of each of the following
conditions, any one or more of which may be waived by Sellers, in its sole
discretion.
8.1 HSR Act. If required under applicable Legal Requirements, all
-------
filings required under the HSR Act shall have been made and the applicable
waiting period shall have expired or been earlier terminated without the receipt
of any objection or the commencement or threat of any litigation by a
Governmental Authority of competent jurisdiction to restrain the consummation of
the transactions contemplated by this Agreement.
8.2 Governmental or Legal Actions. No action, suit or proceeding shall
-----------------------------
be pending or threatened by any Governmental Authority and no Legal Requirement
shall have been enacted, promulgated or issued or deemed applicable to any of
the transactions contemplated by this Agreement by any Governmental Authority
that would (a) prohibit Buyer's ownership of the Shares, the Company or
operation of the Systems, the Business or the Assets, (b) result in the
imposition of material damages against Buyer in connection with the consummation
of the transactions contemplated by this Agreement or (c) prevent or make
illegal the consummation of the transactions contemplated by this Agreement.
37
8.3 Accuracy of Representations and Warranties. The representations and
------------------------------------------
warranties of Buyer contained in this Agreement shall be true and correct in all
material respects as of the date of this Agreement and as of the Closing Date,
with the same effect as though made on and as of the Closing Date.
8.4 Performance of Agreements. Buyer shall have performed in all
-------------------------
material respects all obligations and agreements and complied or caused to be
complied with all covenants and conditions required by this Agreement to be
performed or complied with by Buyer at or prior to the Closing Date.
8.5 Opinion of Buyer's Counsel. Sellers shall have received the opinion
--------------------------
of Xxxxxxxxx Xxxxxx Xxxxxxxx Xxxxxx & Xxxxxx, P.C., counsel for Buyer, dated the
Closing Date, substantially in the form of Exhibit D attached hereto.
---------
8.6 Additional Documents and Acts. Buyer shall have delivered or caused
-----------------------------
to be delivered to Sellers all other documents required to be delivered pursuant
to this Agreement and done all other acts or things reasonably requested by
Sellers to evidence compliance with the conditions set forth in this Article
VIII.
8.7 Certificates. Buyer shall have furnished Sellers with such other
------------
certificates of Buyer and others, dated as of the Closing Date, to evidence
compliance with the conditions set forth in this Article VIII, as may be
reasonably requested by Sellers.
ARTICLE IX
INDEMNITY
9.1 Survival of Representations and Warranties. The representations and
------------------------------------------
warranties of the parties contained in this Agreement or in any document
delivered pursuant hereto shall be deemed to be continuing and shall survive the
Closing, and any party may assert a claim for indemnity with respect thereto,
for a period of two years; provided that the representations and warranties of
Sellers relating to Taxes, title to the Assets, employment and employee benefit
matters, and environmental matters shall survive the Closing , and Buyer may
assert a claim for indemnity with respect thereto, for a period ending sixty
(60) days after the expiration of the applicable statute of limitations; and
provided, further, that any claims by Buyer against Sellers for indemnification
with respect to third party claims or matters pertaining to the Excluded Assets
shall survive the Closing, and may asserted by Buyer, indefinitely.
9.2 Sellers' Indemnity.
------------------
A. Sellers agree to indemnify and hold Buyer harmless from, against and
in respect of, and shall on demand reimburse Buyer for:
(i) any and all Liabilities of the Company in existence on the
Closing Date, whether or not known on or prior to the Closing Date
which constitute breaches of Section
38
4.24 hereof or which arose after the date hereof contrary to the
provisions of Article 6 hereof, or which were not reflected in the
Working Capital Adjustment, provided that this indemnity shall not
apply to the extent any such liabilities have been reflected or
reserved against in the Financial Statements or which have resulted
in an adjustment to the Purchase Price which has been credited to
Buyer at Closing or paid by Sellers to Buyer after Closing;
(ii) the liability of the Company for United States, state,
local or other Taxes for periods ending on or before December 31,
1998 (to the extent exceeding the provisions for current and deferred
taxes in the Financial Statements) and the liability of the Company
for United States, state, local or other Taxes for the period from
January 1, 1999 to the Closing Date (including, without limitation,
the Excluded Assets Tax Liability) to the extent not provided in the
Financial Statements as at December 31, 1998 and, for periods after
December 31, 1998, to the extent exceeding similar provisions for
such taxes after the date as reflected in the Working Capital
Adjustment; provided, that this indemnity shall not apply to the
extent of any such liabilities which have resulted in an adjustment
to the Purchase Price which has been credited to Buyer at Closing or
paid by Sellers to Buyer after Closing.
(iii) The obligations of the Company after the Closing Date
under any Governmental Permits or Contracts constituting a breach of
Section 4.17 or resulting from breaches of Article 6 hereof;
(iv) any and all loss, damage, deficiency, costs or expenses
sustained by Buyer, or the Company as a result of:
(a) any error, misstatement, omission or misrepresentation
in any of the representations and warranties of the Sellers
contained in this Agreement or any Schedule, certificate,
document or instrument delivered to Buyer hereunder;
(b) any order, judgment or decree made at any time by any
court or judicial or administrative department or agency of any
foreign, federal, state, county, municipal or local government
as the result of any act or omission of the Company occurring,
or resulting from the operations of the Business or the Company,
prior to the Closing Date;
(c) the nonfulfillment of any obligation on the part of the
Sellers to be performed under the terms of this Agreement; and
(d) any and all actions, suits, proceedings, claims,
demands, assessments, judgments, costs and expenses, including
without limitation, legal fees and expenses, incident to any of
the foregoing or incurred in investigating or attempting to
avoid the same or to oppose the imposition thereof, or in
enforcing this indemnity.
B. If any claim covered by the foregoing indemnity is asserted against
Buyer by a third party, Buyer shall promptly give the Sellers notice thereof and
give Sellers an opportunity to defend the same with counsel of Sellers' choice
at Sellers' expense. Buyer shall provide reasonable
39
cooperation in connection with such defense. In the event that Sellers desires
to compromise or settle any such claim, Buyer shall have the right to consent to
such settlement or compromise; provided, however, that if such compromise or
settlement is for money damages only and will include a full release and
discharge of Buyer, and Buyer withholds its consent to such compromise or
settlement, Buyer and Sellers agree that (i) Sellers' liability shall be limited
to the amount of the proposed settlement and Sellers shall thereupon be relieved
of any further liability with respect to such claim, and (ii) from and after
such date, Buyer will undertake all legal costs and expenses in connection with
any such claim and shall indemnify Sellers from any further liability or
obligation to such third party in connection with such claim in excess of the
amount of the proposed settlement. If Sellers fails to defend any claim within a
reasonable time, Buyer shall be entitled to assume the defense thereof, and
Sellers shall be liable to Buyer for its expenses reasonably incurred, including
attorney's fees and payment of any settlement amount or judgment.
X. Xxxxxxx shall not be required to indemnify or otherwise be liable to
Buyer for any claim unless the losses, liabilities, damages, costs and expenses
of Buyer arising from all such claims exceeds $25,000.00. If the losses,
liabilities, damages, costs and expenses of Buyer arising from all such claims
exceeds $25,000, Sellers shall be required to indemnify Buyer for the full
amount of all such claims provided that Sellers shall not be required to
indemnify or otherwise be liable to Buyer for any claim to the extent that the
losses, liabilities, damages, costs and expenses of Buyer arising from all such
claims exceed, in the aggregate, the sum of Five Million dollars ($5,000,000).
Notwithstanding the foregoing, the above threshold and limitations shall not
apply to claims for indemnity by Buyer arising out of third party claims or
relating to the Excluded Assets.
9.3 Buyer's Indemnity
-----------------
A. Buyer agrees to indemnify and hold Sellers harmless from, against and
in respect of, and shall on demand reimburse Sellers for:
(i) any and all loss, liability or damage resulting from any untrue
representation, breach of warranty or nonfulfillment of any covenant or
agreement by Buyer contained in any Transaction Document delivered to
Sellers hereunder;
(ii) the obligations of the Company arising from the operation of the
Business from and after the Closing Date;
(iii) the non-fulfillment of any obligation on the part of Buyer to be
performed under the terms of this Agreement; and
(iv) any and all actions, suits, proceedings, claims, demands,
assessments, judgments, costs and expenses, including without limitation,
legal fees and expenses, incident to any of the foregoing or incurred in
investigating or attempting to avoid the same or to oppose the imposition
thereof, or in enforcing this indemnity.
B. If any claim covered by the foregoing indemnity is asserted against
Sellers by a third party, Sellers shall promptly give the Buyer notice thereof
and give Buyer an opportunity to defend
40
the same with counsel of Buyer's choice at Buyer's expense. Sellers shall
provide reasonable cooperation in connection with such defense. In the event
that Buyer desires to compromise or settle any such claim, Sellers shall have
the right to consent to such settlement or compromise; provided, however, that
if such compromise or settlement is for money damages only and will include a
full release and discharge of Sellers, and Sellers withholds their consent to
such compromise or settlement, Sellers and Buyer agree that (i) Buyer's
liability shall be limited to the amount of the proposed settlement and Buyer
shall thereupon be relieved of any further liability with respect to such claim,
and (ii) from and after such date, Sellers will undertake all legal costs and
expenses in connection with any such claim and shall indemnify Buyer from any
further liability or obligation to such third party in connection with such
claim in excess of the amount of the proposed settlement. If Buyer fails to
defend any claim within a reasonable time, Sellers shall be entitled to assume
the defense thereof, and Buyer shall be liable to Sellers for its expenses
reasonably incurred, including attorney's fees and payment of any settlement
amount or judgment.
C. Buyer shall not be required to indemnify or otherwise be liable to
Sellers for any claim unless the losses, liabilities, damages, costs and
expenses of Sellers arising from all such claims exceeds $25,000. If the losses,
liabilities, damages, costs and expenses of Sellers arising from all such claims
exceeds $25,000, Buyer shall be required to indemnify Sellers for the full
amount of all such claims, provided, that Buyer shall not be required to
indemnify or otherwise be liable to Sellers for any claim to the extent that the
losses, liabilities, damages, costs and expenses of Sellers arising from all
such claims exceed in the aggregate the sum of Five Million dollars
($5,000,000).
9.4 Remedies Cumulative; Right to Offset. The remedies provided in this
------------------------------------
Article IX shall be cumulative and shall not preclude assertion by any party
hereto of any other rights or the seeking of any other remedies against the
other party as specifically set forth in this Agreement.
ARTICLE X
TERMINATION
10.1 Conditions for Termination. This Agreement may be terminated as
--------------------------
follows:
A. By mutual consent of the parties hereto;
B. By either party, upon written notice to the other, if the Closing
shall not have occurred on or prior to September 30, 1999 (provided that the
terminating party shall not then be in breach or default of this Agreement);
C. By Buyer pursuant to Sections 6.7, 6.11, and 6.12; or
D. By Buyer or Sellers as provided in Article XI hereof.
10.2 No Liability Upon Certain Terminating Events. In the event of the
--------------------------------------------
termination of this Agreement pursuant to the provisions of this Section 10
(other than as a result of any breach or default by either party as set forth on
Section 11 hereto), this Agreement shall become void and have
41
no effect, without liability on the part of any of the parties hereto, or the
directors, officers, partners, members, managers or venturers of Sellers or
Buyer and each of the parties hereto shall bear its own counsel fees and
expenses.
ARTICLE XI
LIABILITY IN THE EVENT OF A BREACH
11.1 Default by Buyer. If Buyer shall default in the performance of its
----------------
obligations under this Agreement in any material respect or if, as a result of
Buyer's material breach of its obligations pursuant to this Agreement, the
conditions precedent to Sellers' obligation to close specified in Section 8 are
not satisfied, and none of the Sellers shall then be in default in the
performance of its obligations hereunder in any material respect, Sellers shall
be entitled, as their sole remedy, to terminate this Agreement by written notice
to Buyer and to receive the sum of $2,000,000, as liquidated damages, in which
event Sellers and Buyer shall be discharged from all further liability under
this Agreement upon payment of such liquidated damages to Sellers. Sellers and
Buyer agree in advance that actual damages would be difficult to ascertain and
that the amount of such liquidated damages is a fair and equitable amount to
reimburse Sellers for damages sustained due to such default by Buyer of this
Agreement.
11.2 Default by Sellers. If any of the Sellers shall default in the
------------------
performance of its obligations under this Agreement in any material respect or
if, as a result of a material breach by any Seller of its obligations pursuant
to this Agreement, the conditions precedent to Buyer's obligation to close
specified in Section 7 are not satisfied, and Buyer shall not then be in default
in the performance of its obligations hereunder in any material respect, Buyer
shall then be entitled, at Buyer's sole option, either:
A. to exercise Buyer's right to a decree of specific performance of the
transactions contemplated by this Agreement and the right to injunctive relief
in connection therewith, without any bond or security being required and without
the necessity of showing actual damages, upon proper action instituted by Buyer.
Sellers and Buyer acknowledge and agree that the subject matter of this
Agreement is unique and accordingly, in the event of any action by Buyer to
enforce this Agreement, Sellers hereby waive the defense that there is an
adequate remedy at law. In the event of a breach or default which results in the
filing of an action by Buyer for specific performance or injunctive relief, the
prevailing party in such action shall be entitled to receive reimbursement from
the non-prevailing party for its costs and expenses in connection therewith,
including reasonable attorneys' fees.
B. to terminate this Agreement by written notice to Sellers and to
receive the sum of $2,000,000 as liquidated damages, in which event Sellers and
Buyer shall be discharged from all further liability under this Agreement upon
payment of such liquidated damages to Buyer. Sellers and Buyer agree in advance
that actual damages would be difficult to ascertain and that the amount of such
liquidated damages is a fair and equitable amount to reimburse Buyer for damages
sustained due to such default by Sellers of this Agreement.
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ARTICLE XII
NOTICES
12.1 Notices. Any notices or other communications to the Sellers or the
-------
Buyer, shall be sent by overnight mail, certified or registered mail, return
receipt requested, or by facsimile with report of delivery, to the addresses set
forth below, or to such other address as Sellers or Buyer may designate, from
time to time, by written notice to the other:
To Buyer: MEDIACOM LLC
000 Xxxxxxx Xxx Xxxx
Xxxxxxxxxx, Xxx Xxxx 00000
Attention: Xxxxx X. Xxxxxxxx
Facsimile: (000) 000-0000
with a copy to: Xxxxxx X. Xxxxxxxx, Esq.
Xxxxxxxxx Xxxxxx Xxxxxxxx
Xxxxxx & Xxxxxx, P.C.
000 Xxxxx Xxxxxx - 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Facsimile: (000) 000-0000
To Sellers: Xxxxx Xxxxxx, Trustee for the
Trusts created under the Will dated June 3, 1982
of Xxxxx X. Xxxxxxx, deceased, for the benefit of
Xxxxxxx X. Xxxxxxx and Xxxx X. Xxxxxxx
000 Xxxx Xxxxx
Xxxxxxxxxx, XX 00000
Facsimile: (000) 000-0000
XXXXXXX X. XXXXXXX
00 Xxx Xxxxx Xxxx
Xxxxxxxxx, XX 00000
Facsimile: (000) 000-0000
XXXX X. XXXXXXX
0000 X. Xxxxxx
00
Xxxxxxxx, XX 00000
Facsimile: (000) 000-0000
with a copy to: Xxxxxxx X. Xxxxxx, Esq.
Xxxxxx, Xxxxxxx & Xxxxxxxxx, LLP
000 Xxxxx Xxxxxxxx Xxxxxx
Xxxxx 000
Xxxxx Xxxxx, Xxxxx Xxxxxx 00000-0000
Facsimile: (000) 000-0000
Any such notice shall be effective when delivered by overnight mail service or
by facsimile, or date receipt acknowledged, if by certified mail, return receipt
requested.
ARTICLE XIII
MISCELLANEOUS
13.1 Entire Agreement. This writing constitutes the entire agreement of
----------------
the parties with respect to the subject matter hereof and may not be modified,
amended or terminated, except by a written agreement specifically referring to
this Agreement signed by Buyer and Sellers. No waiver of any breach or default
hereunder shall be considered valid unless in writing and signed by the party
giving such waiver, and no such waiver shall be deemed a waiver of any
subsequent breach or default of the same or similar nature.
13.2 Successors and Assigns. This Agreement and all of the provisions
----------------------
hereof shall be binding upon and inure to the benefit of the parties hereto and
their respective successors and permitted assigns. Neither the Agreement nor any
of the rights, interests or obligations hereunder shall be assigned, by
operation of law or otherwise, by any party hereto without the prior written
consent of the other party, provided, that Buyer may assign this Agreement to
--------
any parent, subsidiary or Affiliate of Buyer without the prior written consent
of Sellers. Nothing in this Agreement, express or implied, is intended to confer
upon any person other than the parties hereto and their respective successors
and permitted assigns, any rights, remedies or obligations under or by reason of
this Agreement.
13.3 Arbitration. Except for claims for injunctive relief under Sections
-----------
6.14 and 6.15, claims for damages or equitable relief pursuant to Sections 11.1
and 11.2 and third-party claims by one party against the other in any action or
proceeding commenced by unaffiliated persons or firms, all claims, disputes and
differences hereunder shall be determined by arbitration under the rules then
obtaining of the American Arbitration Association in New York City. If $50,000
or more is at issue, the matter shall be heard by a panel of three arbitrators.
In such case Sellers and Buyer shall each designate one disinterested arbitrator
and the two arbitrators so designated shall select the third arbitrator. Buyer
and Sellers agree that in any dispute submitted for arbitration in connection
44
herewith, the non-prevailing party shall pay all fees and expenses of the
arbitration proceedings incurred by the prevailing party.
13.4 Captions. The paragraph headings contained herein are for the
--------
purposes of convenience only and are not intended to define or limit the
contents of said paragraphs.
13.5 Counterparts. This Agreement may be executed in one or more
------------
counterparts, all of which taken together, shall be deemed one original.
13.6 Governing Law. This Agreement shall be governed and construed in
-------------
accordance with the laws of the State of New York, without regard to conflict of
law provisions in such state.
13.7 Sellers' Knowledge. For purposes of this Agreement reference to "to
------------------
the best of Sellers' knowledge" or "to Sellers' knowledge" or "the knowledge of
Sellers" or any variation thereof means and refers to the knowledge, after due
investigation and inquiry, of each of the Sellers, Xxxxx Xxxxxx as trustee under
the Trust, individually, and as an officer of Xxxxxx Co., and Xxxxx Xxxxxxxx as
well as any other Employee operating the Business of the Company.
[Remainder of page intentionally left blank;
signatures to follow]
45
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
SELLER:
__________________________
XXXXXXX X. XXXXXXX
__________________________
XXXX X. XXXXXXX
TRUSTS CREATED UNDER THE WILL DATED JUNE 3, 1982
OF XXXXX X. XXXXXXX, DECEASED, FOR THE BENEFIT OF
XXXXXXX X. XXXXXXX AND XXXX X. XXXXXXX
By:_______________________
Name: Xxxxx Xxxxxx
Title: Trustee
BUYER:
MEDIACOM LLC
By:_______________________
Xxxxx X. Xxxxxxxx, Manager
Solely with respect to Sections 4.12, 6.14 and
6.15
XXXXXX COMPANY
By:_______________________
Xxxxx Xxxxxx, President
Solely with respect to Se` ctions 6.14 and 6.15
__________________________
XXXXX XXXXXX
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