1
ASSET PURCHASE AGREEMENT
BY AND BETWEEN
NORTHLAND CABLE PROPERTIES FOUR LIMITED PARTNERSHIP
("BUYER")
AND
BROOKRIDGE CABLE SPECIAL PURPOSE PARTNERSHIP; BROOKRIDGE
CABLE SPECIAL PURPOSE PARTNERSHIP - II; BROOKSHIRE CABLE
TV, LIMITED PARTNERSHIP; CARTHAGE CABLE TV, L.P.;
AND HILLSBORO CABLE TV, LIMITED PARTNERSHIP
(COLLECTIVELY, JOINTLY AND SEVERALLY, THE "SELLER")
2
TABLE OF CONTENTS
Page
----
Section 1. Definitions.......................................................................2
1.1 Agreement.................................................................2
1.2 Assets....................................................................2
1.2.1 Cash and Cash Equivalents..........................................2
1.2.2 CATV Instruments...................................................2
1.2.3 CATV Equipment.....................................................2
1.2.4 Real Property......................................................2
1.2.5 Seller Contracts...................................................3
1.2.6 Intangibles........................................................3
1.3 Basic Package Services....................................................3
1.4 Basic Service Tier........................................................3
1.5 Buyer.....................................................................3
1.6 CATV......................................................................3
1.7 CATV Systems..............................................................3
1.8 CLI Rules.................................................................4
1.9 Closing and Closing Date..................................................4
1.10 Code......................................................................4
1.11 Equivalent Billing Units..................................................4
1.12 Equivalent Subscribers....................................................4
1.13 ERISA.....................................................................5
1.14 Excluded Assets...........................................................5
1.15 FCC.......................................................................5
1.16 Group A Systems...........................................................5
1.17 Group B Systems...........................................................5
1.18 Monthly Revenue; Minimum Monthly Revenue..................................5
1.19 Note......................................................................5
1.20 Pay-TV Services...........................................................5
1.21 Pay-TV Subscribers........................................................6
1.22 Permitted Exceptions......................................................6
1.23 Purchase Price............................................................6
1.24 Remedial Steps............................................................6
1.25 Required Consents.........................................................6
1.26 Security Interest.........................................................6
1.27 Seller....................................................................6
Section 2. Sale of Assets............................................................7
2.1 Agreement to Purchase and Sell............................................7
2.2 Assets to Be Sold.........................................................7
Section 3. Purchase Price............................................................7
3.1 Purchase Price............................................................7
i
3
3.1.1 Cash...................................................................................7
3.1.2 Note...................................................................................7
3.2 Adjustments and Prorations to the Purchase Price at Closing...................................7
3.2.1 Shortfall Adjustments..................................................................7
3.2.2 Prorations and Other Adjustments.......................................................8
3.3 Post-Closing Adjustments.....................................................................10
3.3.1 Procedure.............................................................................10
3.3.2 Property Taxes........................................................................11
3.3.3 Continuing Offset Rights of Buyer.....................................................11
3.4 Allocation of Purchase Price.................................................................11
Section 4. Assumption of Liabilities............................................................................11
4.1 Assignment and Assumption....................................................................11
4.2 Limitation of Liability......................................................................12
4.2.1 Buyer's Liability.....................................................................12
4.2.2 Termination of or Indemnification Against Agreements not Assumed......................12
4.3 Sales and Transfer Taxes; Third-Party Consents. .............................................12
Section 5. Representations and Warranties of Seller.............................................................12
5.1 Organization and Authority...................................................................12
5.2 Schedules....................................................................................13
5.3 No Breach or Violation.......................................................................13
5.4 Title to Assets..............................................................................13
5.5 Real Property................................................................................13
5.5.1 Zoning................................................................................13
5.5.2 Access; Utilities.....................................................................14
5.5.3 Effectiveness of Leases...............................................................14
5.5.4 Easements.............................................................................14
5.5.5 Environmental Matters.................................................................14
5.6 Required Consents............................................................................15
5.7 CATV Instruments and Seller Contracts........................................................15
5.7.1 Effectiveness.........................................................................15
5.7.2 Copies................................................................................16
5.7.3 Status of CATV Instruments and Seller Contracts Not Assumed...........................16
5.8 FCC Compliance...............................................................................16
5.8.1 General Compliance....................................................................16
5.8.2 CLI Compliance........................................................................17
5.8.3 Tests and Compliance with Standards...................................................17
5.8.4 System Repair.........................................................................18
5.8.5 Payment of Fines......................................................................18
5.9 Copyrights, Patents and Trademarks...........................................................19
5.9.1 Copyright Filings.....................................................................19
5.9.2 Copyright Infringement................................................................19
5.9.3 Payment of Fines and Copyright Royalties..............................................19
5.9.4 Patents, Trademarks...................................................................19
ii
4
5.10 Assets and CATV Business.....................................................................19
5.10.1 Generally.............................................................................19
5.10.2 Cable Plant...........................................................................20
5.11 Litigation and Proceedings...................................................................20
5.12 Tax Returns; Other Reports...................................................................20
5.13 Dissenters' Rights...........................................................................21
5.14 Employment Matters...........................................................................21
5.14.1 Employees............................................................................21
5.14.2 Employment Relationship..............................................................21
5.14.3 Unions...............................................................................21
5.14.4 Benefits.............................................................................21
5.14.5 Plans................................................................................21
5.14.6 Seller's Responsibility..............................................................21
5.14.7 Health Care Continuation.............................................................22
5.14.8 Miscellaneous Federal Acts...........................................................22
5.14.9 FCC Filings..........................................................................22
5.15 Subscribers Fees and Rates...................................................................22
5.16 Insolvency Proceedings.......................................................................22
5.17 Finders and Brokers..........................................................................22
5.18 Effect of Certificates.......................................................................22
5.19 Citizenship..................................................................................23
5.20 Overbuilds; Competition......................................................................23
5.21 Financial Statements.........................................................................23
5.22 Free CATV Service............................................................................23
5.23 Full Disclosure..............................................................................23
Section 6. Buyer's Representations and Warranties...............................................................23
6.1 Organization and Authority...................................................................23
6.2 Litigation and Proceedings...................................................................23
6.3 Finders and Brokers..........................................................................24
6.4 Status of Assumed Liabilities................................................................24
6.5 Effect of Certificates.......................................................................24
6.6 Citizenship..................................................................................24
Section 7. Conduct Pending Closing..............................................................................24
7.1 Access to Premises and Records...............................................................24
7.2 Continuity and Maintenance of Operations.....................................................24
7.3 Existing Relationships.......................................................................25
7.4 Employees; Employment Relationship...........................................................25
7.5 Buyer's Right to Employ......................................................................25
7.6 Approvals....................................................................................26
7.7 News Releases and Media Notification.........................................................26
7.8 Written, Executed Easements..................................................................26
7.9 Remedial Steps...............................................................................26
iii
5
Section 8. Closing; Closing Date; Termination...................................................................27
8.1 Closing Date.................................................................................27
8.2 Termination..................................................................................27
8.3 Effect of Termination........................................................................27
Section 9. Seller's Obligations At and Prior to Closing.........................................................28
9.1 Transaction Documents........................................................................28
9.2 Closing Documents Checklist..................................................................28
9.3 Security Interest Searches...................................................................28
9.4 Tax Certificates.............................................................................29
9.5 Employees....................................................................................29
Section 10. Buyer's Obligations At Closing......................................................................29
Section 11. Conditions of Buyer's Obligations...................................................................29
11.1 Tests and Inspections Before Closing..............................................................29
11.1.1 Technical Tests .....................................................................29
11.1.2 Environmental Site Assessments.......................................................30
11.1.3 Financial Inspection ................................................................30
11.2 Approvals and Consents............................................................................30
11.2.1 Franchises...........................................................................30
11.2.2 Other Required Consents .............................................................30
11.3 Performance by Seller of Covenants and Accuracy of Representations and
Warranties .....................................................................................30
11.3.1 Performance of Covenants.............................................................30
11.3.2 Operability..........................................................................30
11.3.3 Restraint of Proceedings.............................................................31
11.3.4 No Governmental Action...............................................................31
11.3.5 Equivalent Subscribers and Monthly Revenue...........................................31
11.3.6 Updated Schedules....................................................................31
11.3.7 Closing Documents....................................................................31
11.4 Conveyance of Title to Assets.....................................................................31
11.4.1 Security Interests...................................................................31
11.4.2 Title Insurance......................................................................31
Section 12. Conditions of Seller's Obligations..................................................................32
12.1 Performance by Buyer.........................................................................32
12.2 Buyer's Certificate. .......................................................................32
12.3 Operability..................................................................................32
12.4 Restraint of Proceedings.....................................................................32
12.5 No Governmental Action.......................................................................32
12.6 Closing Documents............................................................................33
12.7 Equivalent Subscribers and Monthly Revenue...................................................33
Section 13. Noncompetition Agreement ...........................................................................33
iv
6
Section 14. Indemnification.....................................................................................33
14.1 Survival of Representations, Warranties and Covenants........................................33
14.2 Limitations of Liability.....................................................................33
14.3 Indemnification..............................................................................35
14.4 Defense of Claims............................................................................36
14.5 Extension of Due Date of Note................................................................37
14.6 Dispute Resolution Regarding Indemnification Claims..........................................37
Section 15. Miscellaneous......................................................................................37
15.1 Governing Law................................................................................37
15.2 Assignment and Delegation of Agreement.......................................................37
15.3 Entire Agreement; Amendments.................................................................38
15.4 Binding Effect...............................................................................38
15.5 Additional Agreements........................................................................38
15.6 Efforts......................................................................................38
15.7 Expenses.....................................................................................38
15.8 Execution in Multiple Counterparts...........................................................38
15.9 Schedules and Exhibits.......................................................................38
15.10 Waiver.......................................................................................39
15.11 Counsel......................................................................................39
15.12 Captions and Headings........................................................................40
15.13 Notices......................................................................................40
15.14 Legal Expenses...............................................................................40
15.15 Severability; Invalidity.....................................................................41
15.16 Time of the Essence..........................................................................41
v
7
ASSET PURCHASE AGREEMENT
This Asset Purchase Agreement is made as of September 13, 1995, by and
between NORTHLAND CABLE PROPERTIES FOUR LIMITED PARTNERSHIP, a Washington
limited partnership, and BROOKRIDGE CABLE SPECIAL PURPOSE PARTNERSHIP, a
Connecticut general partnership, BROOKRIDGE CABLE SPECIAL PURPOSE PARTNERSHIP -
II, a Connecticut general partnership, BROOKSHIRE CABLE TV, LIMITED PARTNERSHIP,
a Texas limited partnership, CARTHAGE CABLE TV, L.P., a Texas limited
partnership and HILLSBORO CABLE TV, LIMITED PARTNERSHIP, a Texas limited
partnership.
RECITALS
A. Seller currently is engaged in the business of providing cable
television service in or around the following: (i) the unincorporated areas of
Xxxxxx County known as Huffman and North Huffman, the incorporated area of the
City of Houston known as Lakewood Heights, and the unincorporated areas of
Xxxxxx County known as Indian Shores and Spanish Cove; (ii) the incorporated
community of Prairie View, the incorporated community of Xxxxxx, the campus of
Prairie View A & M University, and nearby unincorporated areas of Xxxxxx County;
(iii) the incorporated community of Cut and Shoot and nearby unincorporated
areas of Xxxxxxxxxx County; (iv) the incorporated community of Brookshire and
nearby unincorporated areas of Xxxxxx County; (v) the unincorporated area of
Liberty County known as Xxxxxxxxx; (vi) the unincorporated areas of Liberty
County and Polk County known as and near Ace, including unincorporated areas
under control of the Wild Country P.O.A., the Big Thickett P.O.A. and Xxxxxx
Lakes Estates Maintenance Committee; and (vii) the incorporated communities of
Simonton and Fulshear and nearby unincorporated areas of Fort Bend County; all
in the State of Texas.
B. Buyer desires to purchase, and Seller desires to sell and convey
substantially all of the assets of Seller used or useful in connection with such
cable television business, all as more particularly described below.
AGREEMENT
For good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties agree as follows:
Page 1
8
SECTION 1. DEFINITIONS
For the purposes of this Agreement, the following capitalized terms
shall have the respective meanings ascribed to them below (terms defined in the
singular shall have the same meanings when used in the plural, and vice versa):
1.1 Agreement shall mean this Asset Purchase Agreement, as amended,
supplemented or modified from time to time, including all agreements,
instruments and documents delivered in connection with this Agreement and all
Schedules and Exhibits annexed hereto.
1.2 Assets shall mean all properties, privileges, rights and
interests, real and personal, tangible and intangible, of every type and
description in which Seller has any right, title or interest, and that are
owned, held, used, or useful in the CATV Systems as of the Closing Date, except
only for the Excluded Assets as defined in Section 1.14. Assets include without
limitation the items which are listed in Schedule 1.2, and the following:
1.2.1 Cash and Cash Equivalents. All cash and cash equivalents
held by Seller and relating to converter and other subscriber deposits (but only
to the extent the refund obligations for the same are assumed by Buyer), all
subscriber prepayments, advertising prepayments and other prepaid revenues, and
all accounts receivable existing as of Closing with respect to the CATV Systems,
including but not limited to those Cash Equivalents described in Schedule 1.2,
but not including cash on hand, accounts or investments of any kind that are not
otherwise Cash Equivalents;
1.2.2 CATV Instruments. Franchises, licenses, crossing permits,
service agreements, retransmission consent agreements and all intangible CATV
channel distribution rights or privileges owned, used or held for use by Seller,
including without limitation those described in Schedule 1.2;
1.2.3 CATV Equipment. All tangible personalty, furniture,
fixtures, office equipment and supplies, electronic devices, strand, trunk,
feeder, drop and other distribution cable, towers, antennae, poles, amplifiers,
power supplies, conduit, vaults, pedestals, grounding and pole hardware,
"headend" (origination, earth stations, transmission and distribution system)
hardware, motor and other vehicles, tools, construction equipment, test
equipment, maintenance equipment, spare parts, inventory and other personal
property and facilities owned, leased, used, or held for use in the CATV
Systems, and subscribers' devices to the extent owned by Seller (including
without limitation converters, encoders, transformers behind TV sets and
fittings), all of which includes without limitation those described in Schedule
1.2;
1.2.4 Real Property. All realty, including appurtenances,
improvements, and fixtures located thereon, easements, and other such items,
owned or leased by Seller and used or held for use in the CATV Systems,
including Seller's fee and leasehold interests therein, and including without
limitation those items or interests described in Schedule 1.2;
Page 2
9
1.2.5 Seller Contracts. All contracts, agreements and other
arrangements pertaining to the lawful ownership, operation and maintenance of
the CATV Systems or used in the CATV Systems, including without limitation those
described in Schedule 1.2; and
1.2.6 Intangibles. All general intangibles including, but not
limited to, subscriber lists, accounts receivable, notes receivable, options,
claims, trade names (other than "Brookridge, Inc.," "Brookridge Cable Special
Purpose Partnership," "Brookridge Cable Special Purpose Partnership-II,"
"Brookshire Cable TV, Limited Partnership," "Carthage Cable TV, L.P.,"
"Hillsboro Cable TV, Limited Partnership," "Texas Cablevision" and any
derivatives thereof), patents, copyrights, registered trademarks, and goodwill.
1.3 Basic Package Services shall mean the package of cable television
programming, including broadcast and satellite service programming (but
excluding premium or pay-television programming) sold to the greatest number of
subscribers of the CATV Systems for a fixed monthly fee, as more particularly
described in Schedule 1.7.
1.4 Basic Service Tier shall mean that level of cable services,
offered at the rate set forth in Schedule 1.7, that includes only (a) the
signals of off-air television broadcast stations, (b) the signals of television
broadcast stations that are secondarily transmitted by a satellite carrier
beyond the local service area of such stations, (c) local origination channels,
and (d) public, educational and governmental access channels.
1.5 Buyer shall mean Northland Cable Properties Four Limited
Partnership, a Washington limited partnership.
1.6 CATV shall mean cable television.
1.7 CATV Systems shall refer to (a) Seller's complete CATV reception
and distribution systems as presently conducted by Seller in or around (i) the
unincorporated areas of Xxxxxx County known as Huffman and North Huffman, the
incorporated area of the City of Houston known as Lakewood Heights, and the
unincorporated areas of Xxxxxx County known as Indian Shores and Spanish Cove
(the "Huffman System"); (ii) the incorporated community of Prairie View, the
incorporated community of Xxxxxx, the campus of Prairie View A & M University,
and nearby unincorporated areas of Xxxxxx County (the "Prairie View System");
(iii) the incorporated community of Cut and Shoot and nearby unincorporated
areas of Xxxxxxxxxx County (the "Cut and Shoot System"); (iv) the incorporated
community of Brookshire and nearby unincorporated areas of Xxxxxx County (the
"Brookshire System"); (v) the unincorporated area of Liberty County known as
Xxxxxxxxx (the "Xxxxxxxxx System"); (vi) the unincorporated areas of Liberty
County and Polk County known as and near Ace, including unincorporated areas
under control of the Wild Country P.O.A., the Big Thickett P.O.A. and Xxxxxx
Lakes Estates Maintenance Committee (the "Ace System"); and (vii) the
incorporated communities of Simonton and Fulshear and nearby unincorporated
areas of Fort Bend County (the "Simonton System"); all in the State of Texas,
consisting of one or more headends, trunk cable, feeder cable,
Page 3
10
microwave transmission and reception facilities, drops and associated electronic
equipment, which are, or are capable of being, operated as an independent system
without interconnections to other CATV systems; and (b) all of the Assets and
business of such systems, as more particularly described in Schedule 1.7.
1.8 CLI Rules shall refer to the Cumulative Leakage Index ("CLI")
standards under currently effective FCC rules and regulations.
1.9 Closing and Closing Date shall refer to the meeting for the purpose
of concluding the transactions contemplated by this Agreement, to be held at the
place and on the date specified in Section 8.1. The day on which such meeting
takes place shall be referred to as the "Closing Date."
1.10 Code shall mean the Internal Revenue Code of 1986, and any
successor statute of similar import, and regulations thereunder, in each case as
in effect from time to time.
1.11 Equivalent Billing Units shall mean the sum of: (a) the number
obtained by dividing the aggregate monthly amount billed as of the Closing Date
by Seller to bulk subscribers of the CATV Systems, such as hotels, motels and
apartment houses, that receive Basic Package Services (not more than a single
month's billing for any single bulk account and excluding installation and other
non-recurring charges), by the full monthly rate charged to single family
households in the CATV Systems for Basic Package Services, provided, that no
part of the account of any bulk subscriber (other than interest and late fee
charges) is more than sixty (60) days past due from the original due date of
billing, and provided further that each such bulk subscriber has paid at least
two (2) months' regular charges for Basic Package Services and all installation
charges billed therefor; and (b) the number obtained by dividing the aggregate
monthly amount billed as of the Closing Date by Seller to Basic Service Tier
subscribers (excluding installation and other non-recurring charges) by the full
monthly rate charged to subscribers of the Basic Package Services, and provided
further, that no part of the account of any Basic Service Tier subscriber (other
than interest and late fee charges) is more than sixty (60) days past due from
the original due date of billing, and provided further that each Basic Service
Tier subscriber has paid at least two (2) months' regular charges for such
services and all installation charges billed therefor.
1.12 Equivalent Subscribers shall mean, with respect to the CATV
Systems, the sum of (a) the number of single family households (exclusive of
"additional outlets" or "second connects" and "pending disconnects," as such
terms are commonly understood in the CATV industry) subscribing to Basic Package
Services of the CATV Systems and paying the full monthly rate for such services,
whose accounts payable to Seller for Basic Package Services are not more than
sixty (60) days past due from the original due date as stated on such billing,
and who have paid at least two (2) months' payment for Basic Package Services in
full without discount and all installation charges billed therefor, and (b) the
number of Equivalent Billing Units.
Page 4
11
1.13 ERISA shall mean the Employee Retirement Income Security Act of
1974, as amended, and any successor statute of similar import, and regulations
thereunder, in each case as in effect from time to time.
1.14 Excluded Assets shall include: Seller's cash on hand at Closing
(but only to the extent that such cash does not constitute Cash Equivalents
under Section 1.2.1); the names "Brookridge, Inc.," "Brookridge Cable Special
Purpose Partnership," "Brookridge Cable Special Purpose Partnership-II,"
"Brookshire Cable TV, Limited Partnership," "Carthage Cable TV, L.P.,"
"Hillsboro Cable TV, Limited Partnership," "Texas Cablevision" and all
derivatives thereof; and only those other assets mutually agreed to by the
parties and listed in Schedule 1.14.
1.15 FCC shall mean the Federal Communications Commission.
1.16 Group A Systems shall mean the Xxxxxxx System, the Prarie View
System, and the Cut and Shoot System.
1.17 Group B Systems shall mean the Brookshire System, the Xxxxxxxxx
System, the Ace System, and the Xxxxxxxx System.
1.18 Monthly Revenue; Minimum Monthly Revenue shall mean the monthly
average of the total revenues (as defined under generally accepted accounting
principles, but not including any franchise fees, sales or similar taxes
collected by Seller on behalf of any governmental entity) earned by the CATV
Systems during the three (3) full calendar months immediately preceding the
Closing Date from (a) recurring monthly subscription payments received from the
CATV Systems' Equivalent Subscribers and Pay-TV Subscribers, and (b) the other
operations of the CATV Systems; provided, however, that such revenue shall be
counted in the determination of Monthly Revenue only to the extent that the CATV
Systems' charges to customers for any equipment and/or services subject to
regulation are in compliance with the applicable rate regulation rules of the
FCC. "Minimum Monthly Revenue" shall mean, in the case of Group A Systems,
Seventy Seven Thousand Five Hundred Dollars ($77,500), and in the case of Group
B Systems, Twenty Four Thousand Five Hundred Dollars ($24,500).
1.19 Note shall mean the promissory note referred to in Section 3.1.2,
substantially in the form of Exhibit G.
1.20 Pay-TV Services shall mean one or more addition channels of
programming commonly known as premium or pay-television programming channels not
otherwise made available to Equivalent Subscribers without the payment of
monthly fees in addition to the fee for Basic Package Services.
1.21 Pay-TV Subscribers shall mean the sum of (a) the number of
Equivalent Subscribers who are paying to receive one or more Pay-TV Services,
and (b) the number of such Pay-TV Services in excess of one which each such
Equivalent Subscriber is paying for, provided, that the payment for such Pay-TV
Services is not more than sixty (60) days past due from the
Page 5
12
original due date as stated on such billing and that such subscriber has paid at
least two (2) months' regular charges for such services and all installation
charges billed therefor.
1.22 Permitted Exceptions shall mean, with respect to ALTA lessee's and
owner's extended coverage title insurance policies, (a) standard printed
exceptions, (b) inchoate liens for current taxes and assessments not yet
delinquent, (c) standard utility and roadway easements, covenants and
restrictions, whether or not of record, that do not individually or in the
aggregate materially detract from the value of, or impair the use of the Real
Property affected thereby, (d) existing zoning or similar laws or ordinances
that do not interfere with the operation of the CATV Systems, (e) Security
Interests specifically assumed by Buyer pursuant to Section 4.1, (f) survey
exceptions that do not individually or in the aggregate materially detract from
the value of, or impair the use of the Real Property affected thereby, and (g)
standard mineral or water rights exceptions.
1.23 Purchase Price shall mean the total consideration payable by Buyer
to Seller for the transactions contemplated in this Agreement, as more
particularly described in Section 3.1.
1.24 Remedial Steps shall mean the necessary steps Seller will have
taken so as to have caused the CATV Systems to be in full compliance with the
standards prescribed in Section 5.8.3, but only to the extent the CATV Systems
or any portion thereof are not in compliance with such rules and standards.
1.25 Required Consents shall mean the written consents of the
governmental authorities and other third parties necessary or required for Buyer
to conduct the business of the CATV Systems, as more particularly described in
Section 5.6.
1.26 Security Interest shall mean any mortgage, deed-of-trust, lien,
security agreement, limitation, pledge, hypothecation, assignment for security
purposes, option, put, charge, restrictive agreement, capital or financing lease
arrangement, restriction, priority, encumbrance, adverse interest, claim,
restraint on transfer, or claim of any kind or nature whatsoever (including,
without limitation, any agreement to give or suffer to exist any of the
foregoing) against title with respect to any Asset to be sold under this
Agreement.
1.27 Seller shall mean, collectively, jointly and severally, Brookridge
Cable Special Purpose Partnership, a Connecticut general partnership, Brookridge
Cable Special Purpose Partnership - II, a Connecticut general partnership,
Brookshire Cable TV, Limited Partnership, a Texas limited partnership, Carthage
Cable TV, L.P., a Texas limited partnership and Hillsboro Cable TV, Limited
Partnership, a Texas limited partnership.
Page 6
13
SECTION 2. SALE OF ASSETS
2.1 Agreement to Purchase and Sell. Subject to the terms and
conditions set forth in this Agreement, at Closing Buyer shall purchase and
Seller shall sell, transfer, assign, convey and deliver the Assets to Buyer.
2.2 Assets to Be Sold. Except as otherwise specifically provided in
this Agreement, all of the Assets, whether or not described in the Schedules to
this Agreement, are intended to be sold, transferred, assigned, conveyed and
delivered to Buyer, free and clear of all Security Interests.
SECTION 3. PURCHASE PRICE
3.1 Purchase Price. Buyer shall pay to Seller total consideration of
Five Million Seven Hundred Ninety Thousand Dollars ($5,790,000) (the "Purchase
Price") for the Assets, as adjusted pursuant to Sections 3.2 and 3.3. The
Purchase Price shall be paid as follows:
3.1.1 Cash. At Closing, Buyer shall pay to Seller Five Million
Five Hundred Thousand Five Hundred Dollars ($5,500,500), as adjusted pursuant to
Section 3.2, by wire transfer of immediately available funds on the Closing
Date; and
3.1.2 Note. At Closing, Buyer shall execute and deliver to Seller
an unsecured, non-negotiable, non-assignable, non-interest bearing promissory
note in the principal amount of Two Hundred Eighty Nine Thousand Five Hundred
Dollars ($289,500), due and payable one hundred eighty (180) days after Closing
and in substantially the form of Exhibit G. The Note shall be subject to offset
as described in Section 3.3.3, and shall be guaranteed by Northland
Communications Corporation, the managing general partner of Buyer, pursuant to a
Corporate Guaranty substantially in the form of Exhibit H. Upon the request of
Buyer, Seller, at Closing, shall enter into a subordination agreement with
Buyer's senior lender, reasonably acceptable to Seller, Buyer and Buyer's senior
lender, providing that the Note and any right to payment thereunder shall be
fully subordinated to the interest of Buyer's senior lender.
3.2 Adjustments and Prorations to the Purchase Price at Closing
3.2.1 Purchase Price Adjustments. The Purchase Price and the
portion thereof payable under Section 3.1.1 shall be adjusted, at Buyer's sole
discretion, based upon the lowest result generated from each of the following:
(a) Subscriber Adjustments
(i) If the Group A Systems serve greater or fewer than
two thousand seven hundred ninety-nine (2,799) Equivalent
Subscribers at the Closing Date, to an amount determined by the
following:
[$1,000 * (Actual Equivalent Subscribers at Closing - 2,799)]
Page 7
14
provided, that the maximum increase or decrease of the Purchase
Price pursuant to this Subsection 3.2.1(a)(i) will be One Hundred
Forty Thousand Dollars ($140,000); and
(ii) If the Group B Systems serve greater or fewer than
eight hundred eighty-five (885) Equivalent Subscribers at the
Closing Date, to an amount determined by the following:
[$1,000 * (Actual Equivalent Subscribers at Closing - 885)]
provided, that the maximum increase or decrease of the Purchase
Price pursuant to this Subsection 3.2.1(a)(ii) will be Twenty Five
Thousand Dollars ($25,000); or
(b) Monthly Revenue Shortfall Adjustments
(i) If the Group A Systems generate more or less than
the Minimum Monthly Revenue at the Closing Date, to an amount
determined by the following:
[$1,000 * (Actual Monthly Revenue at Closing - $77,500)]
--------------------------------------------------------
$27.67
provided, that the maximum increase or decrease of the Purchase
Price pursuant to this Subsection 3.2.1(b)(i) will be One Hundred
Forty Thousand Dollars ($140,000); and
(ii) If the Group B Systems generate more or less than
the Minimum Monthly Revenue at the Closing Date, to an amount
determined by the following:
[$1,000 * (Actual Monthly Revenue at Closing - $24,500)]
--------------------------------------------------------
$27.67
provided, that the maximum increase or decrease of the Purchase
Price pursuant to this Subsection 3.2.1(b)(ii) will be Twenty Five
Thousand Dollars ($25,000).
3.2.2 Prorations and Other Adjustments
(a) Prorations. In addition to the adjustments described in
Section 3.2.1, appropriate adjustments to the Purchase Price and the portion
thereof payable under Section 3.1.1 shall be made on a prorata basis as of
the Closing Date to the extent reasonably possible for all prepaid expenses,
accrued expenses and prepaid revenue, all as determined in accordance with
generally accepted accounting principles, to reflect the principle that all
expenses arising out of and all income attributable to the CATV Systems for
the period prior to 11:59 p.m. on the Closing Date are for the account of
Seller, and that all expenses arising out of and all income attributable to
the CATV Systems for the period after 11:59 p.m. on the Closing Date are for
the account of Buyer.
Page 8
15
All overlapping items of income or expense, including without limitation the
following, shall be prorated or reimbursed, as the case may be, as of 11:59
p.m. on the Closing Date:
(i) Prepaid expenses and deposits made prior to Closing,
as permitted by the terms hereof, for or in connection with goods
or services where all or a part of such goods or services have not
been received or used as of the Closing Date (e.g., rents paid in
advance for a rental period extending beyond the Closing Date);
(ii) Liabilities customarily accrued, arising from
expenses incurred but unpaid as of Closing, including without
limitation liabilities under any and all obligations assumed by
Buyer pursuant to Section 4.1 (e.g., rents, sales commissions,
fees for business and professional services, and other similar
matters);
(iii) Taxes and utility charges related to the CATV
Systems or in respect of any of the Assets (other than state sales
taxes that may be due as a consequence of the consummation of the
transactions contemplated by this Agreement, and any taxes that
may be imposed upon Buyer on the basis of Buyer's income);
(iv) Deposits made and unearned prepayments received by
Seller in connection with any of Seller's obligations assumed by
Buyer pursuant to Section 4.1; and
(v) Franchise fees, copyright payments, pole attachment
agreements, railroad and/or highway crossing charges, programming
expenses, satellite service fees, antenna space leases, bad debt
expenses, billing company charges, and other fees, expenses, costs
and charges normally prorated in the sale of the assets of a CATV
business.
No payments or adjustments shall be made with respect to any Excluded
Assets.
(b) Pre-Closing Procedure. At least five (5) calendar days
before Closing, Seller shall notify Buyer of Seller's good faith estimate of
(i) the Equivalent Subscribers and the Monthly Revenue as of the Closing
Date, and (ii) any adjustments or prorations required by this Section 3.2.
If such estimate will result in a reduction to the Purchase Price, then the
amount to be paid by Buyer at Closing shall be preliminarily reduced by such
estimate. Prior to Closing, Seller shall provide Buyer or Buyer's
representatives with copies of or reasonable access to all books and
records, subscriber work orders, billing reports, bank statements and
related documentation as Buyer may reasonably request for purposes of
verifying the matters set forth in such notification, but without limiting
Seller's obligations hereunder to certify the accuracy of all adjustments.
Seller and Buyer shall work together in good faith to resolve on or before
the Closing Date any disagreement with respect to any matter set forth in
such notification. At least
Page 9
16
one (1) day before Closing, Seller shall deliver to Buyer a certificate
setting forth (i) the number of Equivalent Subscribers and the Monthly
Revenue as of the Closing Date, and (ii) any reductions or prorations
required by this Section 3.2 to which the parties have mutually agreed.
(c) Accounts Receivable. In addition to the Purchase Price,
Buyer shall purchase, and Seller shall sell, transfer, assign, convey and
deliver to Buyer, all of Seller's accounts receivable existing as of Closing
with respect to the CATV Systems. For purposes of this Agreement, the age of
Seller's accounts receivable shall be measured from the original due date as
stated on Seller's xxxxxxxx. The consideration that Buyer shall pay to
Seller shall be calculated as follows:
(i) For accounts receivable aged 0-30 days, 90% of the aggregate
amounts of such accounts receivable;
(ii) For accounts receivable aged 31-60 days, 50% of the aggregate
amount of such accounts receivable; and
(iii) For accounts receivable aged over 60 days, 0% of the
aggregate amounts of such accounts receivable.
3.3 Post-Closing Adjustments
3.3.1 Procedure. As soon as practicable, but in any event within
sixty (60) days after the Closing Date, Buyer shall prepare and deliver to
Seller a certificate setting forth Buyer's computations of the amount of all
prorations and adjustments, if any, called for in Section 3.2. After such
certificate has been delivered, Seller shall have a period of fifteen (15) days
to review such certificate and to present objections, if any, to Buyer. Buyer
shall grant to Seller or Seller's representatives reasonable access to Buyer's
books and records as Seller may reasonably request for purposes of verifying
such computations. Such certificate shall be final and conclusive unless
objected to by Seller in writing within such 15-day period. During the fifteen
(15) days after Buyer's receipt of any such written objection from Seller,
Seller and Buyer shall attempt to reach agreement upon the proper prorations and
adjustments called for in Section 3.2. A payment shall be made by Seller or
Buyer within five (5) business days after any such agreement as to the proper
undisputed amounts, taking into account any preliminary adjustment for such
items made at Closing. If Seller and Buyer are unable to agree upon the proper
amount of any such adjustment within such 15-day period, then the amounts in
dispute shall be submitted to an accounting firm mutually acceptable to Buyer
and Seller, which shall render a written decision to Seller and Buyer within
thirty (30) calendar days after it has been retained, which decision shall be
final, and whose fees shall be paid one-half by Buyer and one-half by Seller.
3.3.2 Property Taxes. If the amount of any real or personal
property tax to be prorated is not known on the Closing Date, such tax shall be
apportioned on the basis of the most recent tax assessment; except, however, if
there is a re-assessment pending or threatened with
Page 10
17
respect to the property being taxed, then the parties shall mutually agree to an
appropriate apportionment taking into account such pending or threatened
re-assessment.
3.3.3 Continuing Offset Rights of Buyer. Buyer shall have the
continuing right to offset or recoup against the Note: (a) for liabilities or
expenses of Seller which were undisclosed by Seller prior to Closing and which
Buyer in its sole and absolute discretion elects to assume; or (b) for damages
suffered or costs incurred (whether or not yet paid) by Buyer for reason of
Seller's breach of any provision of this Agreement. After Closing, Buyer shall
not have the right to offset or recoup against the escrow account for further
reductions to the Purchase Price pursuant to Section 3.2.1, unless Buyer can
reasonably demonstrate that Seller committed fraud or made a knowing
misrepresentation. Nothing contained in this Section 3.3.3 shall be deemed to
limit or in any way restrict Buyer's right to be indemnified by Seller pursuant
to Section 14 of this Agreement to the extent the amount to which Buyer is
entitled under Section 14 exceeds the amount actually offset or recouped under
this Section 3.3.3.
3.4 Allocation of Purchase Price. The Purchase Price shall be
allocated among the Assets in such amounts as set forth in Schedule 3.4. Buyer
and Seller agree to be bound by such allocation and to file according to Code
Section 1060, all returns and reports with respect to the transaction
contemplated by this Agreement, including, but not limited to, all federal,
state, and local tax returns, on the basis of such allocation. In the event the
Purchase Price is adjusted pursuant to Sections 3.2 or 3.3, the difference shall
be allocated among appropriate categories on a prorata basis unless such
differences are specifically allocable in whole or in part to a particular
category or categories as mutually agreed by Buyer and Seller.
SECTION 4. ASSUMPTION OF LIABILITIES
4.1 Assignment and Assumption. All of Seller's obligations with
respect to the CATV Systems are set forth in the agreements listed in Schedule
1.2. Buyer shall assume only the obligations of Seller set forth on Schedule 4.1
that accrue after the Closing Date (the "Assumed Liabilities"). If and to the
extent that Seller, in the ordinary course of business, enters into other
agreements after the date of this Agreement but before the Closing Date that are
not listed on Schedule 4.1 but have terms less than ninety (90) days and have
payment or performance obligations that are not material, Buyer shall assume all
of such agreements as a part of the Assumed Liabilities. At Closing, Seller
shall assign and Buyer shall assume the Assumed Liabilities. Such agreement for
assignment and assumption pertaining to CATV Instruments and Seller Contracts
shall, to the extent reasonably possible, be in the form of Exhibit B. Such
agreement for assignment and assumption pertaining to Franchises shall, to the
extent reasonably possible, be in the form of Exhibit C. Such agreement for
assignment and assumption pertaining to Real Property shall, to the extent
reasonably possible, be in the form of Exhibit D.
4.2 Limitation of Liability
4.2.1 Buyer's Liability. It is expressly understood and agreed
that Buyer shall not be liable for, and does not assume, any obligations or
liabilities of Seller of any kind or
Page 11
18
nature, other than Seller's obligations to subscribers of the CATV Systems with
respect to (a) subscriber deposits held by Seller (and for which Buyer receives
credit) as of the Closing Date which are refundable, and (b) subscriber advance
payments held by Seller (and for which Buyer receives credit) as of the Closing
Date for services to be rendered in connection with the operation of the CATV
Systems subsequent to the Closing Date, and (c) obligations accruing after
Closing under the Assumed Liabilities expressly assumed by Buyer pursuant to the
terms of Section 4.1. Except as otherwise set forth herein, Buyer shall be under
no obligation to, and shall not, assume any obligation, liability or
indebtedness of Seller or the CATV Systems, including without limitation any and
all fines or penalties levied or assessed by the Copyright Office after Closing,
to the extent that such fines or penalties (i) relate to the period prior to
Closing, and (ii) have been determined to be valid.
4.2.2 Termination of or Indemnification Against Agreements not
Assumed. Seller in its discretion may terminate as of Closing any and all
agreements with third parties which affect the Assets or the CATV Systems which
Buyer does not expressly assume; provided, however, that any agreements not
terminated shall be subject to Seller's representations and warranties set forth
in Section 5.7.3.
4.3 Sales and Transfer Taxes; Third-Party Consents. Buyer shall assume
the liability for and shall pay all taxes that may be imposed on Buyer pursuant
to law as a result of the consummation of the transactions contemplated by this
Agreement. Seller shall assume the liability for and shall pay any and all taxes
that may be imposed on Seller on the basis of Seller's income, and any and all
other reasonable costs, fees and taxes associated with the consummation of the
transactions contemplated by this Agreement, including without limitation the
expenses associated with obtaining the consent or agreement to any part of the
transactions contemplated by this Agreement of any governmental authority or any
independent third-party with whom Seller is contractually bound; provided,
however, that Seller shall not be obligated under this Section either to pay any
unreasonable fees or expenses or to undertake any unreasonable obligations as a
part of Seller's performance. Notwithstanding the foregoing, unless specifically
set forth herein, each party shall bear the expenses of its own attorneys,
accountants and experts.
SECTION 5. REPRESENTATIONS AND WARRANTIES OF SELLER
To induce Buyer to enter into this Agreement, each of the entities
comprising Seller jointly and severally represent and warrant to Buyer as
follows:
5.1 Organization and Authority. Each entity comprising Seller is duly
formed, validly existing and in good standing under the laws of the state of its
respective formation and is qualified to transact business in all other
jurisdictions in which the failure to so qualify would have a material adverse
effect on its business or properties; openly and lawfully does business under
the names the names "Brookridge, Inc.," "Brookridge Cable Special Purpose
Partnership," "Brookridge Cable Special Purpose Partnership-II," "Brookshire
Cable TV, Limited Partnership," "Carthage Cable TV, L.P.," "Hillsboro Cable TV,
Limited Partnership" and "Texas Cablevision" but no other name; has full power
and authority to execute, deliver, and perform
Page 12
19
this Agreement; has all requisite power and authority to carry on its business
as currently conducted and to own, lease, use, and operate the Assets at the
places they are located and in the manner in which the CATV Systems are
operated; and has taken all partnership action required by law, its partnership
agreement and otherwise, and as of Closing shall have used its commercially
reasonable efforts to have obtained all Required Consents and shall have
received all necessary partnership consents and approvals, including without
limitation the approval of all of the partners of each entity comprising Seller,
to authorize the execution, delivery, and performance of this Agreement. Seller
has not, within the four (4) year period immediately preceding the date of this
Agreement, changed its name, been the surviving entity of a merger or
consolidation, or acquired all or substantially all of the assets of any person,
company or entity.
5.2 Schedules. The Schedules to this Agreement, as the same may be
amended or supplemented pursuant to Section 15.9 , list all of the material
Assets owned, held, or used for the performance of any CATV Instrument or Seller
Contract and for the lawful conduct of the CATV Systems. All Schedules to this
Agreement, as the same may be amended or supplemented pursuant to Section 15.9
are true, accurate, and complete in all material respects.
5.3 No Breach or Violation. The execution, delivery, and performance
of this Agreement will not (a) conflict with or result in a breach or violation
by Seller of, or (b) constitute default by Seller under, or (c) create or impose
any Security Interest or right of termination, cancellation, or acceleration
with respect to any of the Assets pursuant to, any statute, ordinance, rule,
regulation, or order, or any material agreement, lease, instrument, document or
arrangement affecting the CATV Systems or the Assets or any part thereof, to
which Seller is a party or by which Seller or the Assets are bound. This
Agreement constitutes the legal, valid, and binding obligation of Seller,
enforceable in accordance with its terms.
5.4 Title to Assets. Seller has good, marketable and indefeasible
title, both legal and equitable, to all of the Assets which are owned, and a
valid leasehold interest in all of the Assets which are leased; and the Assets
are free and clear of all Security Interests of any kind or nature, subject only
to (a) Permitted Exceptions with respect to Real Property, (b) any property
taxes not delinquent, and (c) those Security Interests disclosed in Schedule
5.4, which Security Interests shall be removed and released at or prior to
Closing, unless assumed by Buyer.
5.5 Real Property. With respect to all Real Property:
5.5.1 Zoning. The Real Property and the improvements located
thereon and the continuation of business presently being conducted thereon do
not and will not violate any applicable material zoning laws.
5.5.2 Access; Utilities. The Real Property is served by all
utilities and services, including without limitation electrical power, water,
sewer and telephone, reasonably necessary for the normal and intended use of the
Real Property in connection with the operation of the CATV Systems.
Page 13
20
5.5.3 Effectiveness of Leases. All leases of Real Property are
currently in full force and effect and are valid and enforceable in accordance
with their respective terms under all applicable laws. Seller is in compliance
with all of the material requirements and obligations under all such leases, and
there is no pending assertion or claim by any party that Seller is in default or
otherwise not in compliance with all such leases. Except as disclosed in
Schedule 5.5.3, each lease of Real Property has been duly recorded in the
records of the appropriate governmental authority.
5.5.4 Easements. Except as disclosed in Schedule 5.5.4, Seller owns and
possesses all easements and rights-of-way necessary for the operation,
maintenance, repair, replacement, and current location of all cables, lines,
towers, poles, equipment, and other facilities used or useful in connection with
the operation of the CATV Systems.
5.5.5 Environmental Matters
(a) Definitions. For purposes of this Section 5.5.5, the following
terms shall have the following meanings:
(i) Hazardous Substance. "Hazardous Substance" shall mean any
chemical, substance, material, or waste, including without limitation
asbestos, PCBs and formaldehyde, that is defined, classified, listed,
or designated as hazardous, toxic, or radioactive, or by other similar
term, by any federal, state, or local environmental statute,
regulation, rule, order, or ordinance presently in effect.
(ii) Other Property. "Other Property" shall mean any property
that becomes contaminated with any Hazardous Substance as a result of
operations or other activities on, or as a result of any contamination
of, the Real Property.
(iii) Environmental Laws. "Environmental Laws" shall mean all
federal, state and local laws and regulations in effect as of the
Closing Date relating to emissions, discharges, releases or threatened
releases of pollutants, contaminants, chemicals or industrial,
hazardous or toxic materials or wastes into the environment (including
without limitation the atmosphere, ambient water, surface water, ground
water or land surface or sub-surface) or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage,
disposal, transport, or handling of Hazardous Substances.
(b) Presence. Except as set forth on Schedule 5.5.5, Seller has no
knowledge of: (i) any storage, spill, release, discharge, emission, or
disposal of any Hazardous Substance that has occurred or is presently
occurring in, upon, or onto the Real Property in violation of any
Environmental Law; or (ii) the presence of any underground storage tank on
the Real Property.
Page 14
21
(c) Pending Proceedings. Except as set forth on Schedule 5.5.5,
there is no pending civil or criminal litigation, notice of violation,
investigation or administrative proceeding arising out of the business or
activities of Seller, including without limitation any pending litigation,
notice, investigation or proceeding relating in any way to the Environmental
Laws, and, to the best of Seller's knowledge, none of the foregoing is
threatened.
5.6 Required Consents. Schedule 5.6 sets forth a true, correct and complete
list of all Required Consents to be obtained from governmental agencies,
franchising authorities, lessors, and any other third parties whose consents and
approvals are reasonably necessary or required for Seller to sell, transfer,
assign, convey and deliver the Assets to Buyer and for Buyer to conduct the
business of the CATV Systems and to own, lease, use, and operate, as the case
may be, the Assets at the places and in the manner in which the CATV Systems and
Assets are presently conducted or used and will be conducted or used on the
Closing Date.
5.7 CATV Instruments and Seller Contracts
5.7.1 Effectiveness. Except as disclosed in Schedule 1.2, the CATV
Instruments and Seller Contracts (i) are currently in full force and effect,
(ii) are valid and enforceable in accordance with their respective terms under
all applicable federal, state, and local laws and (iii) include all material
licenses, rights of entry, permits, and other rights and authorizations,
necessary to enable Seller to operate the CATV Systems as and in the manner in
which they presently are conducted and in accordance with all applicable
federal, state and local laws. Seller is not in default under or violation of
any material provision of any CATV Instrument or Seller Contract. Except as
disclosed in Schedule 1.2, there is no dispute, legal action, governmental
proceeding or investigation, pending or threatened, for the purpose of
modifying, revoking, terminating, suspending, canceling, or reforming any CATV
Instrument or Seller Contract, or seeking damages or other relief with respect
thereto. Except as disclosed in Schedule 1.2, Seller is in material compliance
with the applicable requirements of all governing or regulatory authorities
(including without limitation the FCC and the Register of Copyrights) relating
to the CATV Instruments and Seller Contracts, including, without limitation, all
requirements relating to notification, filing, document delivery, reporting,
posting, maintenance of logs and records and payment of fees or other amounts
due. Except as set forth in Schedule 5.11, there is no pending assertion or
claim in writing by any governmental authority or party to any CATV Instrument
or Seller Contract that operations pursuant to such CATV Instruments or Seller
Contracts have been improperly conducted or maintained. As of Closing, a request
for renewal has been filed under Section 626 of the Cable Communications Policy
Act of 1984 with respect to all franchises expiring within thirty-six (36)
months of the date of this Agreement.
5.7.2 Copies. Seller has delivered to Buyer true, correct and complete
copies of all material CATV Instruments and Seller Contracts and any amendments
to the CATV Instruments and the Seller Contracts to the date of this Agreement.
Page 15
22
5.7.3 Status of CATV Instruments and Seller Contracts Not Assumed. At
Closing, Seller either (a) will have terminated all CATV Instruments and Seller
Contracts that are not assumed by Buyer under Section 4.1, or (b) will indemnify
Buyer for any and all Third Party Claims and Direct Claims (as such terms are
defined in Section 14.2.1) against Buyer arising directly or indirectly from
such CATV Instruments and Seller Contracts that are not assumed by Buyer under
Section 4.1 and not terminated by Seller in accordance with (a) above.
5.8 FCC Compliance
5.8.1 General Compliance. As of Closing, Seller shall be duly
authorized under applicable CATV Instruments and FCC rules, regulations, and
orders to distribute all of the off-air television and radio broadcast signals
presently being carried to the subscribers of the CATV Systems and to utilize
all carrier frequencies generated by the CATV Systems, and shall be duly
licensed to operate all the property, equipment and facilities, including,
without limitation, any business radio and any CATV relay service system, being
operated in connection with the CATV Systems. As of Closing, the operation of
the CATV Systems and of any FCC-licensed facility used in conjunction with the
operation of the CATV Systems shall be in material compliance with the FCC's
rules and regulations and, to the extent applicable, the rules and regulations
of the Federal Aviation Administration, and Seller has received no notice, and
otherwise has no reason to know, of any claimed default or violation with
respect to the foregoing. Prior to Closing, Seller will have delivered to Buyer
copies of all current and past reports and filings for the immediately past two
years as may be necessary for Buyer to evaluate Seller's compliance with FCC
rules and regulations. As of Closing, Seller will have materially complied with
and will have provided Buyer with true, correct and complete copies of all valid
Syndicated Exclusivity, Network Nonduplication and Sports Blackout requests and
all notices received by Seller with respect to any of the signals carried on the
CATV Systems. Prior to Closing, Seller will have delivered to Buyer true and
correct copies of all current and past reports, filings and notices, for the
immediately past two years, of the following (if and to the extent the same are
available):
(i) The CATV Systems' political file maintained pursuant to
Section 76.207 of the FCC's rules.
(ii) The CATV Systems' advertising and sponsorship identification
file maintained pursuant to Section 76.221(f) of the FCC's rules.
(iii) The CATV Systems' paid political advertising file maintained
pursuant to Section 76.221(d) of the FCC's rules.
(iv) The CATV Systems' file on commercial matter on children's
programs maintained pursuant to Section 76.225(c) of the FCC's rules.
(v) The CATV Systems' proof of performance test data, including an
identification of the instruments, a description of the procedures utilized,
and a statement of the qualifications of the person performing the tests,
from the semi-annual performance tests required pursuant to Section
76.601(c) of the FCC's rules.
Page 16
23
(vi) The CATV Systems' written policy statement and all records
relating to indecent leased access programming pursuant to Section 76.701(h)
of the FCC's rules, and a schedule of Seller's commercial leased access
rates pursuant to Section 76.970(e) of the FCC's rules.
(vii) Records of complaints from subscribers of the CATV system
concerning the quality of the television signals delivered together with
Seller's correspondence and other records of how such complaints were
resolved.
(viii) Letters to off-air broadcasters sent pursuant to Section
76.58 of the FCC's rules.
(ix) FCC Forms 393, 1200, 1210 and 1215 as submitted to the FCC
and/or any of the CATV Systems' franchising authorities, together with any
correspondence, notices or other documentation related thereto.
(x) The CATV Systems' notices to subscribers sent pursuant to
Sections 76.56(d)(3), 76.309(c)(3), 76.607, 76.630(a), 76.630(d), 76.630(e),
76.802, 76.931, 76.932, 76.964, 76.952, and 76.980(d) of the FCC's rules,
and the notice sent to subscribers pursuant to Section 624(d) of the
Communications Act of 1934, as amended.
5.8.2 CLI Compliance. As of Closing, Seller shall have materially
complied with its obligations in connection with the CLI Rules including,
without limitation, (a) using reasonably adequate CLI monitoring equipment, (b)
maintaining appropriate log books and other record-keeping pursuant to and in
accordance with Section 76.601(e) of the FCC's rules, and (c) promptly
correcting any radiation leakage discovered by Seller in connection with its
monitoring obligations under the CLI Rules.
5.8.3 Tests and Compliance with Standards. During the period beginning
not more than thirty (30) days prior to the execution of this Agreement and
ending not more than forty-five (45) days after the execution of this Agreement,
Seller shall have completed each of the following tests in the manner specified
below and shall have certified to Buyer that each of the CATV Systems complies
with the standards set forth in Sections 5.8.3(a) and (e), and Section 5.10.2,
and that each of the CATV Systems that serves greater than 1,000 subscribers
complies, or at the Closing Date will comply, with the standards set forth in
Sections 5.8.3(a), (b), (c), (d) and (e). (When conducting any of the following
tests, the CATV Systems shall be operated at the power levels specified in the
CATV Systems' technical design.)
(a) Signal Leakage and CLI Certification. Pursuant to the CLI
Rules and in accordance with the standards generally accepted by qualified
engineers in the CATV industry, Seller shall complete a ground-based signal
leakage test on the CATV Systems and shall certify to the Buyer that the
CATV Systems' CLI, as determined by using the I(Infinity) method, shall be
equal to or less than 58. Results of the signal leakage test,
Page 17
24
together with a log covering the three year period immediately preceding
the date of this Agreement of all detected leaks and a description of the
repairs effected, shall be delivered to Buyer promptly following
completion of the testing.
(b) Proof of Performance. Buyer shall perform an end-to-end swept
frequency response test of all the trunk facilities of the Xxxxxxx System to
330 MHz, the Prarie View System to 300 MHz, the Cut and Shoot System to 300
MHz, the Xxxxxxxxxx System to 270 MHz, the Xxxxxxxxx System to 270 MHz, the
Ace System to 270 MHz, and the Xxxxxxxx System to 300 MHz, and demonstrate a
"peak-to-valley" ratio of less than 3dB between adjacent channels and less
than 10dB between all other channels.
(c) Carrier to Noise. Buyer shall perform carrier to noise ratio
testing on all channels of the CATV Systems and shall demonstrate a ratio of
better than 43 db on all channels throughout the CATV Systems.
(d) Hum Modulation. Buyer shall perform hum modulation testing on
all channels of the CATV Systems and shall demonstrate hum disturbances of
less than three percent on all channels throughout the CATV Systems.
(e) Aeronautical Frequencies. All aeronautical frequencies used by
the CATV Systems shall be maintained within 5 KHz +/- of the authorized
offset frequency.
5.8.4 System Repair. To the extent the CATV Systems or any portion
thereof are not in compliance with CLI Rules, or with the other standards
prescribed in Section 5.8.3, Seller will have taken all appropriate Remedial
Steps no later than ten (10) days prior to Closing. Seller shall have completed
the Remedial Steps at its sole cost and expense, and otherwise shall have
thereafter maintained the CATV Systems in compliance with the CLI Rules and with
the standards prescribed in Section 5.8.3.
5.8.5 Payment of Fines. Seller has, prior to Closing, paid in full any
and all fines or penalties levied or assessed by the FCC as a result of the
failure of any portion of the CATV Systems to comply with the CLI Rules or
standards prescribed in Section 5.8.3. Seller shall remain responsible for (and
shall pay in full) any such fines or penalties levied or assessed by the FCC
after Closing, to the extent that such fines or penalties (a) relate to the
period prior to Closing, and (b) have been determined to be valid.
5.9 Copyrights, Patents and Trademarks
5.9.1 Copyright Filings. Except as set forth in Schedule 5.9.1, Seller
has, prior to closing, made all requisite filings with and payments to the
Register of Copyrights and is otherwise in material compliance with all
applicable rules and regulations of the Copyright Office. Seller has delivered
to Buyer copies of all current and past reports and filings within the past
three (3) years reasonably necessary to evidence such compliance with Copyright
Office rules and regulations.
Page 18
25
5.9.2 Copyright Infringement. The Assets and the programming offered
over the CATV Systems are free and clear of any rightful claim of any third
person by way of copyright infringement. The manner in which the off-air
broadcast signals and other program services are offered over the CATV Systems
will not result in additional reportable gross receipts under applicable rules
and regulations of the Copyright Office.
5.9.3 Payment of Fines and Copyright Royalties. Seller has, prior to
Closing, paid in full any and all fines or penalties levied or assessed by the
Copyright Office as a result of the failure to timely or accurately file
Statements of Account for the CATV Systems.
5.9.4 Patents, Trademarks. Seller does not possess any patent, patent
right, trademark, copyright or other proprietary intellectual property and is
not a party to any license or royalty agreement with respect to any patent,
trademark, or copyright except for licenses respecting program material and
obligations under the Copyright Act of 1976 applicable to CATV systems
generally.
5.10 Assets and CATV Business
5.10.1 Generally. Except as expressly set forth in the Schedules to
this Agreement and subject to any waiver with respect to the CATV Equipment
pursuant to Section 11.1, at Closing all Assets shall be in operating condition,
ordinary wear and tear excepted. None of the CATV Systems, or the buildings,
structures, or appurtenances used in the CATV Systems, violates applicable laws,
ordinances, codes, regulations or restrictive covenants, the enforcement of
which would involve a material cost to correct, would materially detract from
their value, or would materially interfere with their use. Except as expressly
set forth in the Schedules, the CATV Systems are properly located and materially
comply with all applicable laws, rules and regulations. Seller has not received
any notice heretofore not complied with, from any federal, state, local or other
governmental authority or agency having jurisdiction over the CATV Systems or
the Assets, or any insurance or inspection body, that the CATV Systems or the
Assets fail to materially comply with any applicable law, ordinance, regulation,
building or zoning law, or the requirements of any public authority or body. The
CATV Systems and the Assets are suitable for continued use in the manner in
which they are presently operated without the need for repairs or replacement,
except for the repairs and maintenance normally arising in the ordinary course
of business of a cable system of similar age and geographic location.
5.10.2 Cable Plant. All cable used in the CATV Systems is coaxial, and,
except for such conditions as might be expected for a cable system of its age
and geographic location, is generally water-tight and joined and connected
according to normal and customary industry standards. The CATV Systems, at the
Closing Date, shall have no fewer than the number of plant miles (excluding
service drops), and shall be capable of operation (in accordance with the
standards set forth at Section 5.8.3) at the capacity levels specified in the
table set forth below:
Page 19
26
Cable System Plant Miles Capacity
------------ ----------- --------
Xxxxxxx System 178 330 MHz
Prarie View System 42 300 MHz
Cut and Shoot System 00 000 XXx
Xxxxxxxxxx System 00 000 XXx
Xxxxxxxxx System 00 000 XXx
Xxx Xxxxxx 00 000 XXx
Xxxxxxxx System 25 300 MHz
5.11 Litigation and Proceedings. Except as set forth in Schedule 5.11, there
is no litigation at law, or in equity, and to Seller's knowledge, there is no
other proceeding or investigation pending or, to Seller's knowledge, threatened
against, or which may adversely affect, Seller, or which involves the
possibility of any judgment, order, award or other decision affecting Seller and
(i) which might impair the ability of Seller to perform under this Agreement,
(ii) could have any adverse effect on the CATV Systems, might impair the quality
of title to the Assets, or (iii) might adversely affect the rights, title, or
interest of Seller, and Seller does not know of any basis for such litigation or
proceedings. Seller is not materially in default in any manner with respect to
any order, writ, injunction, or decree of any court or federal, State,
municipal, or other governmental department, commission, board, bureau, agency,
or instrumentality which relates to the operation of the CATV Systems, and
Seller has materially complied with all laws, rules, or regulations applicable
to the CATV Systems and the operation thereof.
5.12 Tax Returns; Other Reports. Except as set forth on Schedule 5.12,
Seller has duly and timely filed in proper form all federal, state, local, and
foreign income, franchise, sales, use, property, excise, payroll, and other tax
returns and all other reports (whether or not relating to taxes) required to be
filed by law with any governmental authority or agency thereof. All taxes, fees
and assessments of whatever nature due or payable by Seller pursuant to said
returns, reports, or otherwise, have been paid. There are no tax audits pending
and no outstanding agreements or waivers extending the statutory period of
limitations applicable to any federal, state, or local income tax return for any
period.
5.13 Dissenters' Rights. Neither the sale and transfer of the Assets
pursuant to this Agreement, nor Buyer's ownership, possession, or use of the
Assets from and after the Closing because of such sale and transfer, will result
in or be subject to, the imposition of any liability upon Buyer for appraisal
rights or any other liability of any nature whatsoever owing to any
participation interest holder in Seller or any other person.
5.14 Employment Matters
5.14.1 Employees. Schedule 5.14.1 contains a true and complete list of
the names, positions, current hourly wages or annual salary, and other
compensation amounts of all employees of the CATV Systems. Seller has materially
complied with all applicable laws
Page 20
27
relating to the employment of labor, including, without limitation, ERISA,
and those relating to wages, hours, collective bargaining, unemployment
insurance, worker's compensation, equal employment opportunity and the payment
and withholding of taxes.
5.14.2 Employment Relationship. Seller has no employment agreements,
either written or oral, with any person which would require Buyer to employ any
person after the Closing Date.
5.14.3 Unions. Seller is not a party to any contract with any labor
organization, and neither has Seller agreed to recognize any union or other
collective bargaining unit, nor has any union or other collective bargaining
unit been certified as representing any of its employees nor has Seller received
any requests from any party for recognition as a representative of employees for
collective bargaining purposes.
5.14.4 Benefits. At Closing, Seller shall have the sole responsibility
for, and Buyer shall not be required to continue, any defined benefit, defined
contribution, or other employee benefit plan subject to the jurisdiction of
ERISA to which Seller is currently a party or by which Seller is bound.
5.14.5 Plans. Seller shall have the sole responsibility for maintenance
and/or distribution of benefits accrued under any qualified plans maintained by
Seller pursuant to the plan provisions of all such plans sponsored by Seller, if
any. Buyer will not assume any liability for (a) any such accrued benefits or
(b) any fiduciary or administrative responsibility to account for or dispose of
any such accrued benefits maintained under any qualified plans sponsored by
Seller.
5.14.6 Seller's Responsibility. All welfare plan claims and short- or
long-term disability plan obligations incurred on or before the Closing, if any,
shall remain the sole responsibility of Seller. Eligible indemnity plan expenses
attributable to any of Seller's covered employees or dependents who are confined
to a hospital or medical institution on the date of the Closing will continue to
be the responsibility of Seller to the extent required under Seller's applicable
plans.
5.14.7 Health Care Continuation. There has been no material failure to
comply with the continuation health care requirements of the Code or related
acts, laws, rules and regulations as such requirements have applied or currently
apply to any current or former employee of Seller or any spouse, former spouse,
dependent child, or former dependent child of any such employee under any group
health plan maintained by or for Seller on or prior to the Closing Date.
5.14.8 Miscellaneous Federal Acts. Seller's present employment
practices materially comply with all rules and standards set by the Americans
With Disabilities Act of 1990, Pub. L. 101-36, as amended, and the Family and
Medical Leave Act of 1993, Pub. L. 103-3 including any regulations promulgated
thereunder.
Page 21
28
5.14.9 FCC Filings. Schedule 5.14.9 contains true, correct and
complete copies of Seller's most recently filed FCC Form 395-A filings.
5.15 Subscribers Fees and Rates. The monthly rates currently charged by
Seller for each of the services offered on the CATV Systems are as set forth in
Schedule 1.7. Except as set forth in Schedule 5.15, Seller has not been ordered
by the FCC or any of the CATV Systems' local franchising authorities to reduce
the rates charged for any of the regulated services and equipment listed in
Schedule 1.7 nor is any such order threatened. For the last two billing cycles
prior to the execution of this Agreement, Seller has not increased the rates
charged for regulated services and equipment.
5.16 Insolvency Proceedings. No insolvency proceedings of any
character, including without limitation bankruptcy, receivership,
reorganization, composition or arrangement with creditors, voluntary or
involuntary, affecting Seller or the CATV Systems are pending or threatened.
Seller has not made an assignment for the benefit of creditors or taken any
action with a view to, or that would constitute a valid basis for, the
institution of any such insolvency proceedings. On the Closing Date, Seller (i)
will have sufficient capital to carry on its business and transactions, (ii)
will be able to pay its debts as they mature or become due, and (iii) will own
assets the fair market value of which will be greater than the sum of all
liabilities of Seller not specifically assumed by Buyer pursuant to the terms of
this Agreement.
5.17 Finders and Brokers. Neither Seller nor its officers, directors,
shareholders or employees has entered into any contract, arrangement, or
understanding with any person or firm which may result in the obligation of
Seller or Buyer to pay any finder's, brokerage, or agent's fees, commission or
other like payment or compensation due to the transactions contemplated in this
Agreement. For the two year period prior to the date of this Agreement, Seller
has not entered into any agreement, whether written, oral, express or implied,
directly or indirectly regarding the sale or other disposition of the CATV
Systems.
5.18 Effect of Certificates. All certificates required to be delivered
by Seller under this Agreement shall be deemed to be additional representations
and warranties of Seller.
5.19 Citizenship. Seller is not a "foreign person" as defined in
Section 1445(f)(3) of the Code. Buyer shall have the right to furnish copies of
any Seller affidavit of such representation to the Internal Revenue Service.
5.20 Overbuilds; Competition. To the best of Seller's knowledge, no
area presently served by the CATV Systems or within the scope of any of Seller's
CATV franchises is presently subject to an overbuild situation. To the best of
Seller's knowledge, no person or firm other than Seller has been granted a CATV
franchise in any of the communities (or any of the unincorporated areas)
presently served by the CATV Systems or within the geographical scope of any of
Seller's CATV franchises. Seller has no current knowledge of any person or firm
that (a) intends to construct or operate a CATV system within any area served by
the CATV Systems or any area within the geographical scope of any of Seller's
CATV franchises, or (b) intends to
Page 22
29
apply for a CATV franchise covering any area served by the CATV Systems or any
area within the geographical scope of any of Seller's CATV franchises.
5.21 Free CATV Service. Except as set forth in Schedule 5.21 to this
Agreement, there is no agreement, obligation or other requirement for Seller to
provide free CATV service to any person, entity or firm.
5.22 Full Disclosure. No representation or warranty by Seller in this
Agreement or any Schedule or Exhibit to this Agreement, or any statement, list,
document or certificate furnished or to be furnished by Seller pursuant to this
Agreement, contains or will contain any untrue statement of material fact, or
omits or will omit to state a material fact required to be stated therein or
necessary to make the statements contained therein not misleading or necessary
in order to provide a prospective purchaser of the Assets and CATV Systems with
complete and proper information as to such assets and business.
SECTION 6. BUYER'S REPRESENTATIONS AND WARRANTIES
6.1 Organization and Authority. Buyer is a limited partnership duly formed
and validly existing under the laws of the State of Washington; has full power
and authority to execute, deliver and perform this Agreement; and has taken all
partnership action required by law and otherwise to authorize the execution,
delivery and performance of this Agreement. This Agreement constitutes the
legal, valid and binding obligation of Buyer enforceable in accordance with its
terms.
6.2 Litigation and Proceedings. Except as set forth in Schedule 6.2, there
is no litigation at law, or in equity, and there is no other proceeding or
investigation pending or, to Buyer's knowledge, threatened against, or which may
adversely affect, Buyer, or which involves the possibility of any judgment,
order, award or other decision which might impair the ability of Buyer to
perform under this Agreement, and Buyer does not know of any basis for such
litigation or proceedings.
6.3 Finders and Brokers. Neither Buyer, nor its partners, nor its officers,
directors, shareholders or employees of its partners has entered into any
contract, arrangement, or understanding with any person or firm, which may
result in the obligation of Seller or Buyer to pay any finder's, brokerage, or
agent's fees, commission or other like payment or compensation.
6.4 Status of Assumed Liabilities. After Closing, Buyer shall perform and
pay any and all obligations due under the Assumed Liabilities which accrue after
the Closing Date.
6.5 Effect of Certificates. All certificates required to be delivered by
Buyer under this Agreement shall be deemed to be additional representations and
warranties of Buyer.
Page 23
30
SECTION 7. CONDUCT PENDING CLOSING
7.1 Access to Premises and Records. Between the date of execution and
delivery of this Agreement and the Closing Date, Seller shall allow Buyer, its
accountants, auditors, engineers and representatives full access, on not less
than three (3) business days' prior notice, at mutually agreed upon reasonable
times, to all of the premises and books and records of Seller and the CATV
Systems and shall furnish to Buyer and its representatives all information
regarding the business and properties of Seller. Buyer shall have the
opportunity to perform CLI testing, other FCC-related systems performance
testing, and environmental site assessments of the Assets pursuant to Section
11.1 with Seller's full cooperation and assistance prior to the Closing,
provided that such audit and other procedures do not unreasonably interfere with
the operations of the CATV Systems. Buyer shall have the opportunity to perform
a field audit of Seller's accounts and such other procedures commonly performed
in an audit conducted by an independent certified public accounting firm with
Seller's full cooperation and assistance prior to the Closing, provided that
such audit and other procedures do not unreasonably interfere with the
operations of the CATV Systems. Seller also shall cooperate with Buyer and its
accountants, auditors and representatives to enable Buyer to generate the type
of financial information required under Form 8-K to be filed by Buyer with the
United States Securities and Exchange Commission pursuant to Section 13 or
Section 15(d) of the Securities Exchange Act of 1934, as amended, and the rules
and regulations promulgated thereunder.
7.2 Continuity and Maintenance of Operations. Seller shall continue to
operate the CATV Systems, shall maintain the Assets (including maintenance and
replenishment of all inventories of spare equipment and parts reasonably
adequate for the needs of the CATV Systems, including without limitation those
listed in Schedule 1.2), and shall keep all of its business books, records, and
files all in the ordinary course of business in accordance with past practices,
consistently applied. Seller shall bear the risk of loss on or prior to Closing
with respect to the Assets and the CATV Systems as a result of any loss, claim,
casualty, or calamity. Seller shall not, without prior written consent of Buyer,
which consent shall not be unreasonably withheld, (i) change the rate charged
for Basic Package Services or any premium services, (ii) add or delete any
program services, or (iii) rearrange the CATV Systems' channel line-ups. Seller
shall not sell, transfer, assign, or permit the creation of any Security
Interest on any of the Assets without the prior written consent of Buyer, which
consent shall not be unreasonably withheld. Except as otherwise required under
the terms of this Agreement, Seller may amend or cancel any CATV Instruments,
any Seller Contract or any other contract or agreement which is necessary or
appropriate for the maintenance of the Assets or the operation of the CATV
Systems, but only in the ordinary course of business. Seller specifically
acknowledges that any amendment or cancellation of any franchise or lease
agreement shall be deemed not to be in the ordinary course of business. Seller
shall not itself, nor shall Seller permit any of its directors, officers,
shareholders, agents or employees, or any of its partners or its partners',
directors, officers, shareholders, agents, or employees to pay any of Seller's
accounts receivable from the CATV Systems' subscribers outstanding on the date
of this Agreement or hereafter; provided, however, that such persons shall be
permitted to make payment for CATV services received by them at their own
dwellings.
Page 24
31
7.3 Existing Relationships. Except as otherwise required by this Agreement,
Seller shall use its best efforts to preserve the CATV Systems as a going
concern and to preserve existing relationships with suppliers, customers,
governmental entities and others having business dealings with Seller, all in
accordance with Seller's ordinary course of business consistent with past
practices.
7.4 Employees; Employment Relationship. All of Seller's employees shall be
and remain Seller's employees, with Seller having full authority and control
over their actions, and Buyer shall not assume the status of an employer or a
joint employer of, or incur or be subject to any liability or obligation of an
employer with respect to, any such employees unless and until actually hired by
Buyer. Seller shall be solely responsible for any and all liabilities and
obligations Seller may have to its employees, including without limitation
compensation, severance pay, and accrued vacation time and long-term disability,
if applicable. Seller shall comply with the provisions of the Worker Adjustment
and Retraining and Notification Act and similar laws, if applicable, and shall
be solely responsible for any and all liabilities, penalties, fines, or other
sanctions that may be assessed or otherwise due under such laws on account of
the closing of the transaction contemplated by this Agreement and the dismissal
or termination of any of Seller's employees by Seller at or prior to Closing.
Seller shall use its best efforts to preserve Seller's relationship with its
employees and shall pay to those employees all salaries, commissions, benefits
and other compensation to which they are entitled for services rendered prior to
Closing. Seller shall not, without the prior written consent of Buyer, which
consent shall not be withheld unreasonably, change the compensation of any
employees of the CATV Systems where such changes would be inconsistent with
Seller's past practices consistently applied.
7.5 Buyer's Right to Employ. Seller consents to Buyer discussing with any of
Seller's employees, at any time after five (5) days from the execution of this
Agreement the possibility of their employment by Buyer after the Closing and to
Buyer hiring any of those employees after the Closing. Seller agrees and
acknowledges, however, that Buyer is under no obligation to offer employment to
any of those employees. Current employees of Seller which are hired by Buyer, if
any, shall not be considered to be in the employ of Buyer until such time as
they have been formally hired by Buyer and satisfy the active work requirement
of completing one full hour of active service for Buyer.
7.6 Approvals. To the extent reasonably possible, Seller shall deliver to
Buyer for Buyer's review and approval a copy of Seller's request for each
Required Consent, together with any franchise, agreement, lease, document,
instrument or paper to be executed by or on behalf of any governmental entity,
franchising authority, lessor or other third party, prior to delivery of such to
any such party. Such consents shall be in forms reasonably acceptable to Buyer.
Seller shall use its best efforts to obtain each of the Required Consents,
including without limitation the payment of standard processing fees, charges
and expenses, but Seller shall not be required to pay any extraordinary or
unreasonable fees or expenses. Buyer shall reasonably cooperate with and assist
Seller in obtaining the Required Consents; provided, however, that such
cooperation and assistance shall not require Buyer to undertake any
extraordinary or unreasonable measures to obtain such approvals and consents,
including, without limitation, the payment of any
Page 25
32
extraordinary or unreasonable fees or expenses, or the initiation or prosecution
of legal proceedings.
7.7 News Releases and Media Notification. Prior to Closing, any and all news
releases or other notification of the local media with respect to the
transactions contemplated in this Agreement shall be subject to the prior
consent of both Seller and Buyer, which consent shall not be unreasonably
withheld.
7.8 Written, Executed Easements. With respect to easements listed in
Schedule 5.5.4 that are not in a properly recordable form, Seller shall use its
best efforts to obtain written easements that are assignable to Buyer, executed
by the proper third parties, that accurately set forth the legal descriptions
and scope of such easements or rights-of-way.
7.9 Remedial Steps. In the event Buyer and Seller are unable to agree
whether appropriate Remedial Steps have been taken to bring the CATV Systems
into compliance with the standards prescribed in Section 5.8.3, Buyer and Seller
shall appoint a mutually acceptable engineering firm to conduct appropriate
tests, in accordance with the rules of the FCC and the standards generally
accepted by qualified engineers in the CATV industry, to certify the CATV
Systems' compliance with the standards of Section 5.8.3, which firm shall render
a written report to Buyer and Seller within thirty (30) calendar days after it
has been retained, and whose fees shall be paid one-half by Buyer and one-half
by Seller.
SECTION 8. CLOSING; CLOSING DATE; TERMINATION
8.1 Closing Date. Subject to the terms and conditions of this Agreement,
Closing shall be conducted at the offices of Buyer or such other location on a
Closing Date as may be mutually agreed to by the parties. Timing of the Closing
shall be subject to the following terms: Closing shall take place not later than
September 30, 1995, if Seller has then obtained all Required Consents and has
complied with all other terms and conditions of this Agreement; provided,
however, that the Closing may be postponed by either party for an aggregate
maximum period of sixty (60) days from the later of (i) September 30, 1995, or
(ii) the date on which Seller has obtained all Required Consents and has
complied with all other terms and conditions of this Agreement.
8.2 Termination. This Agreement may be terminated at any time prior to
Closing:
(a) by the mutual written consent of Seller and Buyer;
(b) by either Buyer or Seller, if the adjustments made pursuant to
Sections 3.2.1(a) and (b) either increase or decrease the Purchase Price (a)
in the case of Group A Systems, by over $140,000, or (b) in the case of
Group B Systems, by over $25,000.
(c) by Buyer in its reasonable discretion, if the Seller or the CATV
Systems are subject to an order of the FCC or any of the CATV Systems' local
franchising
Page 26
33
authorities to materially reduce any of the rates charged to the CATV
Systems' subscribers;
(d) by either Seller or Buyer, in the event of a material breach or
misrepresentation under this Agreement by the other party unless (i) such
breach is cured within fifteen (15) days after written notice thereof is
given by the party alleging such material breach or misrepresentation, or
(ii) the alleged breaching party has given written notice providing
reasonable assurance to the nonbreaching party that it is exercising its
diligent best efforts to cure the alleged breach; provided that in no
circumstance shall the period to cure exceed forty-five (45) days after the
original written notice was given; or
(e) by either party in such party's sole and absolute discretion, if the
transactions contemplated by this Agreement shall not have been consummated
on or before November 30, 1995.
8.3 Effect of Termination. In the event this Agreement is terminated
pursuant to Section 8.2:
(a) this Agreement will thereafter be void and have no force and effect,
except that Sections 5.17, 14 and 15.7 and this Section 8.3 will remain in
effect;
(b) nothing in this Section 8.3 shall be deemed to release either party
from any liability for any breach by such party of the terms and provisions
of this Agreement or any failure by such party to perform its obligations
hereunder. Nothing in this Section 8.3 or elsewhere in this Agreement shall
impair the right of either party, prior to termination of this Agreement
pursuant to Section 8.2, to pursue all legal remedies for breach of contract
and damages or to compel specific performance by the other party of its
obligations hereunder; and
(c) in the event this Agreement is terminated pursuant to Section
8.2(a), (c) or (e), neither Seller nor Buyer shall be liable to each other
for any legal or equitable remedies.
SECTION 9. SELLER'S OBLIGATIONS AT AND PRIOR TO CLOSING
Unless delivery is required prior to Closing by the terms of this Agreement,
Seller, at its sole cost and expense, shall deliver to Buyer at the Closing all
of the following:
9.1 Transaction Documents. Executed originals of a xxxx of sale, an
assignment and assumption agreement, an assignment and assumption of franchises,
an assignment and assumption of leases, a Seller's certificate, a noncompetition
agreement, a promissory note, an opinion of Seller's legal counsel, and an
opinion of Seller's FCC counsel each substantially in the forms of Exhibits A,
B, C, D, E, F, G, I, and J, respectively.
Page 27
34
9.2 Closing Documents Checklist. The documents, certificates and papers
listed on the Closing Documents Checklist, in the form of Exhibit K, together
with such other deeds, assignments, certificates, and other documents,
instruments, and agreements as shall be necessary or appropriate to vest in
Buyer all right, title, and interest in and to the Assets free and clear of all
Security Interests (except for Permitted Exceptions and liabilities assumed by
Buyer pursuant to Section 4.1) and all right, title, and interest of Seller
arising under or by virtue of each CATV Instrument and Seller Contract expressly
assumed in writing by Buyer, and as may otherwise be reasonably required by
Buyer.
9.3 Security Interest Searches. At Seller's expense, Buyer may obtain UCC
searches, tax lien searches, pending litigation searches and judgment searches
of the county and state public records from each county in which any of the
Assets are located, within forty-five (45) days after the execution of this
Agreement. Buyer, at its sole expense, shall obtain any and all updates of such
security interest searches. To the extent that any Security Interests appear on
the aforementioned UCC searches, Seller shall deliver full and complete releases
of such Security Interests in form reasonably satisfactory to Buyer at Closing
unless assumed by Buyer. Seller also shall deliver evidence of the dismissal of
any suits or the satisfaction of any liens or judgments, all in form reasonably
satisfactory to Buyer.
9.4 Tax Certificates. Except as specifically waived by Buyer in writing,
Seller shall deliver to Buyer certificates, if and to the extent available, from
each appropriate taxing authority stating that all applicable state and/or local
taxes, such as personal property taxes, due in connection with the transactions
contemplated by this Agreement have been timely paid in full and that no
obligation or liability is outstanding in connection therewith.
9.5 Employees. Seller will pay its employees (except those employees who are
not hired by Buyer) all accrued, if any, compensation, including vacation, sick
pay, and other benefits accrued as of the Closing Date (except for amounts owing
under the terms of Seller's benefit plans, which amounts shall be provided in
accordance with the terms of such plans). Seller will terminate the employment
of each of its employees as of the Closing Date (except those employees who are
not hired by Buyer).
SECTION 10. BUYER'S OBLIGATIONS AT CLOSING
At Closing, Buyer shall: (a) deliver to Seller payment of the portion of the
Purchase Price required by Section 3.1.1; (b) execute and deliver the Note
required by Section 3.1.2; and (c) deliver to Seller executed originals of an
assignment and assumption agreement, an assignment and assumption of franchises,
an assignment and assumption of leases, a noncompetition agreement, a corporate
guaranty of Buyer's managing general partner, and a Buyer's certificate, each
substantially in the forms of Exhibits B, C, D, F, H, and L, respectively.
Page 28
35
SECTION 11. CONDITIONS OF BUYER'S OBLIGATIONS
Buyer's obligations to close hereunder are subject to the satisfaction of
all of the following conditions, each of which must be satisfied on or before
the Closing Date and any of which may be waived in writing by Buyer.
11.1 Tests and Inspections Before Closing.
11.1.1 Technical Tests. During the period beginning not more than thirty
(30) days prior to the execution of this Agreement and ending not more than
forty-five (45) days after the execution of this Agreement, Seller shall have
caused to be performed on the CATV Systems the tests specified in Section 5.8.3,
in the manner and according to the test criteria specified therein, and the
results and findings of such tests shall be satisfactory to Buyer in its sole
discretion. Within thirty (30) days prior to the Closing Date, Buyer, at Buyer's
expense and with Seller's permission and reasonable cooperation, shall have
re-tested the CATV Systems, and Seller shall have either (a) certified
compliance with the CLI Rules and all of the technical standards specified in
Section 5.8, or (b) effected Remedial Steps so as to bring the CATV Systems into
compliance with all of such rules and technical standards. With respect to the
latter series of tests, the results and findings of such tests shall not
indicate a material variance from the test criteria applicable to each of the
CATV Systems.
11.1.2 Environmental Site Assessments. Within sixty (60) days after the
execution of this Agreement, Buyer, at its sole expense, may conduct "Level I"
environmental site assessments of the Assets (including without limitation the
Real Property) and the CATV Systems, provided that such audits shall not include
any intrusive soil or ground water testing. The results and findings of such
audits shall be satisfactory to Buyer in its sole discretion.
11.1.3 Financial Inspection. Buyer and its accountants and
representatives shall have generated the financial information required by Form
8-K, as more particularly described in Section 7.1. Seller shall have provided
Buyer's accountants with a standard representation letter certifying the
fairness of the presentation of Seller's financial position, the completeness of
the information provided, and the absence of any other irregularities,
communications or transactions not otherwise disclosed. The results and findings
of such financial inspections shall be satisfactory to Buyer in its sole
discretion.
11.2 Approvals and Consents
11.2.1 Franchises. All franchising authorities shall have consented to
the assignment and assumption of the respective franchises, if required, and, if
applicable, shall have (i) waived in writing all rights they may have to
purchase all or any part of the CATV Systems, and (ii) extended the term of such
franchises so that no franchise shall have a stated expiration date prior to
December 31, 2000.
Page 29
36
11.2.2 Other Required Consents. All of the other Required Consents shall
have been obtained and delivered to Buyer, except to the extent that Seller and
Buyer execute a memorandum at Closing specifying any Required Consent that Buyer
agrees need not be obtained until after the Closing Date or Required Consents
for assignment of agreements which Buyer does not agree to assume. Buyer shall
have received from Seller evidence reasonably satisfactory to Buyer that no
material terms or conditions of the CATV Instruments and Seller Contracts have
been or will be amended, modified or changed prior to or effective with the
Closing.
11.3 Performance by Seller of Covenants and Accuracy of Representations and
Warranties
11.3.1 Performance of Covenants. Seller shall have performed all of its
agreements and covenants under this Agreement to the extent such are required to
be performed at or prior to Closing, and all of Seller's representations and
warranties shall be true and correct as of Closing.
11.3.2 Operability. Between the date of this Agreement and the Closing
Date, the CATV Systems shall not have suffered, on or prior to Closing, any
loss, claim, casualty, or calamity that has a material adverse effect on the
Assets or the CATV Systems, whether or not disclosed in Seller's amended
Schedules and whether or not covered by insurance. Seller shall bear the risk of
loss on or prior to Closing with respect to the Assets and the CATV Systems as a
result of any loss, claim, casualty, or calamity.
11.3.3 Restraint of Proceedings. No action, proceeding or investigation
shall have been instituted or threatened on or prior to Closing, to set aside or
modify the transactions provided for in this Agreement or to enjoin or prevent
its consummation or which would impair the ability of Buyer to realize the
benefits of such transactions.
11.3.4 No Governmental Action. No investigation, action or proceeding
shall have been commenced by the Department of Justice or Federal Trade
Commission or any other governmental entity challenging or seeking to enjoin the
consummation of this transaction and neither Buyer nor Seller shall have been
notified of a present intention by the Assistant Attorney General in charge of
the Antitrust Division of the Department of Justice, the Director of the Bureau
of Competition of the Federal Trade Commission or any governmental entity (or
their respective agents or designees) to commence, or recommend the commencement
of, such an investigation, action or proceeding.
11.3.5 Equivalent Subscribers and Monthly Revenue. The adjustments made
pursuant to Sections 3.2.1(a) and (b) will not increase or decrease the Purchase
Price (a) in the case of Group A Systems, by over $140,000, or (b) in the case
of Group B Systems, by over $25,000.
Page 30
37
11.3.6 Updated Schedules. Buyer shall have received updated Schedules,
dated as of the Closing Date and certified by Seller as true, complete and
correct, which are reasonably satisfactory to Buyer and Seller.
11.3.7 Closing Documents. Buyer shall have received all of the documents
described in Section 9 in form reasonably satisfactory to Buyer.
11.4 Conveyance of Title to Assets
11.4.1 Security Interests. Buyer shall have received documentation
reasonably satisfactory to it of the release and discharge of any and all
Security Interests, suits or judgments on or against Seller, the Assets or the
CATV Systems, except to the extent Buyer assumes such Security Interests
pursuant to Section 4.1.
11.4.2 Title Insurance. Seller shall, at least fifteen (15) days prior
to the Closing Date, have delivered to Buyer the commitment(s) of a title
insurance company reasonably satisfactory to Buyer (the "Title Company")
agreeing to issue to Buyer ALTA lessee's extended coverage title insurance
policies and ALTA owner's extended coverage title insurance policies insuring
Buyer's interests in the Real Property (the values of such interests in the
properties so insured being mutually established by Buyer and Seller). In each
case, such policies shall be subject only to Permitted Exceptions. If a
preliminary title binder indicates an exception other than a Permitted Exception
that would impair the marketability or use of the Real Property in any material
respect, Seller shall, at its expense, have caused such exception to be removed
on or before the Closing Date. At Closing Seller shall have delivered to Buyer
an affidavit or indemnification agreement that shall be sufficient to cause the
Title Company to affirmatively insure against the existence of outstanding
rights that could form the basis for mechanic's, materialmen's or similar liens,
unrecorded documents, claims of parties in possession, and judgments,
bankruptcies or other charges against any persons whose names are the same as or
similar to Seller's name. Seller and Buyer shall each pay one-half of the costs
of (a) all surveys and other documents required by the Title Company to issue
such policies, and (b) all title insurance premiums.
SECTION 12. CONDITIONS OF SELLER'S OBLIGATIONS
Seller's obligations to close are subject to all of the following
conditions, any of which may be waived in writing by Seller.
12.1 Performance by Buyer. Buyer shall have performed all of its agreements
and covenants under this Agreement to the extent such are required to be
performed at or prior to Closing.
12.2 Buyer's Certificate. At Closing, Buyer shall have certified to Seller
that Buyer's representations and warranties set forth in this Agreement are true
and correct as of Closing. The Buyer's Certificate shall be in the form of
Exhibit L.
Page 31
38
12.3 Operability. Between the date of this Agreement and the Closing Date,
the CATV Systems shall not have suffered, on or prior to Closing, any loss,
claim, casualty, or calamity that has a material adverse effect on the Assets or
the CATV Systems, whether or not disclosed in Seller's amended Schedules and
whether or not covered by insurance.
12.4 Restraint of Proceedings. No action, proceeding or investigation shall
have been instituted or threatened on or prior to Closing, to set aside or
modify the transactions provided for in this Agreement or to enjoin or prevent
its consummation or which would impair the ability of Seller to realize the
benefits of such transactions.
12.5 No Governmental Action. No investigation, action or proceeding shall
have been commenced by the Department of Justice or Federal Trade Commission or
any other governmental entity challenging or seeking to enjoin the consummation
of this transaction and neither Buyer nor Seller shall have been notified of a
present intention by the Assistant Attorney General in charge of the Antitrust
Division of the Department of Justice, the Director of the Bureau of Competition
of the Federal Trade Commission or any governmental entity (or their respective
agents or designees) to commence, or recommend the commencement of, such an
investigation, action or proceeding.
12.6 Closing Documents. Seller shall have received all of the documents
described in Section 10 in form reasonably satisfactory to Seller.
12.7 Equivalent Subscribers and Monthly Revenue. The adjustments made
pursuant to Sections 3.2.1(a) and (b) will not increase or decrease the Purchase
Price (a) in the case of Group A Systems, by over $140,000, or (b) in the case
of Group B Systems, by over $25,000.
SECTION 13. NONCOMPETITION AGREEMENT
Seller shall enter into a noncompetition agreement with Buyer, in the form
of Exhibit F.
SECTION 14. INDEMNIFICATION
14.1 Survival of Representations, Warranties and Covenants. The
representations, warranties and covenants of each of Buyer and Seller made
pursuant to this Agreement shall survive the Closing for the following periods
after the Closing Date:
(a) The representations, warranties and covenants set forth in Sections
5.4, 5.7.3, 5.17, 6.3 and 6.4 shall survive without limitation as to time.
(b) All other representations, warranties and covenants shall survive
for three (3) years.
Page 32
39
Representations, warranties and covenants under this Agreement shall be of no
further force of effect after the applicable Termination Date (as defined
below). Any claim for indemnification with respect to any alleged breach of any
representation, warranty or covenant not asserted by notice given as herein
provided that specifically identifies a particular breach and the underlying
facts thereto, which notice is given prior to the Termination Date, may not be
pursued and is irrevocably waived and released after such time. Any and all
claims for indemnification under this Section 14 must be based on either a Third
Party Claim or a Direct Claim (as such terms are defined below).
14.2 Limitations of Liability.
14.2.1 For purposes of this Section 14:
(a) "Indemnitee" means any person or entity entitled to
indemnification under this Agreement;
(b) "Indemnifying Party" means any person or entity required to
provide indemnification under this Agreement;
(c) "Indemnifiable Losses" means any losses, liabilities, costs,
fines, penalties, damages (actual, punitive or other), and expenses and any
claims, demands or suits by any person or entity, including, without
limitation, any federal governmental authority or any state, county, town,
municipality, special political subdivision, or any agency, department or
division related thereto, and costs and expenses actually incurred in
connection with any actions, suits, demands, assessments, judgments and
settlements and reasonable attorneys' fees and expense, in such case (i)
reduced by the amount of insurance proceeds recovered from any person or
entity as a result of the Indemnifiable Losses involved and (ii) provided
that the underlying liability or obligation is not solely the result of any
action taken or omitted to be taken by the Indemnitee;
(d) "Indemnification Payment" means any amount of Indemnifiable
Losses required to be paid pursuant to this Agreement;
(e) "Third Party Claim" means any claim or commencement of any
action, proceeding, or investigation by any entity or person that is not a
party to this Agreement or an affiliate of such a party, and includes
without limitation claims asserted against Buyer for any finder's,
brokerage, or agent's fees, commission or other like payments or
compensation as a result of Seller's activities;
(f) "Direct Claim" means any claim by an Indemnitee on account of
an Indemnifiable Loss that does not result from a Third Party Claim; and
(g) "Termination Date" means the date of expiration of any
representation, warranty or covenant as set forth in Section 14.1.
Page 33
40
14.2.2 As between Seller and any affiliate of Seller, on the one hand,
and Buyer and any affiliate of Buyer, on the other hand, the rights and
obligation set forth in this Section 14 will be the exclusive rights and
obligations with respect to the liabilities and obligations referred to in
Section 14.3 and any breach of the representations, warranties or covenants
contained in this Agreement, except for any liability, obligation or breach that
results from the actual fraud under the common law, not otherwise implied or
imputed, by a party to this Agreement.
14.2.3 Notwithstanding any other provision of this Agreement or of any
applicable law, no Indemnitee will be entitled to make a claim against an
Indemnifying Party under Section 14.3.1 or Section 14.3.2 until the aggregate
amount of claims that may be asserted for such Indemnifiable Losses incurred by
the Indemnitee exceeds Two Thousand Dollars ($2,000), after which amount the
Indemnitee may claim for the entire aggregate amount of such claims.
14.2.4 Notwithstanding any other provision of this Agreement, the
indemnification obligations of Seller under Section 14.3.1 and of Buyer under
Section 14.3.2 will not exceed the Purchase Price.
14.2.5 Notwithstanding anything to the contrary contained herein, no
Indemnifying Party shall be liable to or obligated to indemnify any Indemnitee
hereunder for any consequential, special, multiple, punitive or exemplary
damages including, but not limited to, damages arising from loss or interruption
of business, profits, business opportunities or goodwill, loss of use of
facilities, loss of capital, claims of customers, or any costs or expense
related thereto, except to the extent such damages have been recovered by a
third person and are the subject of a Third Party Claim for which
indemnification is available under the express terms of this Section 14.
14.3 Indemnification.
14.3.1 Subject to the other sections of this Section 14, Seller will
indemnify, defend and hold harmless Buyer and its affiliates, directors,
officers, agents and representatives from all Indemnifiable Losses relating to,
resulting from or arising out of (a) a breach by Seller of any of the
representations, warranties or covenants contained in this Agreement, except for
any such breach of representations, warranties or covenants which was specified
on Seller's Schedules or Closing Certificate all of which are waived upon
Closing, or (b) any Third Party Claim, whether filed, asserted, or sought before
or after the Closing Date, in respect of the operations of the CATV Systems or
the ownership or operation of the Assets or CATV Systems by Seller, on or prior
to the Closing Date, regardless of whether known or unknown, asserted or
unasserted, on the Closing Date.
14.3.2 Subject to the other sections of this Section 14, Buyer will
indemnify, defend and hold harmless Seller and its affiliates, and their
directors, officers, agents and representatives from all Indemnifiable Losses
relating to, resulting from or arising out of (a)
Page 34
41
a breach by Buyer of any representations, warranties or covenants contained in
this Agreement, except for any such breach of representations, warranties or
covenants which was specified on Buyer's Closing Certificate all of which are
waived upon Closing, or (b) any Third Party Claim, filed, asserted, or sought
after the Closing Date, in respect to the ownership or operation of the assets
or the CATV Systems by Buyer or its affiliates after the Closing Date.
14.3.3 Payments made under this Section 14.3 shall be treated by Buyer
and Seller as purchase price adjustments and Buyer and Seller shall file all tax
returns consistent with such treatment. Notwithstanding anything to the contrary
contained herein, Buyer shall not be indemnified or reimbursed for any
adjustment to the basis of any asset resulting from any adjustment to the
purchase price or any additional or reduced taxes resulting from any such basis
adjustment.
14.4 Defense of Claims.
14.4.1 If any Indemnitee receives notice of the assertion of any Third
Party Claim against such Indemnitee, with respect to which an Indemnifying Party
is obligated to provide indemnification under this Agreement, the Indemnitee
will give such Indemnifying Party reasonably prompt written notice thereof, but
in any event not later than thirty (30) calendar days after receipt of actual
notice of such Third Party Claim; provided, however, that the failure of the
Indemnitee to notify the Indemnifying Party during the required notification
period shall only relieve the Indemnifying Party from its obligation to
indemnify the Indemnitee pursuant to this Section 14 to the extent that
Indemnifying Party is materially prejudiced by such failure (whether as a result
of the forfeiture of substantive rights or defenses or otherwise); and provided,
however, that the Indemnitee must, in any event, notify the Indemnifying Party
prior to the Termination Date as required pursuant to Section 14.1 in order for
such party to be indemnified. The Indemnifying Party shall be entitled, upon
written notice to the Indemnitee, to assume the investigation and defense
thereof with counsel reasonably satisfactory to the Indemnitee. Whether or not
the Indemnifying Party elects to assume the investigation and defense of any
Third Party Claim, the Indemnitee shall have the right to employ separate
counsel and to participate in the investigation and defense thereof, provided,
however, that the Indemnitee shall pay the fees and disbursements of such
separate counsel unless (a) the employment of such separate counsel has been
specifically authorized in writing by the Indemnifying Party, (b) the
Indemnifying Party has failed to assume the defense of such Third Party Claim
within a reasonable time after receipt of notice thereof with counsel reasonably
satisfactory to such Indemnitee, or (c) the named parties to the proceeding in
which such claim, demand, action or cause of action has been asserted include
both the Indemnifying Party and the Indemnitee and, in the reasonable judgment
of counsel to such Indemnitee, there exists one or more defenses that may be
available to the Indemnitee that are in conflict with those available to the
Indemnifying Party. Notwithstanding the foregoing, the Indemnifying Party shall
not be liable for the fees and disbursements of more than one counsel for all
Indemnified Parties in connection with any one proceeding or any similar or
related proceedings arising from the same general allegations or circumstances.
Without the prior written consent of the Indemnitee, the Indemnifying Party will
not enter into any settlement of any Third Party Claim that would lead to
liability or create any financial or other obligation on the part of the
Indemnitee unless such settlement includes as an
Page 35
42
unconditional term thereof the release of the Indemnitee from all liability in
respect of such Third Party Claim.
14.4.2 Any Direct Claim will be asserted by giving the Indemnifying
Party reasonably prompt written notice thereof, but in any event not later than
thirty (30) calendar days after the Indemnitee actually becomes aware of the
incurrence thereof, and the Indemnifying Party will have a period of thirty (30)
calendar days within which to respond in writing to such Direct Claim; provided,
however, that the failure of the Indemnitee to notify the Indemnifying Party
shall only relieve the Indemnifying Party from its obligation to indemnify the
Indemnitee pursuant to this Section 14 to the extent the Indemnifying Party is
materially prejudiced by such failure (whether as a result of the forfeiture of
substantive rights or defenses or otherwise); and provided, however, that the
Indemnitee must, in any event, notify the Indemnifying Party prior to the
Termination Date as required pursuant to Section 14.1 in order for such party to
be indemnified. If the Indemnifying Party does not so respond within such thirty
(30) calendar day period, the Indemnifying Party will be deemed to have rejected
such claim, in which event the Indemnitee will be free to pursue such remedies
as may be available to the Indemnitee on the terms and subject to the provisions
of this Section 14.
14.4.3 If after the making of any Indemnification Payment, the amount
of the Indemnifiable Loss to which such payment relates is reduced by recovery,
settlement or otherwise under any insurance coverage, or pursuant to any claim,
recovery, settlement or payment by or against any other entity, the amount of
such reduction (less any costs, expenses, premiums or taxes incurred in
connection herewith) will promptly be repaid by the Indemnitee to the
Indemnifying Party. Upon making any Indemnification Payment, the Indemnifying
Party will, to the extent of such Indemnification Payment, be subrogated to all
rights of the Indemnitee against any third party that is not an affiliate of the
Indemnitee in respect to the Indemnifiable Loss to which the Indemnification
Payment relates; provided that (a) the Indemnifying Party shall then be in
compliance with its obligations under this Agreement in respect of such
Indemnifiable Loss and (b) until the Indemnitee recovers full payment of its
Indemnifiable Loss, all claims of the Indemnifying Party against such third
party on account of said Indemnification Payment will be subrogated and
subordinated in right of payment to the Indemnitee's rights against such third
party. Without limiting the generality or effect of any other provision of this
Section 14, each such Indemnitee and Indemnifying Party will duly execute upon
request all instruments reasonably necessary to evidence and perfect the
above-described subrogation and subordination rights.
14.5 Extension of Due Date of Note. If Buyer has submitted a claim for
Indemnifiable Losses pursuant to this Section 14 and there remains pending a
claim for Indemnifiable Losses on the date payment of the Note is due, Buyer, in
addition to its right to offset described in Section 3.3.3, shall be entitled to
postpone payment of the Note until the claim for Indemnifiable Losses has been
resolved pursuant to Section 14.
14.6 Dispute Resolution Regarding Indemnification Claims. If either Seller
or Buyer rejects a claim for indemnification by the other party, Seller and
Buyer shall submit the dispute
Page 36
43
to binding arbitration in accordance with the alternative dispute resolution
procedures set forth in Exhibit M.
SECTION 15. MISCELLANEOUS
15.1 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Washington.
15.2 Assignment and Delegation of Agreement. Neither party may assign this
Agreement or any interest in this Agreement without the prior written consent of
the other party, which consent shall not be unreasonably withheld; provided,
however, that Buyer may assign and delegate, at or prior to Closing, all or a
part of its rights and obligations under this Agreement to one or more entities
formed and controlled by Buyer without the prior written consent of Seller. In
no event shall any such assignment and delegation relieve Buyer from any
liability under this Agreement, including without limitation the payment of the
Purchase Price.
15.3 Entire Agreement; Amendments. This Agreement constitutes and embodies
the entire agreement and understanding between the parties with respect to the
subject matter hereof and this Agreement supersedes all prior or contemporaneous
written or oral agreements and understandings between the parties with respect
thereto. This Agreement may not be modified or amended except by a written
instrument executed by the parties.
15.4 Binding Effect. Notwithstanding the provisions of Section 15.2, this
Agreement shall be binding upon and shall inure to the benefit of the parties to
this Agreement and their respective permitted successors and assigns.
15.5 Additional Agreements. Seller and Buyer shall sign any additional
agreements and other documents necessary or desirable to carry out the terms of
this Agreement.
15.6 Efforts. Subject to the terms and conditions herein, each of the
parties hereto agrees to use all reasonable efforts to take, or cause to be
taken, all actions and to do, or cause to be done, all things necessary, proper
or advisable under applicable laws and regulations to consummate and make
effective the transactions contemplated by this Agreement, including using all
reasonable efforts to obtain all necessary waivers, consents and approvals to be
provided by each of them hereunder, and to effect all necessary registrations
and filings, including, but not limited to, submissions of information requested
by governmental authorities.
15.7 Expenses. Except as otherwise expressly provided in this Agreement,
each party shall pay all of its expenses, including attorneys' and accountants'
fees, in connection with the negotiation of this Agreement, the performance of
its obligations hereunder, and the consummation of the transactions contemplated
by this Agreement.
Page 37
44
15.8 Execution in Multiple Counterparts. This Agreement may be executed in
one or more identical counterparts, and all of such counterparts, when taken
together, shall be deemed to constitute the original of this Agreement.
15.9 Schedules and Exhibits. Each of the Schedules and Exhibits listed below
shall be incorporated into and shall for all purposes be deemed a part of this
Agreement:
Schedule 1.2 - Assets
Schedule 1.7 - Description of CATV Systems
Schedule 1.14 - Excluded Assets
Schedule 3.4 - Allocation of Purchase Price
Schedule 4.1 - Seller's Obligations Assumed by Buyer
Schedule 5.4 - Security Interests
Schedule 5.5.3 - Non-recorded Real Property Leases
Schedule 5.5.4 - Easements to be Obtained
Schedule 5.5.5 - Environmental Matters
Schedule 5.6 - Required Consents
Schedule 5.9.1 - Copyright Filing Matters
Schedule 5.11 - Litigation and Proceedings
Schedule 5.12 - Tax Returns Not Properly Filed
Schedule 5.14.1 - Employees
Schedule 5.14.9 - Form 395-A Filings
Schedule 5.15 - Rate Reduction Orders
Schedule 5.21 - Free CATV Service
Schedule 6.2 - Litigation Matters
Exhibit A - Xxxx of Sale
Exhibit B - Assignment and Assumption Agreement
Exhibit C - Assignment and Assumption of Franchises
Exhibit D - Assignment and Assumption of Leases
Exhibit E - Seller's Certificate
Exhibit F - Noncompetition Agreement
Exhibit G - Promissory Note
Exhibit H - Corporate Guaranty
Exhibit I - Opinion of Seller's Counsel
Exhibit J - Opinion of Seller's FCC Counsel
Exhibit K - Closing Document Checklist
Exhibit L - Buyer's Certificate
Exhibit M - Alternative Dispute Resolution Procedures
Except as otherwise provided in Section 4.1, any of such Schedules and
Exhibits may be later amended or revised by the mutual consent of the parties.
Such Schedules and Exhibits, as so amended or revised, shall be incorporated
into and shall for all purposes be deemed a part of this Agreement.
Page 38
45
15.10 Waiver. No waiver of or with respect to any term, provision,
requirement, or condition of this Agreement, nor consent by a party to the
breach of or departure from any of the terms, provisions, requirements or
conditions hereof by the other party, shall in any event be binding on or
effective against the waiving or non-breaching party unless it be in writing and
signed by such party, and then such waiver shall be effective only in the
specific instance and for the purpose for which given.
15.11 Counsel. Each party has been represented by its own counsel in
connection with the negotiation and preparation of this Agreement and,
consequently, each party hereby waives the application of any rule of law that
would otherwise be applicable in connection with the interpretation of this
Agreement, including but not limited to any rule of law to the effect that any
provisions of this Agreement shall be interpreted or construed against the party
whose counsel drafted the provision.
15.12 Captions and Headings. The captions and headings are inserted in this
Agreement for convenience only, and shall in no event be deemed to define,
limit, or describe the scope or intent of this Agreement, or of any provision
hereof, nor in any way affect the interpretation of this Agreement.
15.13 Notices. All notices and communications required or permitted to be
given under any of the provisions of this Agreement shall be in writing and
shall be deemed to have been duly given when delivered by messenger, by
overnight delivery service, by facsimile transmission (receipt confirmed), or
mailed by first class certified mail, return receipt requested, addressed to the
parties at the addresses set forth below or at such other addresses as either
party shall notify the other in accordance with this Section 15.13:
If to Buyer:
Northland Cable Properties Four Limited Partnership
0000 Xxxxx Xxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxxxxxxx 00000
Attn: Xxxx X. Xxxxxxxx and Xxxxx X. Xxxxxx
and to:
Xxxx X. Xxxxxxx, Esq.
Xxxx Xxxxxxx & Cleveland
0000 Xxxxx Xxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxxxxxxx 00000
Page 39
46
If to Seller:
Xxxxxxx X. Xxxxxx and Xxxx X. XxXxxx, III
Brookridge, Inc.
000 Xxxxxxx Xxxx
Xxxxxxxxxx, Xxxxxxxxxxx 00000
and to:
H. Xxxxx Xxxxxxx, Xx., Esq.
Xxxxxxx & Xxxxxxxxxx
000 Xxxxxx Xxxxxx
Xxxxxxxx, Xxx Xxxx 00000
15.14 Legal Expenses. If any proceeding is brought by either party to
enforce or interpret any term or provision of this Agreement, the substantially
prevailing party in such proceeding shall be entitled to recover, in addition to
all other relief as set forth in this Agreement, such party's reasonable
attorneys' and experts' fees and expenses.
15.15 Severability; Invalidity. If any provision of this Agreement is held
to be invalid, such invalidity shall not render invalid the remainder of this
Agreement or the remainder of which such invalid provision is a part. If any
provision of this Agreement is so broad as to be held unenforceable, such
provision shall be interpreted to be only so broad as is enforceable.
15.16 Time of the Essence. Time is of the essence in this Agreement.
BUYER: NORTHLAND CABLE PROPERTIES FOUR
LIMITED PARTNERSHIP
By Northland Communications Corporation,
Managing General Partner
By /S/ Xxxxx X. Xxxxxx
-------------------------------
Its Vice President
-------------------------------
Page 40
47
SELLER: BROOKRIDGE CABLE SPECIAL PURPOSE PARTNERSHIP
BROOKRIDGE CABLE SPECIAL PURPOSE PARTNERSHIP - II
XXXXXXXXXX CABLE TV, LIMITED PARTNERSHIP
CARTHAGE CABLE TV, L.P.
HILLSBORO CABLE TV, LIMITED PARTNERSHIP
By Brookridge, Inc., a general partner of each partnership
By /S/ Xxxx X. XxXxxx, III
-------------------------------
Its President
-------------------------------
Page 41
