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EXHIBIT 99(a)
AGREEMENT AND PLAN OF REORGANIZATION
This Agreement and Plan of Reorganization (this "Agreement"), dated
effective as of January 28, 1999, is entered into by and among Morrilton Video,
Inc., an Arkansas corporation ("Target"), WEHCO Video, Inc., an Arkansas C
corporation (the "Shareholder"), Morrilton Acquisition, Inc., a Texas
corporation ("Sub"), and TCA Cable TV, Inc., a Texas corporation ("Parent").
WITNESSETH
WHEREAS, the Shareholder owns all of the issued and outstanding capital
stock of Target (the "Stock"), and desires to sell the Stock to Parent;
WHEREAS, Parent desires to purchase the Stock in exchange for shares
of Parent's common stock, $.10 par value ("TCA Stock"), and has established Sub
to facilitate such purchase;
WHEREAS, the respective Boards of Directors of Parent, Sub, Target and
the Shareholder have approved the acquisition of Target by Parent;
WHEREAS, the respective Boards of Directors of Parent, Sub, Target and
the Shareholder have approved a merger of Sub into Target (the "Merger") to
facilitate such sale and purchase; and
WHEREAS, for federal income tax purposes, it is intended that the
Merger shall qualify as a reorganization with the meaning of Section 368(a) of
the Internal Revenue Code of 1986, amended (the "Code") pursuant to the
provisions governing reverse triangular mergers.
NOW THEREFORE, in consideration of the mutual representations,
warranties and covenants herein contained, and on the terms and subject to the
conditions herein set forth, the parties hereto hereby agree as follows:
ARTICLE I
Purchase and Sale as a Merger
Section 1.01. The Merger.
(i) Subject to the terms and conditions of this Agreement and the
Agreement of Merger executed by Parent, Sub and Target on the same date herewith
(the "Agreement of Merger"), Sub shall be merged into Target and the separate
existence of Sub shall thereupon cease, in accordance with the applicable
provisions of the laws of the State of Texas and the State of Arkansas.
Target will be the surviving corporation in the Merger (sometimes
referred to herein as the "Surviving Corporation") and will continue to be
governed by the laws of the State of Arkansas, and
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the separate corporate existence of Target and all of its rights, privileges,
immunities and franchises, public or private, and all its duties and liabilities
as a corporation organized under the laws of the State of Arkansas and other
applicable laws, will continue unaffected by the Merger.
At the Effective Time (as set forth in the Agreement of Merger), by
virtue of the Merger and without any action on the part of any holder of any
capital stock of Sub, all outstanding capital stock of Sub of any kind or nature
shall be canceled and shall cease to exist.
At the Effective Time (as set forth in the Agreement of Merger), by
virtue of the Merger and without any action on the part of any shareholder of
Target, the Stock shall continue unchanged and remain outstanding as the capital
stock of the Surviving Corporation. The Shareholder shall at the Closing
transfer, assign, convey and deliver to Parent, free and clear of all adverse
claims, security interests, liens, claims and encumbrances, and Parent shall
accept and acquire from the Shareholder, the Stock.
For the purposes of this Agreement, (i) the term "Closing" shall mean
the closing of the Merger and the other transactions contemplated by this
Agreement at such time and place as shall be mutually agreed upon in writing by
all of the parties hereto, and (ii) the term "Closing Date" shall mean March 31,
1999, or such other date as may be mutually agreed upon in writing by all of the
parties hereto.
Section 1.02. Purchase Price.
(i) Total Purchase Price. The total purchase price to be paid by Parent
for the Stock shall be One Hundred and Sixty-Eight Thousand (168,000) shares of
TCA Stock of Parent (the "Closing Shares").
(ii) Delivery of the Closing Shares. The Closing Shares shall be
delivered by Parent to the Shareholder pursuant to the provisions of this
Agreement.
Section 1.03. Other Transfers as Part of Plan of Reorganization. As
part of the Plan of Reorganization contemplated by this Agreement, the following
additional transfers shall occur:
Parent shall transfer all of the Stock to its wholly-owned subsidiary
TAL Financial Corporation, a Nevada corporation ("TAL"), as a contribution to
capital.
Target shall transfer a substantial part or all of its assets to TCA
Holdings, L.P., a Texas limited partnership ("TCA Holdings"), in exchange for a
limited partnership interest in TCA Holdings.
TCA Holdings shall transfer the assets of Target received pursuant to
the provisions of the previous paragraph to TCA Cable Partners, a Delaware
general partnership, as a capital contribution.
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Section 1.04. Tax Status of Purchase and Sale. The Merger, the transfer
of the Stock to Parent, and the transfer of the Closing Shares to the
Shareholder contemplated by this Agreement are intended by the parties to
qualify as a reverse triangular tax-free reorganization under Sections
368(a)(1)(A) and 368(a)(2)(E) of the Code, and each of the parties hereto agrees
to act with respect to the Stock and the Closing Shares, as applicable, and
take such other steps, including the proper filing of plans of reorganization
and articles of merger, as shall be necessary to insure the tax-free status of
the transaction under such Code sections and the underlying regulations.
Section 1.05. Status of TCA Stock. The Shareholder hereby acknowledges
that the TCA Stock transferred to it by Parent hereunder will not be registered
under the Securities Act of 1933, as amended (the "Securities Act"), or the
securities laws of any state. The Shareholder hereby acknowledges that it will
be required to hold the TCA Stock received hereunder indefinitely unless such
shares are subsequently registered under the Securities Act and applicable state
laws or unless exemptions from such registrations are available. The Shareholder
agrees to and shall execute a Letter of Investment Intent relating to its
ownership of the Closing Shares in the form of the letter attached hereto as
Exhibit 1.05, and agrees to remain subject to the representations, warranties
and covenants made therein after the Closing Date.
Parent agrees that upon the written request of the Shareholder, after
the Closing, Parent shall use its best efforts to register that portion of the
Closing Shares for which registration is requested, such registration to be at
the sole cost and expense of the Shareholder. In order to eliminate the costs
and expenses of any such registration for the Shareholder, Parent will use its
best efforts to register the Closing Shares pursuant to registration statements
already being filed by Parent. However, Parent is not required to change its
normal registration schedule for other TCA Stock simply to accommodate a dual
registration of the Closing Shares for the Shareholder.
ARTICLE II
Closing Deliveries
Section 2.01. Deliveries of Target and the Shareholder. At the Closing,
Target and the Shareholder shall deliver to Parent the following, all of which
shall be in form and content satisfactory to Parent and its counsel:
(i) certificates representing all of the Stock, duly endorsed and in
proper form for transfer to Parent by delivery under applicable law, or
accompanied by duly executed instruments of transfer in blank;
(ii) executed Agreement Not to Compete (the "Agreement Not to Compete")
among Target, Parent and the Shareholder, in the form of the agreement attached
as Exhibit 2.01(b);
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(iii) a separate Letter of Investment Intent, in the form attached
hereto as Exhibit 1.05, executed by the Shareholder;
(iv) a copy of resolutions of the Board of Directors of Target
authorizing the execution, delivery and performance of this Agreement, the
Agreement of Merger and all related documents and agreements, each certified by
the Secretary of that corporation as being true and correct copies of the
originals thereof subject to no modifications or amendments;
(v) a separate certificate of each of the President of Target and the
Shareholder, dated the Closing, Date, (i) as to the truth and correctness of the
representations and warranties of Target and the Shareholder contained herein on
and as of the Closing Date, (ii) as to the performance of and compliance by
Target and the Shareholder with all covenants contained herein on and as of the
Closing Date, and (iii) certifying that all conditions precedent of Target and
the Shareholder to the Closing have been satisfied;
(vi) a certificate of the Secretary of Target certifying as to the
incumbency of the directors and officers of Target and as to the signatures of
such directors and officers who have executed documents delivered at the Closing
on behalf of Target;
(vii) a certificate, dated within thirty (30) days of the Closing Date,
of the Secretary of State of the State of Arkansas establishing that Target is
in existence, has paid all franchise taxes and otherwise is in good standing to
transact business in that state;
(viii) certificates, dated within thirty (30) days of the Closing Date,
of the Secretaries of State of the states in which it is necessary for Target to
be qualified to do business, to the effect that Target is qualified to do
business and is in good standing as a foreign corporation in each of such
states, if applicable;
(ix) an opinion of legal counsel to Target and the Shareholder, dated
as of the Closing Date, in the form attached hereto as Exhibit 2.01(j), and an
opinion of FCC counsel to Target and the Shareholder, dated as of the Closing
Date, in the form attached hereto as Exhibit 2.01(x-x);
(x) all necessary authorizations, consents, approvals, permits and
licenses referenced in Schedule 3.07;
(xi) releases from Shareholder to Morrilton Video, Inc. for any
security interests or liens held by the Shareholder in the form attached hereto
as Exhibit 2.01(1); and
(xii) such other instrument or instruments as shall be necessary or
appropriate, as Parent or its counsel shall reasonably request, to vest in
Parent good and marketable title to the Stock.
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Section 2.02. Deliveries of Parent. At the Closing, Parent shall
deliver the following to Target or the Shareholder, as applicable:
(i) the Closing Shares to the Shareholder;
(ii) the Agreement Not to Compete;
(iii) a separate certificate of each of the President or any Vice
President of Parent and Sub, dated the Closing Date, (i) as to the truth and
correctness of the representations and warranties of Parent and Sub contained
herein on and as of the Closing Date, (ii) as to the performance of and
compliance by Parent and Sub with all covenants contained herein on and as of
the Closing Date, and (iii) certifying that all conditions precedent of Parent
and Sub to the Closing have been satisfied;
a certificate of the Secretary of Parent certifying as to the
incumbency of such officers of Parent, and as to their signatures, who have
executed documents delivered at the Closing on behalf of Parent;
a certificate of the Secretary of Sub certifying as to the incumbency
of such officers of Sub, and as to their signatures, who have executed documents
delivered at the Closing on behalf of Sub;
a certificate, dated within thirty (30) days of the Closing Date, of
the Secretary of State of the State of Texas, establishing, that Parent is in
existence, has paid all franchise taxes and is in good standing to transact
business in such state, if necessary to do so;
a certificate, dated within thirty (30) days of the Closing Date, of
the Secretary of State of the State of Texas, establishing, that Sub is in
existence, has paid all franchise taxes and is in good standing to transact
business in such state, if necessary to do so.
an opinion of legal counsel to Parent and Sub, dated as of the Closing
Date, in form attached hereto as Exhibit 2,02(h).
entity resolutions for Parent and Sub approving the transactions.
ARTICLE III
Representations and Warranties of Target and the Shareholder
Target and the Shareholder jointly and severally represent and warrant
that the following are true and correct as of the date hereof and will be true
and correct through the Closing, Date as if made on that date.
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Section 3.01. Ownership of the Stock. The Shareholder owns,
beneficially and of record, good and marketable title to the Stock, which
constitutes all of the issued and outstanding capital stock of Target free and
clear of all security interests, liens, adverse claims, encumbrances, equities,
proxies, options or shareholder agreements. At the Closing, the Shareholder will
convey to Parent good and marketable title to all of the Stock, free and clear
of any security interests, liens, adverse claims, encumbrances, equities,
proxies, options, shareholder agreements or other restrictions.
Section 3.02. Organization and Good Standing: Qualification. Target is
a corporation duly organized, validly existing, and in good standing under the
laws of its state of incorporation, with all requisite corporate power and
authority to carry on the business in which it is engaged, to own the properties
it owns, to execute and deliver this Agreement and to consummate the
transactions contemplated hereby. Target is duly qualified and licensed to do
business and is in good standing in all jurisdictions where the nature of its
business makes such qualification necessary, which jurisdictions are listed in
Schedule 3.02, except where the failure to be qualified or licensed would not
have a material adverse effect on the business of Target. Target does not have
any assets, employees or offices located in any state other than the states
listed in Schedule 3.02.
Section 3.03. Capitalization of Target. The authorized capital stock of
Target consists of 1500 shares of common stock, $0 par value per share, of which
3 shares are issued and outstanding. No shares of such capital stock are held in
the treasury of Target. All of issued and outstanding shares of capital stock of
Target are duly authorized, validly issued, fully paid and nonassessable. There
exist no options, warrants, subscriptions or other rights to purchase, or
securities convertible into or exchangeable for, the capital stock of Target.
Neither the Shareholder nor Target are parties to or bound by, nor do they have
any knowledge of, any agreement, instrument, arrangement, contract, obligation,
commitment or understanding of any character, whether written or oral, express
or implied, relating to the sale, assignment, encumbrance, conveyance, transfer
or delivery of any capital stock of Target. No shares of capital stock of Target
have been issued or disposed of in violation of the preemptive rights of any of
Target's Shareholder. All accrued dividends on the capital stock of Target,
whether or not declared, have been paid in full.
Section 3.04. Corporate Records. The copies of the Articles of
Incorporation and all amendments thereto and the Bylaws of Target which have
been delivered to Parent are true, correct and complete copies thereof, as in
effect on the date hereof. The minute book of Target, a copy of which has been
delivered to Parent, contains accurate minutes of all meetings of, and accurate
consents to all actions taken without meetings by, the Board of Directors (and
any committees thereof) and the shareholders of Target since its formation.
Section 3.05. Authorization and Validity. The execution, delivery and
performance by Target of this Agreement and the other agreements contemplated
hereby, and the consummation of the transactions contemplated hereby and
thereby, have been duly authorized by Target and the Shareholder. This Agreement
and each other agreement contemplated hereby have been or will be as of the
Closing Date duly executed and delivered by Target and the Shareholder, as
applicable, and
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constitute or will constitute legal, valid and binding obligations of Target
and the Shareholder, as applicable, enforceable against Target and the
Shareholder in accordance with their respective terms. To the knowledge of
Target and the Shareholder, the sale of the Stock by Shareholder to Parent will
not impair the ability or authority of Target to carry on Target's business as
now conducted in any respect.
Section 3.06. No Violation. Neither the execution, delivery or
performance of this Agreement or the other agreements contemplated hereby nor
the consummation of the transactions contemplated hereby or thereby will (i)
conflict with, or result in a violation or breach of the terms, conditions or
provisions of, or constitute a default under, the Articles of Incorporation or
Bylaws of Target or any agreement, indenture or other instrument under which
Target is bound or to which the appropriate portion of the Stock or any of the
assets of Target are subject, or result in the creation or imposition of any
security interest, lien, charge or encumbrance upon the Stock or any of the
assets of Target, or (ii) violate or conflict with any judgment, decree, order,
statute, rule or regulation of any court or any public, governmental or
regulatory agency or body having jurisdiction over Target, the Stock or the
assets of Target.
Section 3.07. Consents. Except as set forth in Schedule 3.07, no
consent, authorization, approval, permit or license of, or filing with, any
governmental or public body or authority, any lender or lessor or any other
person or entity is required to authorize, or is required in connection with,
the execution, delivery and performance of this Agreement or the agreements
contemplated hereby on the part of Target or the Shareholder.
Section 3.08. Financial Statements. Target has furnished to Parent the
balance sheet and related statements of income, retained earnings and cash flows
for the twelve-month periods ended December 31, 1992 through December 31, 1998,
including the notes thereto, (collectively, the "Financial Statements"). The
Financial Statements are true, correct and complete, are in accordance with the
books and records of Target fairly present the financial condition and results
of operations of Target as of the dates and for the periods indicated and have
been prepared in conformity with generally accepted accounting principles
applied on a consistent basis. Target represents that at Closing Target's
current assets shall have no less than a zero ("0") net balance after deducting
current liabilities at Closing.
Section 3.09. [RESERVED].
Section 3.10. Liabilities and Obligations. Except asset forth in
Schedule 3.10, the Financial Statements reflect all liabilities of Target
accrued, contingent or otherwise (known or unknown and asserted or unasserted),
arising out of transactions effected or events occurring on or prior to the date
hereof. All reserves shown in the Financial Statements are appropriate,
reasonable and sufficient to provide for losses thereby contemplated. Except as
set forth in the Financial Statements, Target is not liable upon or with respect
to, or obligated in any other way to provide funds in respect of or to guarantee
or assume in any manner, any debt, obligation or dividend of any person,
corporation,
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association, partnership, joint venture, trust or other entity, and neither
Target nor the Shareholder know of any basis for the assertion of any other
claims or liabilities of any nature or in any amount.
Section 3.11. Absence of Certain Changes. Except as set forth in
Schedule 3.11, since December 31, 1998, Target has not, except in the ordinary
course of business:
(i) suffered any material adverse change, whether or not caused by any
deliberate act or omission of Target or the Shareholder, in its condition
(financial or otherwise), operations, assets, liabilities, business or
prospects;
(ii) contracted for the purchase of any capital assets other than those
identified in Target's financial statements dated September 30, 1998, previously
provided to Parent;
(iii) incurred any indebtedness for borrowed money or issued or sold
any debt securities;
(iv) incurred or discharged any liabilities or obligations;
(v) paid any amount on any indebtedness prior to the due date, forgiven
or canceled any debts or claims or released or waived any rights or claims;
(vi) mortgaged, pledged or subjected to any security interest, lien,
lease or other charge or encumbrance any of its properties or assets;
(vii) suffered any damage or destruction to or loss of any assets
(whether or not covered by insurance) that has materially and adversely
affected, or could reasonably be expected to materially and adversely affect,
its business;
(viii) acquired or disposed of any assets;
(ix) written up or written down the carrying value of any of its
assets;
(x) changed the costing system or depreciation methods of accounting
for its assets;
(xi) waived any material rights or forgiven any material claims;
(xii) lost or terminated any employee, customer or supplier, the loss
or termination of which has materially and adversely affected, or could
reasonably be expected to materially and adversely affect, its business or
assets;
(xiii) increased the compensation of or paid any bonus to any director
or officer;
(xiv) increased the compensation of or paid any bonus to any employee;
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(xv) made any payments to or loaned any money to any person or entity
referred to in Section 3.30;
(xvi) formed or acquired or disposed of any interest in any
corporation, partnership, joint venture or other entity;
(xvii) redeemed, purchased or otherwise acquired, or sold, granted or
otherwise disposed of, directly or indirectly, any of its capital stock or
securities or any rights to such capital stock or securities, or agreed to
change the terms and conditions of any such rights;
(xviii) entered into any agreement with any person or group, or
modified or amended in any material respect the terms of any such existing
agreement, except in the ordinary course of business;
(xix) entered into, adopted or amended any Employee Benefit Plan (as
hereinafter defined); or
(xx) entered into any other commitment or transaction or experienced
any other event that is material to this Agreement or to any of the other
agreements and documents executed or to be executed pursuant to this Agreement
or to the transactions contemplated hereby or thereby, or that has materially
and adversely affected, or could materially and adversely affect, the condition
(financial or otherwise), operations, assets, liabilities, business or
prospects of Target taken as a whole.
Section 3.12. Title; Leased Assets.
(i) Real Property. A description of all interests in real property
owned by Target (collectively, the "Real Property") is set forth in Schedule
3.12(a). Except as set forth in Schedule 3.12(a), Target has good, valid and
marketable title to all the Real Property. The Real Property and the leased
real property referred to in Section 3.12(c) constitute the only real property
used in the conduct of the business of Target.
(ii) Personal Property. Except as set forth in Schedule 3.12(b),
Target has good, valid and marketable title to all tangible and intangible
personal property owned by them (collectively, the "Personal Property"). The
Personal Property and the leased personal property referred to in Section
3.12(c) constitute the only personal property used in the conduct of the
business of Target.
(iii) Leases. A list and brief description of all leases of real and
personal property to which Target is a party, either as lessor or lessee, are
set forth in Schedule 3.12(c). All such leases are valid and enforceable in
accordance with their respective terms except as may be limited by applicable
bankruptcy, insolvency or similar laws affecting creditors' rights generally or
the availability of equitable remedies.
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(iv) Right to Use Assets. Except for those assets acquired since
December 31, 1998, which are listed in Schedule 3.12(d), all tangible and
intangible assets used in the conduct of the business of Target are reflected in
the Financial Statements in a manner that is in conformity with generally
accepted accounting principles, consistently applied. Target owns, leases or
otherwise possesses a right to use all assets used in the conduct of the
business of Target, which will not be impaired by the consummation of the
transactions contemplated hereby.
Section 3.13. Commitments.
(i) Commitments; Defaults. Except as set forth in Schedule 3.13(a),
Target has not entered into, and the Stock, the assets, and the business of
Target are not bound by, whether or not in writing any
1) partnership or joint venture agreement;
2) deed of trust or other security agreement;
3) guaranty or suretyship, indemnification or contribution
agreement or performance bond;
4) employment, consulting or compensation agreement or
arrangement, including the election or retention in office
of any director or officer;
5) labor or collective bargaining agreement;
6) debt instrument, loan agreement or other obligation
relating to indebtedness for borrowed money or money lent
or to be lent to another;
7) deed or other document evidencing an interest in or
contract to purchase or sell real property;
8) agreement with dealers or sales or commission agents,
public relations or advertising agencies, accountants or
attorneys;
9) lease of real or personal property, whether as lessor,
lessee, sublessor or sublessee;
10) agreement between Target and any affiliate of Target;
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11) agreement relating to any material matter or transaction in
which an interest is held by a person or entity that is an
affiliate of Target;
12) any agreement for the acquisition of services, supplies,
equipment or other personal property and involving, more
than $1,000 in the aggregate;
13) powers of attorney;
14) contracts containing noncompetition covenants;
15) any other contract or agreement that involves either an
unperformed commitment in excess of $1,000 or that
terminates more than 30 days after the date hereof,
16) agreement relating to any material matter or transaction in
which an interest is held by any person or entity referred
to in Section 3.29;
17) agreement providing for the purchase from a supplier of all
or substantially all of the requirements of Target of a
particular product or service; or
18) any other agreement or commitment not made in the ordinary
course of business or that is material to the business or
financial condition of Target.
All of the foregoing items which are listed on Schedule 3.13(a) are
hereinafter collectively referred to as the "Commitments." True, correct and
complete copies of the written Commitments, and true, correct and complete
written descriptions of any oral Commitments, have heretofore been delivered or
made available to Parent. There are no material existing defaults, events of
default or events, occurrences, acts or omissions which, with the giving of
notice or lapse of time or both, would constitute material defaults by Target
and no penalties have been incurred nor are amendments pending, with respect to
the Commitments, except as described in Schedule 3.13(a) The Commitments are in
full force and effect and are valid and enforceable obligations of the parties
thereto in accordance with their respective terms, and no defenses, offsets or
counterclaims have been asserted, or to the knowledge of Target or the
Shareholder, may be made, by any party thereto, nor has Target waived any
rights thereunder, except as described in Schedule 3.13(a). Neither Target nor
any Shareholder has received notice of any default with respect to any
Commitment.
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(ii) No Cancellation or Termination of Commitment. Except as
contemplated hereby, neither Target nor any Shareholder has received notice of
any plan or intention of any other party to any Commitment to exercise any right
to cancel or terminate any Commitment or agreement, and neither Target nor any
Shareholder knows of any fact that would justify the exercise of such a right.
Neither Target nor any Shareholder currently contemplates, or has reason to
believe any other person or entity currently contemplates, any amendment or
change to any Commitment. Except as listed in Schedule 3.13(b), to the knowledge
of Target and the Shareholder, none of the customers or suppliers of Target have
refused, or communicated that they will or may refuse, to purchase or supply
goods or services, as the case may be, or have communicated that they will or
may substantially reduce the amounts of goods or services that they are willing
to purchase from, or sell to, Target.
Section 3.14. Adverse Agreements. Target is not a party to any
agreement or instrument or subject to any charter or other corporate restriction
or any judgment, order, writ, injunction, decree, rule or regulation that
materially and adversely affects, or so far as Target or the Shareholder can now
reasonably foresee, may in the future materially and adversely affect, the
condition (financial or otherwise), operations, assets, liabilities, business or
prospects of Target.
Section 3.15. Insurance. Target carries adequate and necessary
property, liability, workers' compensation and other types of insurance. A list
and brief description of all insurance policies of Target are set forth in
Schedule 3.15. All of such policies are valid and enforceable policies, issued
by insurers of recognized responsibility and in amounts and against such risks
and losses as are customary in its industry. Such insurance shall be outstanding
and duly in force without interruption up to and including the Closing Date.
True, complete and correct copies of all such policies have been provided to
Parent on or prior to the date hereof.
Section 3.16. Subscribers. Target and Shareholder represent that the
Morrilton Cable System shall have at least 2100 cable television subscribers as
of the Closing Date.
Section 3.17. Patents, Trademarks, Service Marks and Copyrights.
(i) Ownership. Target owns all patents, trademarks, service marks and
copyrights, if any, necessary to conduct its business, or possesses adequate
licenses or other rights, if any, therefor, without conflict with the rights of
others. Set forth in Schedule 3.17 is a true and correct description of the
following (the "Proprietary Rights"):
1) all trademarks, tradenames, service marks and other trade
designations, registrations and applications therefor, and all
patents, copyrights and applications currently owned, in whole or
in part, by Target with respect to the business of Target and all
licenses, royalties, assignments and other similar agreements
relating to the foregoing to which Target is a party (including
expiration date if applicable); and
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2) all agreements relating to technology, know how or processes
that Target is licensed or authorized to use by others, or which
either licenses or authorizes others to use.
(ii) Conflicting Rights of Third Parties. Target has the right to use
the Proprietary Rights without infringing or violating the rights of any third
parties. Use of the Proprietary Rights does not require the consent of any other
person and the Proprietary Rights are freely transferable. No claim has been
asserted by any person to the ownership of or right to use any Proprietary Right
or challenging or questioning, the validity or effectiveness of any license or
agreement constituting a part of any Proprietary Right, and neither Target nor
any Shareholder knows of any valid basis for any such claim. Each of the
Proprietary Rights is valid and subsisting, has not been canceled, abandoned or
otherwise terminated and, if applicable, has been duly issued or filed.
(iii) Claims of Other Persons. Target and the Shareholder have no
knowledge of any claim that, or inquiry as to whether, any product, activity or
operation of Target infringes upon or involves, or has resulted in the
infringement of, any proprietary right of any other person, corporation or other
entity; and no proceedings have been instituted, are pending, or to the
knowledge of Target and the Shareholder are threatened, that challenge the
rights of Target with respect thereto.
Section 3.18. Trade Secrets and Customer Lists. Target has the right to
use, free and clear of any claims or rights of others, except claims or rights
specifically set forth in Schedule 3.18, all trade secrets, customer lists and
proprietary information required for the marketing of all merchandise and
services formerly or presently sold or marketed by Target. Target is not using
or in any way making use of any confidential information or trade secrets of any
third party.
Section 3.19. Taxes.
(i) Filing of Tax Return. Target has duly and timely filed with the
appropriate governmental agencies all tax returns (including information
returns) and reports required to be filed by the United States or any state or
any political subdivision thereof or any foreign jurisdiction. All such tax
returns or reports are complete and accurate and properly reflect the taxes of
Target for the periods covered thereby.
(ii) Payment of Taxes. Target has paid or accrued all taxes, penalties
and interest which have become due with respect to any returns that it has
filed and any assessments of which it is aware. Target is not delinquent in the
payment of any tax, assessment or governmental charge.
(iii) No Pending Deficiencies, Delinquencies, Assessments or Audits.
Except as listed in Schedule 3.19(c), no tax deficiency or delinquency has been
asserted against Target. There is no unpaid assessment, proposal for additional
taxes, deficiency or delinquency in the payment of any of the taxes of Target
that could be asserted by any taxing authority. There is no taxing authority
audit of Target pending, or threatened, and the results of any completed audits
are properly reflected
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in the Financial Statements of Target. Target has not violated any federal
state, local or foreign tax law.
(iv) No Extension of Limitation Period. Target has not granted an
extension to any taxing authority of the limitation period during which any tax
liability may be assessed or collected.
(v) All Withholding Requirements Satisfied. All monies required to be
withheld by Target and paid to Governmental agencies for all taxes have been
(i) collected or withheld and either paid to the respective Governmental
agencies or set aside in accounts for such purpose, or (ii) properly reflected
in the Financial Statements of Target.
(vi) State Unemployment Taxes. In respect of its most recently
completed reporting period and all previous reporting periods, Target has paid
state unemployment taxes to all applicable states at the appropriate rates for
the wages paid by Target during such period which were subject to such tax.
(vii)ab Reasonable Expenditures. All amounts paid by Target (i) to officers,
employees, consultants and agents as salaries, compensation, and expenses
reimbursed by Target, or (ii) as rental payments, have been in amounts which
are reasonable and deductible for income tax purposes.
(viii) Tax Liability in Financial Statements. The liabilities
(including deferred taxes) shown in Target's December 31, 1998 Financial
Statements and to be accrued on the books and records of Target through the
Closing Date for taxes, interest and penalties are and will be adequate
accruals and have been and will be accrued in a manner consistent with the
practices utilized for accruing tax liabilities in the tax year ended December
31, 1998 and take into account net operating losses, investment credits and
other carryovers for periods ended prior to the Closing Date.
(ix) Foreign Investment in U.S. Real Property. The Shareholder is not
a foreign person, as such term is used in Section 1445(b)(2) of the Code.
(x) Tax Exempt Entity. None of the assets of Target are or will be
subject to a lease to a "tax exempt entity" as such term is defined in Section
168(h)(2) of the Code.
(xi) Collapsible Corporation. Target has not at any time consented,
and the Shareholder will not permit Target to elect, to have the provisions of
Section 341(f)(2) of the Code apply to it.
(xii) Change in Accounting Method. Target has not voluntarily or
involuntarily changed a method of accounting resulting in Target's inclusion of
amounts in income pursuant to the adjustment provisions of Section 481 of the
Code.
(xiii) C corporation. Target is currently and since August 15, 1979,
has been an C corporation as such term is defined in the internal Revenue Code.
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(xiv) All representations in this Section 3.19 with respect to Target
shall be treated as representations by Target and the Shareholder.
Section 3.20. Compliance with Laws. Target has complied with all laws,
regulations and licensing requirements and has filed with the proper authorities
all necessary statements and reports. There are no existing violations by Target
or the Shareholder of any federal, state or local law or regulation that could
materially and adversely affect the property or business of Target. Target
possesses all necessary licenses, franchises, permits and governmental
authorizations material to the conduct of its business as now conducted, all of
which are listed in Schedule 3.20.
Section 3.21. Finder's Fee. Neither Target nor Shareholder has incurred
any obligation for any finder's, broker's or agent's fee in connection with the
transactions contemplated hereby.
Section 3.22. Litigation. Except as described in Schedule 3.22, there
are no legal actions or administrative proceedings or investigations instituted,
or to the knowledge of Target or the Shareholder threatened, against or
affecting, or that could affect, Target, the Stock, or the business of Target.
Neither Target nor the Shareholder are (i) subject to any continuing court or
administrative order, writ, injunction or decree applicable specifically to
Target or its businesses, assets, operations or employees, or (ii) in default
with respect to any such order, writ, injunction or decree. Neither Target nor
the Shareholder know of any basis for any such action, proceeding or
investigation.
Section 3.23. Condition of Fixed Assets. All of the plants, structures
and equipment (the "Fixed Assets") owned by Target are in good condition and
repair for their intended use in the ordinary course of business and conform in
all material respects with all applicable ordinances, regulations and other
laws and there are no known latent defects therein.
Section 3.24. Inventory. All of the tangible inventory owned by Target
is in good, current, standard and merchantable condition and is not obsolete or
defective. Purchase commitments for merchandise are not in excess of normal
requirements and, taken as a whole, are not at prices in excess of market
prices. Target has, and at the Closing Date will have, the types and quantities
of inventories appropriate, taken as a whole, to conduct its business
consistently with past practices.
Section 3.25. Books of Account. The books of account of Target have
been kept accurately in the ordinary course of business, the transactions
entered therein represent bona fide transactions and the revenues, expenses,
assets and liabilities of Target have been properly recorded in such books.
Section 3.26. Corporate Name - Morrilton Video, Inc. There are no
actions, suits or proceedings pending, or to the knowledge of Target or the
Shareholder threatened, against or affecting Target that could result in any
impairment of the right of Target to use the name "Morrilton Video, Inc." The
use of the name "Morrilton Video, Inc." does not infringe the rights of any
third party nor is it confusingly similar with the corporate name of any third
party. After the Closing Date,
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no person or business entity other than Target will be authorized, directly or
indirectly, to use the name "Morrilton Video, Inc." or any name confusingly
similar thereto.
Section 3.27. Accounts Receivable. Schedule 3.27 sets forth the
accounts receivable of Target from sales made as of December 31, 1998 and the
payments and rights to receive payments related thereto. All such accounts
receivable have arisen from bona fide transactions in the ordinary course of
business and are valid and enforceable claims subject to no right of set-off or
counterclaim.
Section 3.28. Product Warranties. There is no claim against or
liability of Target on account of product warranties or with respect to the
manufacture, sale or rental of defective products or services and there is no
basis for any such claim on account of defective products or services heretofore
manufactured, sold or rented that is not fully covered by insurance.
Section 3.29. Banking Relations. Set forth in Schedule 3.29 is a
complete and accurate list of all arrangements that Target has with any bank or
other financial institution, indicating with respect to each relationship the
type of arrangement maintained (such as checking account, borrowing
arrangements, safe deposit box, etc.) and the person or persons authorized in
respect thereof.
Section 3.30. Ownership Interests of Interested Persons. Except as set
forth in Schedule 3.30, no officer, supervisory employee, director or
shareholder of Target, or their respective spouses or children, owns directly or
indirectly, on an individual or joint basis, any material interest in, or serves
as an officer or director of, any customer or supplier of Target, or any
organization that has a material contract or arrangement with Target.
Section 3.31. Investments in Competitors. Shareholder does not own,
directly or indirectly, any interests or has any investment in any corporation,
business or other person that is a competitor of Target within the service area
of Target.
Section 3.32. Employee Matters.
(i) Cash Compensation. Schedule 3.32(a) contains a complete and
accurate list of the names, titles and cash compensation, including without
limitation wages, salaries, bonuses (discretionary and formula) and other cash
compensation (the "Cash Compensation") of all employees of Target who are
currently compensated at a rate in excess of $15,000 per year and who earned in
excess of such amount during the preceding fiscal year. In addition, Schedule
3.32(a) contains a complete and accurate description of (i) all increases in
Cash Compensation of employees of Target during the current and immediately
preceding fiscal year of Target, and (ii) any promised increases in Cash
Compensation of employees of Target that have not yet been effected.
(ii) Compensation Plans. Schedule 3.32(b) contains a complete and
accurate list of all compensation plans, arrangements or practices (the
"Compensation Plans") sponsored by Target or
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to which Target contributes on behalf of its employees, other than Employee
Benefit Plans listed in Schedule 3.34(a). The Compensation Plans include without
limitation plans, arrangements or practices that provide for severance pay,
deferred compensation, incentive, bonus or performance awards, and stock
ownership or stock options. Target has provided Parent a copy of each written
Compensation Plan and a written description of each unwritten Compensation Plan.
Each of the Compensation Plans can be terminated or amended at will by Target.
(iii) Employment Agreements. All written or oral employment agreements
(the "Employment Agreements") which exist between Target and its employees,
including agreements containing covenants not to compete, are listed on Schedule
3.32(c), Target has provided Parent a copy of each written Employment Agreement
and a written description of each written Employment Agreement, if any.
(iv) Employee Policies and Procedures. Schedule 3.32(d) contains a
complete and accurate list of all employee manuals, policies, procedures and
work-related rules (the "Employee Policies and Procedures") that apply to
employees of Target. Target has provided Parent a copy of all written Employee
Policies and Procedures. Each of the Employee Policies and Procedures Can be
amended or terminated at will by Target, except as prohibited by law.
(v) Unwritten Amendments. No unwritten amendments have been made,
whether by oral communication, pattern of conduct or otherwise, with respect to
any Compensation Plans, Employment Agreements or Employee Policies and
Procedures.
(vi) Labor Compliance. Except as set forth in Schedule 3.32(f),
Target:
1) has been and is in compliance with all laws, rules,
regulations and ordinances respecting employment and employment
practices, terms and conditions of employment and wages and
hours, and
2) is not liable for any arrears of wages or penalties for
failure to comply with any of the foregoing.
Target has not engaged in any unfair labor practice or discriminated on
the basis of race, color, religion, sex, national origin, age or handicap in its
employment conditions or practices.
There are no:
1) unfair labor practice charges or complaints or racial, color,
religious, sex, national origin, age or handicap discrimination
charges or complaints, pending or to the knowledge of Target and
the Shareholder threatened, against Target before any federal,
state or local court, board, department, commission or agency nor
does any basis therefor exist, or
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2) existing, or to the knowledge of Target and the Shareholder
threatened, labor strikes, disputes, grievances, controversies or
other labor troubles affecting Target and no basis therefor
exists.
(vii) Unions. Target has never been a party to any agreement with any
union, labor organization or collective bargaining unit. No employees of Target
are represented by any union, labor organization or collective bargaining unit.
To the knowledge of Target and the Shareholder, the employees of Target have no
intention to and have not threatened to organize or join a union, labor
organization or collective bargaining unit.
(viii) Aliens. All employees of Target are citizens of, or are
authorized to be employed in, the United States.
Section 3.34. Employee Benefit Plans.
(i) Identification. Schedule 3.34(a) contains a complete and accurate
list of all employee benefit plans (the "Employee Benefit Plans") (within the
meaning of Section 3(3) of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA")) sponsored by Target or to which Target contributes on
behalf of its employees and all Employee Benefit Plans previously sponsored or
contributed to on behalf of its employees within the three years preceding the
date hereof. Target has provided Parent with copies of all plan documents,
determination letters, pending, determination letter applications, trust
instruments, insurance contracts, administrative services contracts, annual
reports, actuarial valuations, summary plan descriptions, summaries of material
modifications, administrative forms and other documents that constitute a part
of or are incident to the administration of the Employee Benefit Plans.
(ii) Administration. Each Employee Benefit Plan has been administered
and maintained in compliance with all applicable laws, rules and regulations.
(iii) Examinations. No Employee Benefit Plan is currently the subject
of an audit, investigation, enforcement action or other similar proceeding
conducted by any state or federal agency.
(iv) Prohibited Transactions. No prohibited transactions (within the
meaning of Section 4975 of the Code) have occurred with respect to any Employee
Benefit Plan.
(v) Claims and Litigation. No claims, suits or other proceeding are
pending, or to the knowledge of Target and the Shareholder are threatened, with
respect to any Employee Benefit Plan other than normal benefit claims filed by
participants or beneficiaries.
(vi) Qualification. Target has received a favorable determination
letter or ruling from the
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Internal Revenue Service for each Employee Benefit Plan intended to be qualified
within the meaning of Section 401(a) of the Code and/or tax-exempt within the
meaning of Section 501 (a) of the Code. No proceedings are pending, or to the
knowledge of Target and the Shareholder are threatened, that could result in the
revocation of any such favorable determination letter or ruling.
(vii) Funding Status. No accumulated funding deficiency (within the
meaning of Section 412 of the Code), whether waived or unwaived, exists with
respect to any Employee Benefit Plan or any plan sponsored by any member of a
controlled group (within the meaning, of Section 412(n)(6)(B) of the Code) in
which Target is a member (a "Controlled Group"). With respect to each Employee
Benefit Plan subject to Title IV of ERISA, the assets of each such plan are at
least equal in value to the present value of accrued benefits determined on an
ongoing, basis as of the date hereof. With respect to each Employee Benefit Plan
described in Section 501(c)(9) of the Code, the assets of each such plan are at
least equal in value to the present value of accrued benefits as of the date
hereof. Schedule 3.34(g) contains a complete and accurate statement of all
actuarial assumptions applied to determine the present value of accrued benefits
under all Employee Benefit Plans subject to actuarial assumptions.
(viii) Excise Taxes. Neither Target nor any member of a Controlled
Group has any liability to pay excise taxes with respect to any Employee Benefit
Plan under applicable provisions of the Code or ERISA.
(ix) Multiemployer Plans. Neither Target nor any member of a Controlled
Group is or ever has been obligated to contribute to a multiemployer plan within
the meaning of Section 3(37) of ERISA.
(x) PBGC. No facts or circumstances exist that would result in the
imposition of liability against Parent by the Pension Benefit Guaranty
Corporation as a result of any act or omission by Target or any member of a
Controlled Group. No reportable event (within the meaning of Section 4043 of
ERISA) for which the notice requirement has not been waived has occurred with
respect to any Employee Benefit Plan subject to the requirements of Title IV of
ERISA.
(xi) Medical and Dental Care Claims. Schedule 3.34(k) contains a
complete and accurate list of all claims made (without identifying specific
individuals) under any medical or dental care plan or commitment offered by
Target to its employees involving hospitalization, medical or dental care claims
that have exceeded $500 per year for an individual during the period January 1,
1998 to September 30, 1998.
(xii) Retirees. Target does not have any obligation or commitment to
provide medical, dental or life insurance benefits to or on behalf of any of its
employees who may retire or any of its former employees who have retired from
employment with Target.
Section 3.35. Environmental Matters.
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(i) Environmental Laws. Neither Target nor any of its assets, are
currently in violation of, or subject to any existing, pending, or threatened
investigation or inquiry by any governmental authority or to any remedial
obligations under, any laws or regulations pertaining to health or the
environment (hereinafter sometimes collectively called "Environmental Laws"),
including without limitation (i) the Comprehensive Environmental Response,
Compensation and Liability Act of 1980 (42 U.S.C. Section 9601 et seq. as
amended from time to time ("CERCLA")) (including, without limitation, as amended
pursuant to the Superfund Amendments and Reauthorization Act of 1986), and
regulations promulgated under CERCLA, (ii) the Resource Conservation and
Recovery Act of 1976 (42 U.S.C. Section 6901 et seq.), as amended from time to
time ("RCRA"), and regulations promulgated thereunder, (iii) statutes, rules or
regulations, whether federal, state or local, relating to asbestos or
polychlorinated biphenyls, and (iv) the provisions contained in any applicable
state statutes, rules or orders pertaining to environmental matters, and this
representation and warranty would continue to be true and correct following
disclosure to the applicable governmental authorities of all relevant facts,
conditions and circumstances, if any, pertaining to the assets and operations of
Target.
(ii) Use of Assets. To the knowledge of Target and the Shareholder, the
assets of Target have never been used in a manner that would be in violation of
any of the Environmental Laws, including without limitation, CERCLA or RCRA.
(iii) Permits. Target has not obtained, and is not required to obtain,
and neither Target nor any Shareholder has knowledge of any reason Parent will
be required to obtain, any permits, licenses or similar authorizations to
construct, occupy, operate or use any buildings, improvements, fixtures and
equipment owned or leased by Target or by reason of any Environmental Laws.
(iv) Superfund List. To the knowledge of Target and the Shareholder,
none of the assets owned or leased by Target are on any federal or state
"Superfund" list or subject to any environmentally related liens.
Section 3.36. Certain Payments. To the knowledge of Target and the
Shareholder, neither Target, the Shareholder nor any director, officer or
employee of Target has paid or caused to be paid, directly or indirectly, in
connection with the business of Target:
(i) to any government or agency thereof or any agent of any supplier or
customer any bribe, kick-back or other similar payment; or
(ii) any contribution to any political party or candidate (other than
from personal funds of directors, officers or employees not reimbursed by Target
or as otherwise permitted by applicable law).
Section 3.37. Accuracy of Information Furnished. All information
furnished to Parent by Target or any Shareholder hereby or in connection with
the transactions contemplated hereby is true,
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correct and complete in all material respects. Such information states all facts
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which such statements are made, true, correct
and complete.
ARTICLE IV
Representations and Warranties of Parent and Sub
Parent and Sub each represent and warrant that the following are true
and correct as of the date hereof and will be true and correct through the
Closing Date as if made on that date:
Section 4.01. Organization and Good Standing. Parent and Sub are Texas
corporations duly organized, validly existing and in good standing under the
laws of the State of Texas, with all requisite power and authority to carry on
the businesses in which they are engaged, to own the properties they own, to
execute and deliver this Agreement and to consummate the transactions
contemplated hereby.
Section 4.02. Authorization and Validity. The execution, delivery and
performance by Parent and Sub of this Agreement and the other agreements
contemplated hereby, and the consummation of the transactions contemplated
hereby and thereby, have been duly authorized by Parent and Sub. This Agreement
and each other agreement contemplated hereby have been or will be as of the
Closing Date duly executed and delivered by Parent and Sub and constitute or
will constitute legal, valid and binding obligations of Parent and Sub,
enforceable against Parent and Sub in accordance with their respective terms,
except as may be limited by applicable bankruptcy, insolvency or similar laws
affecting creditors' rights generally or the availability of equitable remedies.
The Closing Shares, when issued in compliance with the provisions of the
Agreement, will be validly issued, fully paid, non-assessable, not issued in
violation of any preemptive rights, and will be free from all taxes, liens,
charges and other encumbrances, subject to the terms and provisions of the
Letter of Investment Intent.
Section 4.03. No Violation. Neither the execution, delivery or
performance of this Agreement or the other agreements contemplated hereby nor
the consummation of the transactions contemplated hereby or thereby will (i)
conflict with, or result in a violation or breach of the terms, conditions and
provisions of, or constitute a default under, the representative organizational
documents of Parent and Sub or any agreement, indenture or other instrument
under which Parent or Sub is bound, (ii) violate or conflict with any judgment,
decree, order, statute, rule or regulation of any court or any public,
governmental or regulatory agency or body having jurisdiction over Parent or Sub
or the properties or assets of Parent or Sub, or (iii) violate or conflict with
any laws, rules or regulations, including but not limited antitrust laws, or
that of any applicable jurisdiction or any applicable public, governmental or
regulatory agency or body.
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Section 4.04. Finder's Fee. Neither Parent nor Sub has incurred any
obligation for any finder's, broker's or agent's fee in connection with the
transactions contemplated hereby.
ARTICLE V
The Covenants of Target and the Shareholder
Target and the Shareholder jointly and severally make the following
covenants relating to the period between the date hereof and the Closing.
Section 5.01. Consummation of Agreement. Target and the Shareholder
shall use their best efforts to cause the consummation of the transactions
contemplated hereby in accordance with their terms and conditions.
Section 5.02. Business Operations. Target shall operate its business in
the ordinary course and will not introduce any new method of management or
operation. Target and the Shareholder shall use their best efforts to preserve
the business of Target intact, to retain the present customers and suppliers so
that they will be available to Parent after the Closing. Target and the
Shareholder shall not take any action that could adversely affect the condition
(financial or otherwise), operations, assets, liabilities, business or prospects
of Target without the prior written consent of Parent or take or fail to take
any action that would cause or permit the representations made in Article III to
be inaccurate at the time of Closing or preclude Target and the Shareholder from
making such representations and warranties at the Closing.
Section 5.03. Access. Target and the Shareholder shall permit Parent
and its authorized representatives full access to, and make available for
inspection, all of the assets and business of Target, including their employees,
customers and suppliers, and permit Parent and its authorized representatives to
inspect and make copies of all documents, records and information with respect
to the affairs of Target as Parent and its representatives may request, all for
the sole purpose of permitting Parent to become familiar with the business and
assets and liabilities of Target.
Section 5.04. Material Change. Target and the Shareholder shall
promptly inform Parent in writing, of any material adverse change in the
condition (financial or otherwise), operations, assets, liabilities, business or
prospects of Target. Notwithstanding the disclosure to Parent of any such
material adverse change, Target and the Shareholder shall not be relieved of any
liability for, nor shall the providing of such information by Target to Parent
be deemed a waiver by Parent of the breach of any representation or warranty of
Target and the Shareholder contained in this Agreement.
Section 5.05. Approvals of Third Parties. Target and the Shareholder
shall use their best efforts to secure, as soon as practicable after the date
hereof, all necessary approvals and consents of third parties to the
consummation of the transactions contemplated hereby.
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Section 5.06. Employee Matters. Target shall not, without the prior
written approval of Parent, except as required by law:
(i) increase the Cash Compensation of any employee of Target;
(ii) adopt, amend or terminate any Compensation Plan, Employment
Agreement, Employee Policies and Procedures or Employee Benefit Plan;
(iii) institute, settle or dismiss any employment litigation;
(iv) enter into, modify, amend or terminate any agreement with any
union, labor organization or collective bargaining unit;
(v) take or fail to take any action with respect to any past or present
employee of Target that could adversely affect the business of Target;
(vi) take any action that would deplete the assets of any Employee
Benefit Plan, other than payment of benefits in the ordinary course to
participants and beneficiaries;
(vii) fail to pay any premium or contribution due with respect to any
Employee Benefit Plan;
(viii) fail to file any return or report with respect to any Employee
Benefit Plan; or
(ix) take or fall to take any action that could adversely affect any
Employee Benefit Plan.
Section 5.07. Contracts. Except with Parent's prior written consent,
Target shall not waive any right or cancel any contract, debt or claim or assume
or enter into any contract, lease, license, obligation, indebtedness,
commitment, or purchase or sale, except in the ordinary course of business.
Section 5.08. Changes in Inventory. Target shall not alter the physical
contents or character of its raw materials, work-in-process or finished goods
inventory or the mixture of products in its finished goods inventory so as to
affect the nature of its business or result in a change in the total dollar
valuation thereof.
Section 5.09. Capital Assets; Payments of Liabilities. Target shall
not, without the prior written approval of Parent, (i) acquire or dispose of any
capital asset, or (ii) discharge or satisfy any lien or encumbrance or pay or
perform any obligation or liability other than (a) liabilities and obligations
reflected in the Financial Statements, or (b) current liabilities and
obligations incurred in the ordinary course of business and, in the case of
either (a) or (b) above, only as required by the express terms of the agreement
or other instrument pursuant to which the liability or obligation was incurred.
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Section 5.10. Mortgages, Liens and Guaranties. Target shall not,
without the prior written approval of Parent, enter into or assume any mortgage,
pledge, conditional sale or other title retention agreement, permit any security
interest, lien, encumbrance or claim of any kind to attach to any of its assets,
whether now owned or hereafter acquired, or guarantee or otherwise become
contingently liable for any obligation of another, except obligations arising by
reason of endorsement for collection and other similar transactions in the
ordinary course of business, or make any capital contribution or investment in
any corporation, business or other person.
Section 5.11. No Negotiation with Others. Target and the Shareholder
shall not solicit or participate in negotiations with (and Target and the
Shareholder shall use their best efforts to prevent any affiliate, shareholder,
director, officer, employee or other representative or agent of Target from
negotiating with, soliciting or participating in negotiations with) any third
party with respect to the sale of the business of Target or any transaction
inconsistent with those contemplated hereby.
Section 5.12.
(i) Income Tax Refunds. The Shareholder hereby acknowledges that its
has no claim to or interest in any income tax refunds which Target may receive
after the Closing Date relating to tax periods prior to the Closing Date.
(ii) Cooperation. The Shareholder shall provide such assistance to
Parent as Parent may reasonably request in connection with the preparation of
any tax return required to be filed in respect of Target, any audit or other
examination by any taxing authority, any Judicial or administrative proceeding
relating to liability for taxes, or any claim for refund in respect of such
taxes, and the Shareholder will retain, and upon request provide, any records or
information which may be relevant to such return, audit, examination, proceeding
or claim. Such assistance shall include (i) making employees or counsel
available at and for reasonable times to provide additional information and
explanation of any material to be provided hereunder, and (ii) furnishing access
to, and permitting the copying of any records, returns, schedules, documents,
work papers or other relevant materials which might reasonably be expected to be
of use in connection with such return, audit, examination, proceeding or claim.
ARTICLE VI
Covenants of Parent and Sub
Section 6.01. Consummation of Agreement. Parent and Sub shall use their
best efforts to cause the consummation of the transactions contemplated hereby
in accordance with their terms and conditions.
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ARTICLE VII
Parent's Conditions Precedent
Except as may be waived in writing by Parent and Sub, the obligations
of Parent and Sub hereunder are subject to the fulfillment at or prior to the
Closing Date of each of the following conditions:
Section 7.01. Representations and Warranties. The representations and
warranties of Target and the Shareholder contained herein shall have been true
and correct in all respects when initially made and shall be true and correct in
all material respects as of the Closing Date; and Parent and Sub shall have
received a certificate from each of Target's President and the Shareholder,
dated as of the Closing Date, to the foregoing effect.
Section 7.02. Covenants and Conditions. Target and the Shareholder
shall have performed and complied in all material respects with all covenants
and conditions required by this Agreement to be performed and complied with by
Target and the Shareholder prior to the Closing Date; and Parent and Sub shall
have received a certificate from each of Target's President and the Shareholder,
dated as of the Closing, Date, to the foregoing effect.
Section 7.03. Proceedings. No action, precaution or order by any court
or governmental body or agency shall have been threatened, orally or in writing,
asserted, instituted or entered to restrain or prohibit the carrying out of the
transactions contemplated hereby.
Section 7.04. No Material Adverse Change. No material adverse change in
the condition (financial or otherwise), operations, assets, liabilities,
business or prospects of Target shall have occurred since the date of the most
recent balance sheet of each included in the Financial Statements, whether or
not such change shall have been caused by the deliberate act or omission of
Target or any Shareholder.
Section 7.05. Resignations of Directors and Officers. Parent and Sub
shall have received the resignations of the directors and officers of Target to
the extent requested.
Section 7.06. Closing Deliveries. Parent shall have received all
documents referred to in Section 2.01 hereof, duly executed in form satisfactory
to Parent and its counsel.
Section 7.07. Tax Affidavit. Parent shall have received a nonforeign
affidavit, as such affidavit is referred to in Section 1445(b)(2) of the Code,
of the Shareholder, signed under penalties of perjury and dated as of the date
of the Closing Date, to the effect that such Shareholder is not a foreign person
(as such term is defined in Section 1445(f)(3) of the Code) and providing such
Shareholder's United States taxpayer identification number.
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Section 7.08. Contemporaneous Closing. Closing of this Agreement and
Plan of Reorganization must occur contemporaneously with the closing of the
Asset Exchange Agreement between TCA Cable Partners and Dardenelle Cable
Television, Inc. to be final and effective.
ARTICLE VIII
The Conditions Precedent of Target and the Shareholder
Except as may be waived in writing by Target and the Shareholder, the
obligations of Target and the Shareholder hereunder are subject to fulfillment
at or prior to the Closing Date of each of the following conditions:
Section 8.01. Representations and Warranties. The representations and
warranties of Parent and Sub contained herein shall have been true and correct
in all respects when initially made and shall be true and correct in all
material respects as of the Closing Date; and Parent and Sub shall have
delivered to the Shareholder certificates of Parent's and Sub's respective
President or Vice President, dated as of the Closing Date, to the foregoing
effect.
Section 8.02. Covenants and Conditions. Parent and Sub shall have
performed and complied in all material respects with all covenants and
conditions required by this Agreement to be performed and complied with by it
prior to the Closing Date; and Parent shall have delivered to the Shareholder
certificates of Parent's and Sub's President or Vice President, dated as of the
Closing Date, to the foregoing effect.
Section 8.03. Proceedings. No action, proceeding or order by any court
or governmental body or agency shall have been threatened in writing, asserted,
instituted or entered to restrain or prohibit the carrying out of the
transactions contemplated hereby.
Section 8.04. Closing Deliveries. Target or the Shareholder, as the
case may be, shall have received all documents referred to in Section 102.
Section 8.05. Contemporaneous Closing. Closing of this Agreement and
Plan of Reorganization must occur contemporaneously with the closing of the
Asset Exchange Agreement between TCA Cable Partners and Dardenelle Cable
Television, Inc. to be final and effective.
ARTICLE IX
Post Closing Matters
Section 9.01. Further Instruments of Transfer. Following the Closing,
at the request of Parent, the Shareholder shall deliver any further instruments
of transfer and take all reasonable action as may be necessary or appropriate to
(i) vest in Parent good and marketable title to the Stock, and (ii) carry
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out more effectively the provisions of this Agreement and to establish and
protect the rights created in favor of the parties hereunder or thereunder.
ARTICLE X
Remedies
Section 10.01. Indemnification by the Shareholder. Subject to the terms
and conditions of this Article, the Shareholder agrees to indemnify, defend and
hold Parent and Sub and their respective directors, officers, agents, attorneys
and affiliates harmless from and against all losses, claims, obligations,
demands, assessments, penalties, liabilities, costs, damages, attorneys' fees
and expenses (collectively "Damages"), asserted against or incurred by any of
such indemnitees by reason of or resulting from:
(i) a breach of any representation, warranty or covenant of Target or
the Shareholder contained herein, in any exhibit, schedule, certificate or
financial statement delivered hereunder, or in any agreement executed in
connection with the transactions contemplated hereby; or
(ii) the violation or alleged violation, on or before the Closing Date,
of any Environmental Law, and any and all matters arising out of any act,
omission, event or circumstance existing or occurring on or prior to the Closing
Date (including without limitation the presence on the Real Property or release
from the Real Property, or the generation by Target or any Shareholder of
hazardous substances or solid waste disposed or otherwise released prior to the
Closing Date), regardless of whether the act, omission, event or circumstance
constituted a violation of any Environmental Law at the time of its existence or
occurrence. The terms "hazardous substance" and "firelease" shall have the
meanings specified in CERCLA, and the terms "solid waste" and "disposed" shall
have the meanings specified in RCRA; provided that to the extent that any
applicable statute of any state, any subdivision thereof or any other
governmental body or agency of competent jurisdiction over the matter, establish
a meaning for "hazardous substance," "release," "solid waste" or "disposed" that
is broader than that specified in either CERCLA or RCRA, such broader meaning
shall apply. The provisions of this Section 10.01(b) shall survive the Closing,
and shall continue indefinitely thereafter in full force and effect.
Section 10.02. Indemnification by Parent. Subject to the terms and
conditions of this Article, Parent hereby agrees to indemnify, defend and hold
Target and the Shareholder and their respective directors, officers, agents,
attorneys and affiliates harmless from and against all Damages asserted against
or incurred by any of such indemnitees by reason of or resulting, from a breach
of any representation, warranty or covenant of Parent or Sub contained herein or
in any exhibit, schedule or certificate delivered hereunder, or in any agreement
executed in connection with the transactions contemplated hereby.
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Section 10.03. Conditions of Indemnification. The respective
obligations and liabilities of the Shareholder and Parent (the "indemnitor") to
the other parties (the "indemnitees") under Sections 10.01 and 10.02 with
respect to claims resulting from the assertion of liability by third parties,
shall be subject to the following terms and conditions:
(i) In the event that a legal proceeding or action is commenced against
an indemnitees with respect to any indemnified matter, that indemnitees promptly
will provide written notice thereof to the indemnitor (but in no event later
than ten (10) days after receipt of notice), together with a copy of any claim,
process or other legal pleading. The indemnitor will undertake the defense
thereof, as its expense, by counsel of its own choosing and reasonably
acceptable to the indemnitees; provided that the indemnitees may participate in
all aspects of the defense with, or without, counsel of its own choice. In the
event that the indemnitees elect to retain additional counsel of their own
choice, the fees and expenses of said counsel shall be the exclusive
responsibility of the indemnitees unless (i) the indemnitor has agreed to pay
such fees and expenses, (ii) the indemnitor has failed to undertake the defense
of such action, or (iii) if the nature of any action presents a conflict between
the interests of the indemnitor and the indemnitees, or the indemnitees have
been advised by counsel that there may be one or more legal defenses available
to it that are different from or additional to those available to the indemnitor
(in which case, if the indemnitees inform the indemnitor in writing that it
elects to employ separate counsel at the expense of the indemnitor, the
indemnitor shall have no further right to participate in or undertake the
defense of such action on behalf of the indemnitees except with respect to
payment of full indemnification for any Damages).
(ii) Except for failure by the indemnitees to provide notice as
provided for above in subsection (a), in the event that the indemnitor, on or
before the thirtieth day after receipt of notice of any such action, or, if
applicable and earlier, on or before the tenth day preceding the day on which an
answer, appearance or other pleading must be served in order to prevent judgment
by default in favor of the person asserting such claim or other prejudice to the
indemnitees, fails to undertake the defense of such action, the indemnitees will
have the right to retain counsel of their own choosing and undertake the
defense, compromise or settlement of such claim for the account and risk of the
indemnitor without waiving the indemnitee's right to full indemnification from
the indemnitor and at the indemnitor's expense, subject to the right of the
indemnitor to assume the defense of such claims at any time prior to settlement,
compromise or final determination thereof with counsel reasonably acceptable to
the indemnitees.
(iii) Notwithstanding the foregoing, the indemnitor shall not settle
any claim asserted against the indemnitees without the prior consent of the
indemnitees unless such settlement involves only the payment of money and the
claimant provides the indemnitees with a release from all liability in respect
of such claim. If the settlement of any claims involves more than the payment of
money, the indemnitor shall not settle the claim without the prior written
consent of the indemnitees, which consent shall not be unreasonably withheld. In
the event the indemnitor has not undertaken the defense, as described above,
with respect to any claim resulting from the assertion of liability by third
parties, the indemnitor may settle any claim without prior notice to and consent
of the indemnifying party, and indemnitor agrees to promptly, and in any event
within thirty days after
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receipt of written demand, reimburse indemnitees for all Damages, including
without limitation all amounts paid or incurred in connection with such
settlement, together with attorneys' fees, costs and expenses and other costs
incurred in connection with defense of the claim.
(iv) The indemnitees and indemnitor will each cooperate with all
reasonable requests of the other.
Section 10.04. Remedies Not Exclusive. The remedies provided in this
Agreement shall not be exclusive of any other rights or remedies available to
one party against the other, either at law or in equity.
ARTICLE XI
Termination
Section 11.01. Termination. This Agreement may be terminated:
(i) At any time prior to the Closing Date by mutual agreement of all
parties.
(ii) At any time prior to the Closing Date by Parent if any
representation or warranty of Target or the Shareholder contained in this
Agreement or in any certificate or other document executed and delivered by
Target or the Shareholder pursuant to this Agreement is or becomes untrue or
breached in any material respect, or if Target or the Shareholder fail to comply
in any material respect with any covenant contained herein.
(iii) At any time prior to the Closing Date by the Shareholder if any
representation or warranty of Parent or Sub contained in this Agreement or in
any certificate or other document executed and delivered by Parent or Sub
pursuant to this Agreement is or becomes untrue or breached in any material
respect or if Parent or Sub fails to comply in any material respect with any
covenant contained herein.
(iv) After the Closing Date by Parent if the conditions stated in
Article VII have not been satisfied by the Closing Date.
(v) After the Closing Date by the Shareholder if the conditions stated
in Article VIII and have not been satisfied by the Closing Date.
In the event this Agreement is terminated pursuant to subparagraph (b),
(c), (d) or (e) above, Parent, Sub, Target and the Shareholder shall each be
entitled to pursue, exercise and enforce any and all remedies, rights, powers
and privileges available at law or in equity. In the event of a termination of
this Agreement under the provisions of this Article, a party not then in
material breach
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of this Agreement shall stand fully released and discharged of any and all
obligations under this Agreement.
ARTICLE XII
Miscellaneous
Section 12.01. Costs, Expenses and Legal Fees. Whether or not the
transactions contemplated hereby are consummated, each party hereto shall bear
its own costs and expenses (including attorneys' fees and expenses), except that
each party hereto that is shown to have breached this Agreement or any other
agreement contemplated hereby agrees to pay the costs and expenses (including
reasonable attorneys' fees and expenses) incurred by any other party in
successfully (i) enforcing any of the terms of this Agreement against such
breaching party, or (ii) proving that another party breached any of the terms of
this Agreement.
Section 12.02. Waiver. No waiver by any party of any default or breach
by another party of any representation, warranty, covenant or condition
contained in this Agreement, or any exhibit or any document, instrument or
certificate contemplated hereby shall be deemed to be a waiver of any subsequent
default or breach by such party of the same or any other representation,
warranty, covenant or condition. No act, delay, omission or course of dealing on
the part of any party in exercising any right, power or remedy under this
Agreement or at law or in equity shall operate as a waiver thereof or otherwise
prejudice any of such party's rights, powers and remedies. All remedies, whether
at law or in equity, shall be cumulative and the election of any one or more
shall not constitute a waiver of the right to pursue other available remedies.
Section 12.03. Offset. Any and all amounts owing, or to be paid by
Parent to the Shareholder hereunder or otherwise, shall be subject to offset and
reduction pro tanto by any amounts that may be owing at any time by the
Shareholder to Parent in respect of any failure or breach of any representation,
warranty or covenant of Target or the Shareholder under or in connection with
this Agreement, the Agreement Not to Compete or any other agreement with Parent
or any transaction contemplated hereby or thereby, as reasonably determined by
Parent. If Parent determines that such offset is appropriate, notice shall be
given to Shareholder of such determination on or prior to the due date of the
payment to be reduced.
Section 12.04. Knowledge. "Knowledge," "have no knowledge of," or "do
not know of" and requires, to any employee of such entity after reasonable
investigation and inquiry by the principal executive officer of such entity.
Section 12.05. Specific Performance. Each of the parties hereto
acknowledges that a refusal by any other party to consummate the transactions
contemplated hereby will cause irreparable harm to each other party for which
there may be no adequate remedy at law and for which the ascertainment of
damages would be difficult. Therefore, each of the parties hereto shall be
entitled,
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in addition to, and without having to prove the inadequacy of, other remedies at
law, to specific performance of this Agreement, as well as injunctive relief
(without being required to post bond or other security).
Section 12.06. Amendment. This Agreement may be amended, modified or
supplemented only by an instrument in writing executed by all the parties
hereto.
Section 12.07. Assignment. Neither this Agreement nor any right created
hereby or in any agreement entered into in connection with the transactions
contemplated hereby shall be assignable by any party hereto, except by Parent to
an affiliate of Parent.
Section 12.08. Parties In Interest: No Third Party Beneficiaries.
Except as otherwise provided herein, the terms and conditions of this Agreement
shall inure to the benefit of and be binding upon the respective heirs, legal
representatives, successors and assigns of the parties hereto. Neither this
Agreement nor any other agreement contemplated hereby shall be deemed to confer
upon any person not a party hereto or thereto any rights or remedies hereunder
or thereunder.
Section 12.09. Entire Agreement. This Agreement, the Agreement of
Merger and the agreements contemplated hereby and thereby constitute the entire
agreement of the parties regarding the subject matter hereof, and supersede all
prior agreements and understandings, both written and oral, among the parties,
or any of them, with respect to the subject matter hereof.
Section 12.10. Severability. If any provision of this Agreement is held
to be illegal, invalid or unenforceable under present or future laws effective
during the term hereof, such provision shall be fully severable and this
Agreement shall be construed and enforced as if such illegal, invalid or
unenforceable provision never comprised a part hereof; and the remaining
provisions hereof shall remain in full force and effect and shall not be
affected by the illegal, invalid or unenforceable provision or by its severance
here from. Furthermore, in lieu of such illegal, invalid or unenforceable
provision, there shall be added automatically as part of this Agreement a
provision as similar in its terms to such illegal, invalid or unenforceable
provision as may be possible and be legal, valid and enforceable.
Section 12.11. Survival of Representations, Warranties and Covenants.
The representations, warranties and covenants contained herein shall survive the
Closing and all statements contained in any certificate, exhibit or other
instrument delivered by or on behalf of Target, the Shareholder, Sub or Parent
pursuant to this Agreement shall be deemed to have been representations and
warranties by Target and the Shareholder or Parent and Sub, as the case may be,
and, notwithstanding any provision in this Agreement to the contrary, shall
survive the Closing for three (3) years from the date of Closing.
Section 12.12. Governing Law. THIS AGREEMENT AND THE RIGHTS AND
OBLIGATIONS OF THE PARTIES HERETO SHALL BE GOVERNED BY AND CONSTRUED
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AND ENFORCED IN ACCORDANCE WITH THE SUBSTANTIVE LAWS (BUT NOT THE RULES
GOVERNING CONFLICTS OF LAWS) OF THE STATE OF TEXAS.
Section 12.13. Captions. The captions in this Agreement are for
convenience of reference only and shall not limit or otherwise affect any of the
terms or provisions hereof.
Section 12.14. Gender and Number. When the context requires, the gender
of all words used herein shall include the masculine, feminine and neuter and
the number of all words shall include the singular and plural.
Section 12.15. Reference to Agreement. Use of the words "herein,"
"hereof," "hereto" and the like in this Agreement shall be construed as
references to this Agreement as a whole and not to any particular Article,
Section or provision of this Agreement, unless otherwise noted.
Section 12.16. Confidentiality, Publicity and Disclosures. Each party
shall keep this Agreement and its terms confidential, and shall make no press
release or public disclosure, either written or oral, regarding the transactions
contemplated by this Agreement without the prior knowledge and consent of the
other parties hereto; provided that the foregoing shall not prohibit any
disclosure (i) by press release, filing or otherwise that is required by federal
securities laws or the rules applicable to issuers whose securities are traded
on the National Association of Securities Dealers Automatic Quotation System,
and (ii) to attorneys, accountants, investment bankers or other agents of the
parties assisting the parties in conducting an examination of the operations and
assets of Target.
Section 12.18. Notice. Any notice or communication hereunder or in any
agreement entered into in connection with the transactions contemplated hereby
must be in writing, and given by depositing the same in the United States mail,
addressed to the party to be notified, postage prepaid and registered or
certified with return receipt requested, or by delivering the same in person or
by facsimile transmission. Such notice shall be deemed received on the date on
which it is hand delivered or received by facsimile transmission or on the third
business day following the date on which it is so mailed. For purposes of
notice, the addresses of the parties shall be:
If to Parent or Sub:
Morrilton Acquisition, Inc.
0000 XXX Xxxx 000
Xxxxx, Xxxxx 00000
Attn.: Xxxx X. Xxxxxxx, President
Ph.: (000) 000-0000
Fax: (000) 000-0000
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with a copy to:
Xxxxxxx X. Xxxxx, General Counsel
0000 XXX Xxxx 000
Xxxxx, Xxxxx 00000
Ph.: (000) 000-0000
Fax: (000) 000-00000
If to the Shareholder:
WEHCO Video, Inc.
000 Xxxx Xxxxxxx Xxxxxx
Xxxxxx Xxxx, Xxxxxxxx 00000
Attention: Xxxxxx X. Xxxxxxx, Xx.
Ph.: (000)000-0000
Fax:(000)000-0000
with a copy to:
Xxxxxx X. Xxxxxxxx
Xxxxxxxx & Xxxxxxxx, LLP
000 Xxxxxx Xxxxxx
Xxxxxx Xxxx, Xxxxxxxx 00000
Ph.: (501)372-0800
Fax: (000)000-0000
Any party may change its address for notice by written notice given to
the other parties in accordance with this Section.
Section 12.19. Service of Process. Service of any and all process that
may be served on any party hereto in any suit, action or proceeding, arising out
of this Agreement may be made in the manner and to the address set forth in
Section 12.18 and service thus made shall be taken and held to be valid personal
service upon such party by any party hereto on whose behalf such service is
made.
Section 12.20. Counterparts. This Agreement may be executed in multiple
counterparts, each of which shall be deemed an original, and all of which
together shall constitute one and the same instrument.
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EXECUTED as of the dates set forth below to be effective as of the date
first above written.
TCA CABLE TV, INC.
a Texas corporation
Date: 2/2/99 By: /s/ Xxxxxx X. Xxxxxxx
--------------------- --------------------------------
Name: Xxxxxx X. Xxxxxxx
----------------------
Title: Vice President
---------------------
MORRILTON ACQUISITION, INC.
a Texas corporation
Date: 2/2/99 By: /s/ Xxxxxx X. Xxxxxxx
--------------------- --------------------------------
Xxxxxx X. Xxxxxxx
Its Vice President
MORRILTON VIDEO, INC.
Date: 1/28/99 By: /s/ Xxxxxx Xxxxxxx, Xx.
--------------------- --------------------------------
Name: Xxxxxx Xxxxxxx, Xx.
----------------------
Title: President
---------------------
WEHCO VIDEO, INC.
Date: 1/28/99 By: /s/ Xxxxxx Xxxxxxx, Xx.
--------------------- --------------------------------
Name: Xxxxxx Xxxxxxx, Xx.
----------------------
Title: President
---------------------
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