1
Exhibit 2.2(a)
MEMBERSHIP PURCHASE AGREEMENT
BY AND BETWEEN
ACEC HOLDING COMPANY, LLC,
AS SELLER
AND
CHARTER COMMUNICATIONS, INC.,
AS BUYER
DATED AS OF JANUARY 1, 1999
2
TABLE OF CONTENTS
ARTICLE I
DEFINITIONS
Sections 1.1 - 1.89: Definitions .......................................... 1 - x
ARTICLE II
PURCHASE AND SALE OF ACEC MEMBERSHIP INTEREST
Section 2.1: Purchase and Sale of ACEC Membership Interest ................ x
2.2: Instruments of Transfer ......................................
ARTICLE III
PURCHASE PRICE
Section 3.1: Purchase Price; Payment; Allocation
3.2: Deposit in Escrow ............................................
3.3: Adjustments and Prorations ...................................
3.4: Indemnity Escrow .............................................
ARTICLE IV
CLOSING
Section 4.1: Closing Date .................................................
4.2: Right to Specific Performance ................................
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF SELLER
Section 5.1: Valid Existence of Seller ....................................
5.2: Seller's Interest in ACEC ....................................
5.3: ACEC's Valid Existence and Qualification .....................
5.4: Business of ACEC .............................................
5.5: Authorization; Enforceability ................................
5.6: Required Consents; Effect of Agreement; No Breach ............
5.7: Financial Statements .........................................
5.8: Undisclosed Liabilities ......................................
5.9: Tax Matters ..................................................
5.10: Franchises and Necessary Contracts ...........................
3
5.11: No Other Agreements ..........................................
5.12: Systems' Capacity, Subscribers and Rates .....................
5.13: Pole Attachment Agreements ...................................
5.14: Employees ....................................................
5.15: Absence of Certain Developments ..............................
5.16: Real Property ................................................
5.17: Title to Assets; Personal Property ...........................
5.18: Intangible Property ..........................................
5.19: Necessary Property ...........................................
5.20: Compliance with Laws .........................................
5.21: Litigation and Legal Proceedings .............................
5.22: Brokers' Fees ................................................
5.23: Pensions and Other Deferred Compsensation; Benefits ..........
5.24: Insurance, Surety Bonds, Damages .............................
5.25: Environmental Laws ...........................................
5.26: No Other Commitment to Sell ..................................
5.27: Disclosure ...................................................
5.28: Affiliate Agreements to be Terminated prior to or upon .......
Closing
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF BUYER
Section 6.1: Organization ................................................
6.2: Authorization; Enforceability
6.3: No Default ..................................................
6.4: Litigation ..................................................
6.5: Finders' and Brokers' Fees
6.6: Disclosure ..................................................
ARTICLE VII
CONDUCT OF BUSINESS OF ACEC PRIOR TO CLOSING
Section 7.1: Restrictions on Operations Prior to Closing Date ............
7.2: Payment of Obligations ......................................
7.3: Inventory ...................................................
7.4: Compliance with Franchises ..................................
7.5: Victorville Rebuild .........................................
ARTICLE VIII
INVESTIGATION BY BUYER
4
Section 8.1: Access to Records.............................................
8.2: Publicity.....................................................
ARTICLE XI
FURTHER COVENANTS
Section 9.1: Delivery of Documents to Buyer................................
9.2: Transfer of Franchises and Necessary Contracts Prior to
Closing ......................................................
9.3: Further Assurances............................................
9.4: Environmental Reports.........................................
9.5: HSR Notification..............................................
9.6: Diligent, Good Faith Efforts..................................
9.7: No Solicitation...............................................
9.8: Closing Notice................................................
ARTICLE X
CONDITIONS PRECEDENT TO THE OBLIGATIONS OF ALL PARTIES
Section 10.1: Orders Prohibiting Consummation of Transactions..............
10.2: HSR Act......................................................
10.3: Subscribers..................................................
ARTICLE XI
CONDITIONS PRECEDENT TO BUYER'S OBLIGATIONS
Section 11.1: Compliance with Agreement....................................
11.2: Correctness of Representations and Warranties................
11.3: No Adverse Change in Business or Properties..................
11.4: Termination of Affiliate Agreements..........................
11.5: Certificate of Officer.......................................
11.6: Rancho Cucamonga Franchise...................................
11.7: Pole Attachments.............................................
11.8: Opinion of Counsel...........................................
11.10: Opinion of FCC Counsel......................................
11.10: Noncompete Agreement.........................................
11.11: Consents.....................................................
ARTICLE XII
CONDITIONS PRECEDENT TO SELLER'S OBLIGATIONS
Section 12.1: Correctness of Representations and Warranties................
5
12.2: Compliance with Agreement....................................
12.3: Certificate of Officer.......................................
12.4: Proceedings and Documents....................................
12.5: Opinion of Counsel...........................................
ARTICLE XIII
EXPENSES OF NEGOTIATION AND TRANSFER
Section 13.1: Expenses.....................................................
ARTICLE XIV
RIGHTS TO TERMINATE; BREACH; LIQUIDATED DAMAGES
Section 14.1: Termination..................................................
ARTICLE XV
INDEMNIFICATION
Section 15.1: Indemnification by Seller....................................
15.2: Indemnification by Buyer.....................................
15.3: Notice and Right to Defend Third Party Claims................
ARTICLE XVI
CASUALTY OR LOSS
Section 16.1: Repairs or Replacement of Assets.............................
16.2: Risk of Loss.................................................
ARTICLE XVII
MISCELLANEOUS
Section 17.1: Assignment...................................................
17.2: Successors...................................................
17.3: Entire Agreement.............................................
17.4: Third Parties................................................
17.5: Amendments in Writing........................................
17.6: Arbitration..................................................
17.7: Governing Law Enforcement....................................
17.8: Interpretation...............................................
17.9: Notices......................................................
17.10:Severability..................................................
6
17.11:Counterparts..................................................
7
EXHIBITS
Exhibit Title
------- -----
2.2 Assignment of ACEC Membership Interest
3.2 Deposit Escrow Agreement
3.4 Closing Escrow Agreement
11.7 Legal Opinion of Seller's Counsel
11.10 Legal Opinion of Seller's FCC Counsel
11.11 Members' Indemnity
11.12 Required Consent
12.5 Legal Opinion of Buyer's Counsel
SCHEDULES
Schedule Title
-------- -----
1.1(A) Systems and Service Areas
1.9 Tangible Assets
1.35 Excluded Assets
1.55 Slow Pay Bulk Accounts
1.87 Victorville Upgrade
5.6 Required Consents
5.9 Unpaid Taxes
5.10(A) Franchises
5.10(B) Necessary Contracts
5.10(C) Defaults; Pending Modifications; Commitments
5.12 System Characteristics, Subscribers and Rates
5.13 Pole Attachments
5.14 Labor Discussions; Employees
5.15 Absence of Certain Developments
5.16 Real Estate Owned by ACEC; Permitted Encumbrances
5.18 Intangible Property
5.21 Litigation and Administrative Proceedings
5.23 Employee Benefit Plans
5.24 Insurance Policies and Surety Bonds
5.25 Environmental Laws; Environmental Permits
5.26 Sale Commitments
5.28 Affiliate Agreements
8
THIS MEMBERSHIP PURCHASE AGREEMENT is made and entered into as of January
1, 1999 by and between ACEC HOLDING COMPANY, LLC, a Delaware limited liability
company ("Seller"), and CHARTER COMMUNICATIONS, INC., a Delaware corporation
("Buyer").
WHEREAS, Seller is the sole member of, and owns and holds all right, title
and interest in and to the sole membership interest in, American Cable
Entertainment Company, LLC, a Delaware limited liability company ("ACEC");
WHEREAS, ACEC owns and operates cable television systems serving
subscribers in the City of Hesperia, the City of Rancho Cucamonga, the City of
San Bernardino, the City of Victorville, the City of Yucaipa, unincorporated
areas of the County of San Bernardino (including the unincorporated areas of
Angelus Xxxx, Xxxxxxx Falls and Spring Valley Lake), and the Town of Apple
Valley, all in the State of California; and
WHEREAS, in reliance upon the representations and warranties of Buyer set
forth herein, Seller desires to sell to Buyer, and in reliance upon the
representations and warranties of Seller set forth herein, Buyer desires to
purchase from Seller, all right, title and interest in and to the sole
membership interest in ACEC;
NOW, THEREFORE, in consideration of the premises and the mutual covenants
and agreements herein set forth, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
As used in this Agreement, the following terms shall have the following
meanings:
1.1 "1992 Act" means the Cable Television Consumer Protection and
Competition Act of 1992.
1.2 "1998 Credit Agreement" means that certain Amended and Restated Credit
Agreement dated as of September 30, 1998 between ACEC and the respective lenders
named therein.
1.3 "ACEC" means American Cable Entertainment Company, LLC, a Delaware
limited liability company doing business as American Cable Entertainment in the
City of Rancho Cucamonga and the other areas served by the Angelus Oaks System,
the Rancho System and the Yucaipa System and as Hi-Desert Cablevision in the
City of Victorville, California and the other areas served by the Victorville
System.
1.4 "ACEC Membership Interest" or "Membership Interest" means ACEC's sole
9
issued and outstanding membership interest.
1.5 "Additional Financial Statements" means (i) as to monthly statements,
ACEC's unaudited Statement of Operations for each monthly period after the
period ended September 30, 1998, and (ii) as to quarterly statements, ACEC's
unaudited Balance Sheet and related Statements of Operations and Statements of
Changes in Financial Position for each quarterly period after the period ended
September 30, 1998.
1.6 "Affiliate" has the meaning prescribed by Rule 12-b-2 of the
regulations promulgated pursuant to the Securities Exchange Act of 1934, as
amended, and in the case of Buyer, Affiliate shall include any Person in which
Xxxx X. Xxxxx has an equity interest valued in excess of $100,000,000.
1.7 "Affiliate Agreements" has the meaning set forth in Section 5.28.
1.8 "Angelus Oaks System" has the meaning set forth in Schedule 1.1(A).
1.9 "Assets" means all of ACEC's assets (including, without limitation,
those listed in Schedules 1.9, 5.10(A), 5.10(B), 5.16 and 5.18), whether
tangible or intangible, other than the Excluded Assets.
1.10 "Assignment" has the meaning set forth in Section 2.2.
1.11 "Basic Subscriber Equivalents" or "BSE's" means equivalent bona fide
Non-Delinquent CATV subscribers served by commercial establishments and
multi-dwelling units (e.g., bars, taverns, apartment buildings, dormitories,
hospitals, etc.) that are billed on a bulk or otherwise discounted basis for
basic (or expanded basic) service which have paid in full the charges for at
least one month of service, none of which is pending disconnection for any
reason, the number of which BSE's shall be deemed to be equal to the quotient
that is derived from dividing: (a) the gross basic (or, if applicable, expanded
basic) xxxxxxxx to all such commercial establishments and multi-dwelling units
that are billed on a bulk or otherwise discounted basis for basic (or expanded
basic) service (but excluding xxxxxxxx from a la carte tiers or premium
services, installation or other non-recurring charges, converter rental, any
fees or charges for any outlet or connection other than the first outlet or
connection, and pass-through charges for sales taxes, line-itemized franchise
fees, fees charged by the FCC and the like) attributable to such commercial
establishment or multi-dwelling unit during the most recent Monthly Billing
Period ended prior to the date of calculation (but excluding xxxxxxxx in excess
of a single Monthly Billing Period's charge) by (b) the rate charged by the
respective System to individual homes at the date of determination for basic
service (or, if the respective commercial establishment or multi-dwelling unit
also takes expanded basic service, then by the rate charged by that System to
individual homes at the date of determination for basic and expanded basic
service), exclusive of any charges for the additional services, franchise fees,
taxes, etc. which are excluded from the calculation of gross basic (or, if
applicable, expanded basic) xxxxxxxx set forth in clause (a) above, such rate to
be not less than the respective System's standard rate for such service.
2
10
1.12 "Basic Subscribers" means (i) all bona fide Non-Delinquent CATV
subscribers (i.e., the first connections) that have paid in full, on a
nondiscounted basis, for at least one Monthly Billing Period of the respective
basic (or expanded basic, as the case may be) services ordered by the respective
subscriber, and to whom the respective System is rendering its basic (or
expanded basic, as the case may be) CATV service (whether or not in conjunction
with any tiered or premium services, and whether or not any such tiered or
premium services have been discounted, provided that any such discount shall be
in accordance with the respective System's past practices in the ordinary course
of business) at that System's then applicable monthly rate therefor, none of
which subscribers is pending disconnection for any reason, plus (ii) all BSE's;
provided, that solely for purposes of calculating the number of Basic
Subscribers, those residential subscribers in the City of Victorville who are
paying the discounted monthly expanded basic service rate then being billed to,
and who qualify as, those "grandfathered" subscribers who funded the initial
construction of the Victorville System shall be deemed to be Basic Subscribers.
1.13 "Basket" has the meaning set forth in Section 15.1(b)(iii).
1.14 "BSE's" means Basic Subscriber Equivalents.
1.15 "Business" means the CATV business conducted by ACEC on the date of
this Agreement through the Systems in and around the Service Areas.
1.16 "Buyer" means Charter Communications, Inc., a Delaware corporation.
1.17 "Cable Act" means the Cable Communications Policy Act of 1984, as
amended and supplemented by the 1992 Act and the Telecommunications Act of 1996.
1.18 "CARS" means CATV relay service.
1.19 "CATV" means cable television.
1.20 "Closing" has the meaning set forth in Section 4.1.
1.21 "Closing Date" has the meaning set forth in Section 4.1.
1.22 "Closing Escrow Agreement" means an indemnification escrow agreement
substantially in the form of Exhibit 3.4.
1.23 "Closing Date Subscriber Total" means the total number of Basic
Subscribers on the Closing Date.
1.24 "Completed Plant" has the meaning set forth in Schedule 1.87, which
Schedule defines the Victorville Upgrade and the Victorville Upgrade Completion
Cost.
1.25 "Debt Certificate" means the certificate to be delivered by Buyer to
Seller not less than 10 days prior to the Closing Date pursuant to Section
3.3(c).
1.26 "DeMinimus Agreements" means ACEC's written or oral subscriber
agreements
3
11
with subscribers entered into in the ordinary course of business for the
provision of CATV service at the standard rates (or, solely with respect to the
Victorville System's "grandfathered" subscribers referred to in Section 1.12, at
the discounted rates) charged by the respective System for such service and
those contracts, leases, assignments, licenses, commitments and other agreements
that involve payments of less than $25,000 individually over the life thereof
and less than $100,000 in the aggregate for all such agreements, etc. over the
life thereof and do not impose (individually or collectively) any material
non-monetary obligations.
1.27 "Deposit" means the sum of Seven Million Two Hundred Thousand Dollars
($7,200,000) deposited into escrow by Buyer with the Escrow Agent pursuant to
Section 3.2(a).
1.28 "Deposit Escrow Agreement" means a deposit escrow agreement
substantially in the form of Exhibit 3.2.
1.29 "Effective Time" means 11:59 p.m. of the day prior to the Closing
Date.
1.30 "Encumbrances" means, collectively, all liens, mortgages, security
interests and other encumbrances of any kind, character or description, whether
accrued, absolute, contingent or otherwise (and whether or not reflected or
reserved against in the balance sheets, books of account and records of ACEC).
1.31 "Environmental Law" means any applicable federal, state, or local
law, statute, standard, ordinance, rule, regulation, code, license, permit,
authorization, approval, and any consent order, administrative or judicial
order, judgment, decree, injunction, or settlement agreement between ACEC and a
governmental entity relating to the protection, preservation or restoration of
the environment (including, without limitation, air, water, land, plant and
animal life or any other natural resource).
1.32 "Environmental Permit" means any permit, license, approval, consent
or other authorization required by any applicable Environmental Law.
1.33 "Escrow Agent" means Societe Generale, New York Branch.
1.34 "Event of Loss" has the meaning set forth in Section 16.1.
1.35 "Excluded Assets" has the meaning set forth in Schedule 1.35.
1.36 "FAA" means the Federal Aviation Authority.
1.37 "FCC" means the Federal Communications Commission.
1.38 "Final Closing Certificate" means the certificate to be delivered by
Buyer to Seller within ninety (90) days after the Closing Date pursuant to
Section 3.3(f).
1.39 "Financial Statements" has the meaning set forth in Section 5.7.
1.40 "Franchise" means, with respect to any System, the respective
franchise (or, in lieu thereof, the respective license, consent, permit,
approval or authorization) entered into, issued or otherwise granted by any
state or local (e.g., city, county, parish, town or village)
4
12
franchising authority, for the construction, installation and operation of the
respective System within the respective Service Area (or portion thereof)
designated therein.
1.41 "GAAP" means generally accepted accounting principles consistently
applied.
1.42 "Hazardous Substance" means any substance or material listed,
defined, designated or classified as hazardous, toxic, radioactive or dangerous,
or otherwise regulated, under any Environmental Law, whether by type or by
quantity; Hazardous Substance includes, without limitation, any toxic waste,
pollutant, contaminant, hazardous substance, toxic substance, hazardous waste,
special waste, industrial substance or petroleum or any derivative or by-product
thereof, radon, radioactive material, asbestos, asbestos-containing material,
urea formaldehyde foam installation, lead and polychlorinated biphenyl
classified as hazardous, toxic, radioactive or dangerous, or otherwise regulated
under any Environmental Law.
1.43 "Homes Passed" means all single family homes and all residential
units in multi-dwelling units (e.g., apartment buildings, dormitories), provided
that as of the date of determination any such home or unit is capable of being
serviced by any System without further trunk or feeder line construction, and
all commercial or institutional real property improvements (e.g., bars, taverns,
hospitals, hotels, motels), provided that as of the date of determination any
such improvement subscribes (directly or indirectly) to any System's CATV
services.
1.44 "HSR Act" has the meaning set forth in Section 9.5.
1.45 "Improvements" means all buildings, structures, CATV towers and
fixtures, and other improvements now or hereafter attached to the Real Estate,
and all modifications, additions, restorations or replacements of the whole or
any part thereof.
1.46 "Indemnifiable Damages" means any and all liabilities in respect of
suits, proceedings, demands, judgments, damages, expenses and costs (including,
without limitation, reasonable counsel fees and costs and expenses) incurred in
the investigation, defense or settlement of any claims covered by the
indemnification set forth in this Agreement.
1.47 "Indemnitee" has the meaning set forth in Section 15.3.
1.48 "Indemnitor" has the meaning set forth in Section 15.3.
1.49 "Indemnity Fund" means the sum of Ten Million dollars ($10,000,000)
of the Purchase Price deposited at Closing with the Escrow Agent pursuant to the
Closing Escrow Agreement.
1.50 "Knowledge" or "knowledge" means, as to Seller, the actual knowledge
of any of Seller's executive officers, and as to ACEC, the actual knowledge of
any of ACEC's executive officers or general manager.
1.51 "Legal Proceedings" has the meaning set forth in Section 5.21.
1.52 "Membership Interest" means the ACEC Membership Interest.
5
13
1.53 "Monthly Billing Period" means the respective monthly period (whether
such period is a calendar month or, as in the case of any System that engages in
cycle billing, any other monthly period) to which any System-generated
subscriber xxxx for CATV services relates.
1.54 "Necessary Contract" means any agreement to which ACEC is a party, or
by which any of the Assets is bound, and which is reasonably necessary for
ACEC's (i) use of any tower, office or headend site, (ii) pole attachments,
(iii) rights-of-way, (iv) service to any residential development or any
commercial or residential dwelling unit, (v) material licenses and easements, or
(vi) operation of the Business and the Systems; provided, that the term
"Necessary Contract" shall be deemed to exclude all Franchises and DeMinimus
Agreements.
1.55 "Non-Delinquent" means a subscriber who does not have a past due
balance of more than two Monthly Billing Periods (except as otherwise set forth
on Schedule 1.55 with respect to those certain bulk accounts, if any, itemized
thereon) from the first day of the initial Monthly Billing Period to which a
xxxx relates, except for past due amounts representing late charges and other
minimal ancillary charges totaling $5.00 or less.
1.56 "NTSC" means National Television System Committee.
1.57 "Operating Agreement" means that certain Limited Liability Company
Agreement of ACEC dated as of April, 1998.
1.58 "Outside Date" has the meaning set forth in Section 4.1.
1.59 "Permitted Encumbrances" means (a) any Encumbrances set forth in
Schedule 5.16; (b) any liens for current taxes, assessments or governmental
charges not yet due and payable; (c) any non-monetary Encumbrances that do not,
in any material respect, individually or in the aggregate, affect or impair
ACEC's use of the affected Asset in the ordinary course of ACEC's business as
presently conducted; and (d) any materialmen's, mechanics', carriers',
workmen's, warehousemen's, repairmen's or other like liens arising in the
ordinary course of business (or deposits to obtain the release thereof).
1.60 "Person" or "person" means an individual, corporation, limited
liability company, partnership, sole proprietorship, association, joint venture,
joint stock company, trust, incorporated organization, or governmental agency or
other entity.
1.61 "Phase I Property" means each parcel of Real Estate referred to in
Section 9.4 for which Seller is to deliver a Phase I environmental report.
1.62 "Pledge Agreement" means that certain Amended and Restated Pledge
Agreement dated as of September 30, 1998 between Seller, as pledgor, and Societe
Generale, as pledgee and administrative agent thereunder.
1.63 "Pre-Closing Certificate" means the certificate to be delivered by
Seller to Buyer not less than 10 days prior to the Closing pursuant to Section
3.3(a).
6
14
1.64 "Premium Subscriber" means a Basic Subscriber who subscribes to and
has been (or is to be) charged for any optional single or multiple premium
channel service for which there is a specified charge.
1.65 "Purchase Price" means Two Hundred Forty Million dollars
($240,000,000), as adjusted pursuant to Section 3.3.
1.66 "Rancho System" has the meaning set forth in Schedule 1.1(A).
1.67 "Real Estate" means, collectively, each parcel of real property owned
by ACEC at the date hereof as described in Schedule 5.16.
1.68 "Required Consents" means those approvals and consents listed on
Schedule 5.6.
1.69 "Remaining Mileage Number" has the meaning set forth in Schedule
1.87, which Schedule defines the Victorville Upgrade and the Victorville Upgrade
Completion Cost.
1.70 "Security Agreement" means that certain Amended and Restated Security
Agreement dated as of September 30, 1998 among ACEC and Societe Generale, as
administrative agent for the lenders under the 1998 Credit Agreement.
1.71 "Seller" means ACEC Holding Company, LLC, a Delaware limited
liability company.
1.72 "Service Areas" has the meaning set forth in Schedule 1.1(A).
1.73 "Signals" means the transmissions (whether television, satellite,
radio or otherwise) of video programming or other information that any System
transmits to its respective subscribers.
1.74 "Signature Date" means the date (or the later of the two dates) on
which Buyer and Seller actually execute this Agreement, as such date(s) is (are)
set forth below Buyer's and Seller's signatures on the signature page hereof;
provided that, as used in this Agreement, the words "the date of this
Agreement", "the date hereof" and words to similar effect shall mean "as of
January 1, 1999" and not the Signature Date.
1.75 "Subscriber Certificate" means the certificate to be delivered by
Seller to Buyer not less than 10 days prior to the Closing pursuant to Section
3.3(b).
1.76 "System" means all of the assets, property and business constituting
any CATV system of ACEC, each of which CATV systems (namely, the Angelus Oaks
System, the Rancho System, the Victorville System and the Yucaipa System)
together with the respective Service Area served thereby is described in
Schedule 1.1(A).
1.77 "Tax" or "Taxes" means any taxes, imposts, duties, fees, levies,
withholdings or other like assessments or charges, imposed by the United States,
or any state, local or foreign government or subdivision or agency thereof,
including any interest, penalties and additions to
7
15
tax attributable thereto.
1.78 "Tax Code" means the Internal Revenue Code of 1986, as amended, and
the U.S. Treasury regulations promulgated thereunder.
1.79 "Tax Return" means any tax return (including any estimated tax
return), report, election, information return, declaration, statement or other
filing (including any amendments thereto) required to be filed with any relevant
taxing authority.
1.80 "Third Party" means any Person other than Buyer or Seller or any
Affiliate of Buyer.
1.81 "Title Asset Representation" means any representation or warranty of
Seller as to ACEC's legal title to any Asset.
1.82 "Title Interest Representation" means any representation or warranty
of Seller as to (i) Seller's legal title to the ACEC Membership Interest or (ii)
Seller's legal and valid sale, assignment and transfer to Buyer of all right,
title and interest in and to the ACEC Membership Interest.
1.83 "Total Purchase Consideration" means the sum of (i) the Purchase
Price and (ii) the aggregate amount of ACEC's liabilities at and upon the
Closing.
1.84 "Transfer Taxes" means all sales, use, transfer, stamp, value added,
motor vehicle transfer or registration, documentary, registration, recording,
excise, real estate transfer and similar Taxes, if any, payable in connection
with Seller's sale, assignment and transfer of the ACEC Membership Interest to
Buyer.
1.85 "Upgrade Test" has the meaning set forth in Schedule 1.87, which
Schedule defines the Victorville Upgrade and the Victorville Upgrade Completion
Cost.
1.86 "Victorville System" has the meaning set forth in Schedule 1.1(A).
1.87 "Victorville Upgrade" has the meaning set forth in Schedule 1.87.
1.88 "Victorville Upgrade Completion Cost" has the meaning set forth in
Schedule 1.87.
1.89 "Yucaipa System" has the meaning set forth in Schedule 1.1(A).
The plural of any term defined in the singular, and the singular of any term
defined in the plural, shall have a meaning correlative to such defined term.
ARTICLE II
PURCHASE AND SALE OF ACEC MEMBERSHIP INTEREST
8
16
2.1 Purchase and Sale of ACEC Membership Interest.
Seller shall sell, transfer and deliver to Buyer on the Closing Date, and
Buyer shall purchase from Seller on the Closing Date, all on the terms and
conditions hereinafter set forth, the ACEC Membership Interest.
2.2 Instruments of Transfer.
At the Closing, Seller will deliver to Buyer an assignment in
substantially the form of Exhibit 2.2 (the "Assignment"), duly executed by
Seller, selling, assigning and transferring to Buyer all right, title and
interest in and to the ACEC Membership Interest. At any time and from time to
time after the Closing Date, on Buyer's reasonable request, Seller will execute,
acknowledge and deliver such further instruments of sale, assignment and
transfer, and take such further actions, as may be reasonably required in
conformity with this Agreement for the adequate sale, assignment and transfer of
the Membership Interest to Buyer.
ARTICLE III
PURCHASE PRICE
3.1 Purchase Price; Payment; Allocation.
The purchase price for the sale of the ACEC Membership Interest under this
Agreement shall be Two Hundred Forty Million Dollars ($240,000,000), as adjusted
pursuant to Section 3.3 (the "Purchase Price"). The entire Purchase Price,
except for the amount of the Indemnity Fund, shall be payable to Seller (or to
such other Persons, not to exceed seven in total, as Seller may designate at
least three business days prior to the Closing Date) at the Closing by the wire
transfer of federal funds to an account or accounts designated by Seller, in a
written notice delivered by Seller to Buyer. Buyer shall deposit the amount of
the Indemnity Fund provided in Section 3.4 directly with the Escrow Agent on the
Closing Date. For tax reporting purposes, Buyer and Seller shall use their good
faith efforts to reach, at least 45 days prior to the Closing, agreement upon
the allocation of the Total Purchase Consideration among the Assets; provided,
that in the event that Buyer and Seller shall not reach agreement upon such
allocation at least 45 days prior to the Closing, then Buyer shall select (with
Seller's consent, not to be unreasonably withheld) and retain, at Buyer's
expense, a reputable appraisal firm with experience in the valuation and
appraisal of CATV system assets, to prepare that allocation. The foregoing
allocation (whether agreed upon by Buyer and Seller, or prepared by an appraisal
firm) shall be prepared in accordance with the rules under Section 1060 of the
Tax Code, which allocation shall thereafter be amended to reflect any
adjustments to the Purchase Price under Section 3.3. Seller shall promptly
notify Buyer, and Buyer shall promptly notify Seller, of any adjustment that
comes to its attention which is proposed to be made by any federal, state or
local taxing authority with respect to the allocation of the Total Purchase
Consideration. Unless otherwise required by applicable law, Buyer and Seller
agree to act, and to cause their respective Affiliates to act, in accordance
with the computations and allocations contained in the foregoing allocation
9
17
in any relevant Tax Returns or similar filings (including any forms or reports
required to be filed pursuant to Section 1060 of the Tax Code), to cooperate in
the preparation of any such tax forms or reports required to be filed pursuant
to such Section 1060, to file any such tax forms or reports in the manner
required by applicable law, and to not take any position inconsistent with such
allocation upon examination of any tax refund or refund claim, in any litigation
or otherwise.
3.2 Deposit in Escrow.
(a) On (or within five business days after) the Signature Date, Buyer will
deposit in escrow with the Escrow Agent under the Deposit Escrow Agreement the
sum of Seven Million Two Hundred Thousand dollars ($7,200,000) (the "Deposit").
At the Closing, Buyer and Seller shall authorize and direct the Escrow Agent to
pay the Deposit plus accrued interest to Seller on the Closing Date, which
combined sum shall be credited against the Purchase Price. In the event that the
Closing shall not occur prior to the Outside Date by reason of a material breach
or default hereunder by Buyer, and provided that Seller shall have performed, or
shall stand ready, willing, and able to perform, its obligations under this
Agreement in all material respects, and shall not otherwise be in material
breach of its obligations hereunder, the Escrow Agent, in accordance with the
terms of the Deposit Escrow Agreement, shall pay the Deposit and all accrued
interest to Seller, which Seller shall thereupon be entitled to receive, take
possession of and make use of pending any final judgment obtained by Buyer or
Seller (or any written agreement entered into by Buyer and Seller) with respect
to the final disposition thereof, it being agreed that (i) such payment shall
not constitute liquidated damages hereunder, unless Seller shall elect (in
Seller's sole discretion) to accept such payment as liquidated damages by
written notice to Buyer and the Escrow Agent within fifteen (15) business days
after Seller's receipt thereof, in the event of which election by Seller that
payment shall be deemed to constitute full liquidated damages hereunder and to
terminate all of Buyer's obligations to Seller (and all of Seller's obligations
to Buyer) hereunder, and (ii) in the event that Seller shall not elect (as
hereinbefore provided) to accept Seller's receipt of the Deposit as liquidated
damages, Seller shall be entitled to (a) Buyer's specific performance of all of
Buyer's obligations hereunder and (b) upon (and subject to) Buyer's specific
performance hereof and the consummation of the Closing in accordance with the
terms and provisions of this Agreement, Seller shall apply the Deposit and all
accrued interest thereon, less Seller's costs and expenses (including court
costs, attorney fees and related expenses) incurred by Seller in connection with
Seller's obtaining Buyer's specific performance hereof, to Buyer's payment of
the Purchase Price. For purposes of Buyer's foregoing grant to Seller of the
right to Buyer's specific performance of all of Buyer's obligations hereunder,
Buyer acknowledges that under the current circumstances applicable to ACEC,
ACEC's management and Seller's management, and Seller's sale of the ACEC
Membership Interest, Seller's remedies at law would not be adequate to enable
Seller to obtain all of the benefits of the subject sale (or benefits comparable
thereto); and Buyer does hereby irrevocably waive any objection to Seller's
foregoing right of specific performance hereunder. Notwithstanding anything to
the contrary hereinbefore set forth, however, Seller's exclusive remedy
hereunder shall be either (i) to accept Seller's receipt of the Deposit as
liquidated damages, in the event that Seller shall not elect (as hereinbefore
provided) to pursue Buyer's specific performance of Buyer's obligations under
this Agreement, or (ii) to accept Seller's receipt of the Deposit as partial
performance by Buyer of Buyer's obligations under this
10
18
Agreement, in the event that Seller shall elect (as hereinbefore provided) to
pursue Buyer's specific performance thereof.
(b) In the event that (i) the Closing does not occur prior to the Outside
Date for any reason other than a material breach or default by Buyer under this
Agreement, (ii) this Agreement is terminated by Seller for any reason in
accordance with Section 14 (other than a termination by Seller based upon a
material breach or default by Buyer under this Agreement), or (iii) this
Agreement is terminated by Buyer for any reason in accordance with Section 14,
then Buyer and Seller shall authorize and direct the Escrow Agent to return the
Deposit plus interest to Buyer, in accordance with the terms of the Deposit
Escrow Agreement (without prejudice to Buyer's other remedies hereunder, if
any).
(c) Concurrent with the execution of this Agreement, Buyer, Seller and the
Escrow Agent are entering into (or, within five business days after the
Signature Date, Buyer, Seller and the Escrow Agent shall enter into) the Deposit
Escrow Agreement, subject to the Escrow Agent's timely receipt of the Deposit
pursuant to Section 3.2(a).
3.3 Adjustments and Prorations.
The Purchase Price shall be adjusted at the Closing as follows:
(a) The Purchase Price shall be increased or decreased with respect to
ACEC's current assets and current liabilities, as follows: Seller shall deliver
to Buyer, not less than ten (10) days prior to the Closing Date, a certificate
signed by or on behalf of Seller (the "Pre-Closing Certificate"), together with
such supporting documentation as Buyer may reasonably request, which Pre-Closing
Certificate shall specify Seller's good faith estimate of the amount of the
current assets and current liabilities of ACEC as such items would be reflected
in the current assets and the current liability section of a balance sheet
prepared, as of the Closing Date, in accordance with GAAP. Notwithstanding
anything else contained herein, for purposes of making the calculations under
this Section 3.3(a), (i) current assets shall not include (1) assets from which
ACEC will not derive a benefit subsequent to the Closing Date or (2) any
receivables from Seller or any other Affiliate of ACEC or Seller; (ii) without
limiting the applicability of GAAP with respect to other items, current assets
shall include (1) only an amount for ACEC's subscriber accounts receivable for
services rendered by ACEC prior to the Closing Date, as determined in accordance
with GAAP, equal to (a) 98% of the face amount of all subscriber receivables
which, as of the Effective Time, are not more than sixty (60) days past due from
the first day of the respective Monthly Billing Period to which a xxxx relates,
and (b) zero percent of the face amount of the subscriber receivables which, as
of the Effective Time, are more than sixty (60) days past due from the first day
of the respective Monthly Billing Period to which a xxxx relates, excepting from
every such past due determination with respect to the foregoing clauses (a) and
(b) such charges (other than late charges) as do not exceed $5.00 per subscriber
and any and all late charges; (2) only an amount for ACEC's advertising sales
accounts receivable for services rendered by ACEC prior to the Closing Date, as
determined in accordance with GAAP, equal to 95% of the face amount of all
advertising receivables which, as of the Effective Time, are not more than
ninety (90) days past due; and (3) the prepaid portion of
11
19
premiums and/or fees paid by ACEC in connection with bonds which are included in
the Assets that are attributable to periods after the Closing Date; (iii)
without limiting the applicability of GAAP with respect to other items, current
liabilities shall include (1) the amount of subscriber deposits and converter
deposits (and any interest accrued thereon) and subscriber prepayments; (2)
adjustments for accrued vacation pay; (3) deferred revenue; and (4) any amounts
due in respect of bonuses to employees not otherwise paid or discharged on or
before the Closing Date (including, without limitation, any employee bonuses
due, but not otherwise paid or discharged on or before the Closing Date, under
those certain eight employee letter agreements listed in Schedule 5.10(B) and,
insofar but only insofar as any of such eight employees is terminated by ACEC at
and upon the Closing, any additional severance bonuses due, but not otherwise
paid or discharged on or before the Closing Date, under those eight letter
agreements, it being agreed that Buyer shall be responsible for any and all
costs and expenses attributable to ACEC's post-Closing termination of any ACEC
employee); and (iv) current liabilities shall not include the current portion of
any long-term debt. If the Pre-Closing Certificate shows that current assets
exceed current liabilities, the Purchase Price payable at Closing shall be
increased by such excess; and if the Pre-Closing Certificate shows that current
liabilities exceed current assets, the Purchase Price payable at Closing shall
be decreased by such excess.
(b) In the event the Closing Date Subscriber Total shall be less than
68,200, the Purchase Price shall be decreased by an amount equal to Three
Thousand Five Hundred dollars ($3,500) for each Basic Subscriber less than
68,200. For purposes of calculating the Closing Date Subscriber Total prior to
the Closing, Seller shall deliver to Buyer not less than ten (10) days prior to
the Closing Date a certificate signed by or on behalf of Seller (the "Subscriber
Certificate"), together with such supporting documentation as Buyer may
reasonably request, which shall specify Seller's good faith estimate of the
Closing Date Subscriber Total, and that Subscriber Certificate shall be used by
Buyer and Seller on the Closing Date for purposes of calculating the foregoing
Purchase Price decrease (if any), without prejudice to either party's right to
seek any post-Closing adjustment or correction thereof that may be appropriate.
(c) The Purchase Price shall be decreased at the Closing by (i) the
principal amount of all long-term debt of ACEC, including the current portion
thereof and any accrued and unpaid interest on such debt (including, without
limitation, all debt and interest outstanding under the 1998 Credit Agreement),
as such items would be reflected in the liability section of a balance sheet
prepared, as of the Closing Date, in accordance with GAAP, together with any
prepayment penalties, premiums or other costs and expenses attributable to,
arising out of or relating to such debt or the discharge of such debt; (ii) the
amount of any management fees, together with accrued but unpaid interest
thereon, or any other amounts due and owing by ACEC to Seller or to any
Affiliate of Seller or to ACEC Management Company, Inc., as of the Closing Date;
(iii) to the extent not reflected in the Pre-Closing Certificate, the amount of
any other liabilities or obligations of ACEC attributable to the period on or
prior to the Closing Date that are not otherwise adjusted under Section 3.3(a)
or this Section 3.3(c) (including, without limitation, the cost incurred to
cancel any of ACEC's then existing interest rate hedge agreements); and (iv)
ACEC's costs (including, without limitation, its attorneys' fees), insofar as
unpaid at the Closing Date, related to its consummation of its Closing
obligations under this Agreement. Buyer shall cause ACEC to pay all amounts
referred to in clauses (i) and (ii) of this Section 3.3(c) concurrent
12
20
with the Closing hereunder. For the purpose of determining such long-term debt,
management fees or any other amounts in clauses (i), (ii) and (iii) of this
Section 3.3(c) as of the Closing Date, Seller shall deliver to Buyer not less
than ten (10) days prior to the Closing Date, a certificate signed by or on
behalf of Seller (the "Debt Certificate") , together with such supporting
documentation as Buyer may reasonably request, which shall specify the amount of
such long-term debt, management fees or any other amounts in clauses (i), (ii)
and (iii) of this Section 3.3(c), calculated as of the Closing Date.
(d) If the Victorville Upgrade Completion Cost shall exceed $3,500,000,
then the Purchase Price shall be decreased by that excess amount (i.e., by the
Victorville Upgrade Completion Cost less $3,500,000). If the Victorville Upgrade
Completion Cost shall be less than $3,500,000, then the Purchase Price shall not
be adjusted on account thereof; provided, that in the event that Buyer shall
have directed ACEC pursuant to Section 7.5 to continue (and Seller shall have
continued) with the Victorville Upgrade notwithstanding the Victorville Upgrade
Completion Cost's reaching and equalling $3,500,000, then the Purchase Price
shall be increased by the difference between (x) $3,500,000 and (y) the
Victorville Upgrade Completion Cost.
(e) Lastly, the Purchase Price shall be decreased by one-half of the
aggregate amount of all Transfer Taxes.
(f) Within ninety (90) days after the Closing Date, Buyer shall deliver to
Seller a certificate (the "Final Closing Certificate") to be signed by an
executive officer of Buyer setting forth any changes to the adjustments made as
of the Closing pursuant to Sections 3.3(a), (b), (c), (d) and (e) together with
a copy of such supporting evidence as shall be appropriate hereunder and as
Seller may reasonably request. If Seller shall conclude that the Final Closing
Certificate does not accurately reflect the changes to be made to the closing
adjustments pursuant to this Section 3.3, Seller shall, within thirty (30) days
after its receipt of the Final Closing Certificate, provide to Buyer its written
statement (together with any supporting documentation as Buyer may reasonably
request) of any discrepancy or discrepancies believed to exist. Seller's
representatives shall be permitted access to all books, records, billing service
reports and other documents necessary or appropriate for the determination of
the adjustments.
(g) Buyer and Seller shall attempt jointly to resolve any discrepancies
within thirty (30) days after receipt of Seller's discrepancy statement, which
resolution, if achieved, shall be binding upon all parties to this Agreement and
not subject to dispute or review. If Buyer and Seller cannot resolve the
discrepancies to their mutual satisfaction within such thirty (30) day period,
Buyer and Seller shall, within the following ten (10) days, jointly retain the
New York City office of Ernst & Young, or (in the event of the unavailability or
unwillingness to serve of Ernst & Young or the existence of any conflict of
interest on the part of Ernst & Young with respect to either Buyer or Seller)
the New York City office of another mutually-acceptable nationally known
independent public accounting firm to review the Final Closing Certificate
together with Seller's discrepancy statement and any other relevant documents.
The cost of retaining such independent public accounting firm shall be borne
equally by Seller and Buyer. Such firm shall report its conclusions in writing
to Buyer and Seller and such conclusions as to adjustments pursuant to this
Section 3.3 shall be conclusive on Seller and Buyer and not subject
13
21
to dispute or review.
(h) If as a result of such adjustments, Buyer shall owe any amount to
Seller, Buyer shall pay that amount to Seller in immediately available funds
within three business days of such determination, and if Seller shall owe any
amount to Buyer, Seller shall pay that amount to Buyer in immediately available
funds within three business days of such determination (it being agreed that any
such amount to be paid by Seller shall not be subject to the limitations of
Section 15.1 and shall not decrease the Indemnity Fund; provided, however, that
at Buyer's option, Buyer may seek payment thereof from the Indemnity Fund).
3.4 Closing Escrow.
At the Closing, Buyer shall deposit with the Escrow Agent the sum of Ten
Million dollars ($10,000,000) of the Purchase Price (the "Indemnity Fund")
pursuant to the Closing Escrow Agreement. One-half of the Indemnity Fund, less
the amount of all claims theretofore paid to Buyer from such Indemnity Fund and
the amount of all unresolved claims theretofore made by Buyer for
indemnification pursuant to Section 15.1 (provided that the aggregate amount of
such of the foregoing claims as are based upon breaches of Seller's
representations and warranties contained herein, other than any claims based
upon breaches of any Title Asset Representation or Title Interest
Representation, shall exceed the Basket), shall be paid to Seller under the
Closing Escrow Agreement at the close of business on the first business day
after nine (9) months from the Closing Date. The remainder of the Indemnity
Fund, less the amount of all unresolved claims theretofore made by Buyer for
indemnification pursuant to Section 15.1 (provided that the aggregate amount of
such of the foregoing claims as are based upon breaches of Seller's
representations and warranties contained herein shall exceed the Basket), shall
be paid to Seller at the close of business on the first business day after
fifteen (15) months from the Closing Date. Seller expressly agrees that any
post-Closing Date adjustments required to be made to the Purchase Price pursuant
to Section 3.3 and payable to Buyer shall be paid directly by Seller to Buyer in
immediately available funds and shall not decrease the amount of the Indemnity
Fund; provided that Buyer may, at its option, make a claim against the Indemnity
Fund for such Purchase Price adjustment amounts, which claim shall not be
subject to either the Basket or any other limitation as to the maximum amount
thereof which Buyer may seek or be entitled to indemnification under Section 15
or any other provision of this Agreement.
14
22
ARTICLE IV
CLOSING
4.1 Closing Date
Subject to the satisfaction of the terms and conditions of this Agreement,
the closing of the transactions contemplated hereby (the "Closing") shall occur
at 10:00 a.m. at the offices of Paul, Hastings, Xxxxxxxx & Xxxxxx LLP at 000
Xxxx Xxxxxx, 00xx Xxxxx, xx Xxx Xxxx, Xxx Xxxx on such date (the "Closing Date")
as Buyer shall designate upon at least fifteen (15) business days prior written
notice to Seller, which designation (i) Buyer shall make within five (5)
business days following the delivery of notice by Seller to Buyer that all
conditions to Buyer's obligation to consummate the Closing have been satisfied
(or could reasonably be expected to be satisfied by or upon the Closing) or have
been waived by the respective party (parties) otherwise entitled to the
fulfillment thereof or (ii) Buyer may make, at Buyer's election, in the event
that all conditions to Buyer's obligation to consummate the Closing have been
satisfied (or could reasonably be expected to be satisfied by or upon the
Closing) or have been waived by the respective party (parties) otherwise
entitled to the fulfillment thereof but Seller shall have failed promptly to
deliver to Buyer the foregoing notice to that effect; provided, that in the
event that Buyer shall fail to timely exercise its duty to designate a Closing
Date under clause (i) hereof and shall not have exercised its right to do so
under clause (ii) hereof, then Seller shall have the right to designate the
Closing Date upon at least fifteen (15) business days prior written notice to
Buyer; provided, further, that in no event shall the Closing Date occur (or be
designated by Buyer or Seller to occur) prior to May 1, 1999 or later than July
31, 1999, unless either party upon prior written notice to the other at least
two (2) business days prior to that July 31st date elects to extend such date
for up to an additional nine months (not to extend beyond April 30, 2000) in
order to allow Seller the further opportunity to obtain all of the Required
Consents in the event that any such Required Consents have not been received by
July 31, 1999, but are being actively pursued with a reasonable expectation of
their receipt. The foregoing July 31, 1999 date, as the same may hereafter be
extended to April 30, 2000 as hereinbefore provided, is hereinafter referred to
as the "Outside Date".
4.2 Right to Specific Performance.
Notwithstanding anything to the contrary set forth herein or elsewhere,
(i) Seller shall be entitled, at its sole option, (a) to waive compliance by
Buyer with any term or provision of this Agreement (including, without
limitation, any closing conditions) and/or (b) without the posting of any bond
or other security, to require Buyer to consummate and specifically perform the
purchase of the ACEC Membership Interest from Seller in accordance with all
other terms of this Agreement, if necessary through injunction or other court
order or process, if the conditions to the obligations of Buyer to effect the
Closing have been satisfied or are capable of being satisfied by or upon the
Closing, if the Closing were to be held, and (ii) Buyer shall be entitled, at
its sole option, (a) to waive compliance by Seller with any term or provision of
this Agreement (including, without limitation, any closing conditions) and/or
(b) without the posting of any bond or other security, to require Seller to
consummate and specifically perform the sale of the ACEC Membership Interest to
Buyer in accordance with all other terms of this Agreement, if necessary
15
23
through injunction or other court order or process, if the conditions to the
obligations of Seller to effect the Closing have been satisfied or are capable
of being satisfied by or upon the Closing, if the Closing were to be held. Any
such equitable relief invoked or granted shall not be exclusive and Seller or
Buyer, as the case may be, shall also be entitled to seek and obtain money
damages (including, without limitation, court costs, attorney fees and related
expenses) insofar as applicable law shall permit, subject (in the case of
Seller) to the last sentence of Section 3.2(a).
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF SELLER
As an inducement to Buyer to enter into this Agreement and to consummate
the transactions contemplated hereby, Seller hereby makes the following
representations and warranties:
5.1 Valid Existence of Seller.
Seller is a limited liability company duly organized, validly existing and
in good standing under the laws of the State of Delaware. Seller has the
requisite limited liability company power and authority to own, lease, use and
operate the properties it currently owns, leases, uses or operates and to
execute, deliver and perform this Agreement.
5.2 Seller's Interest in ACEC.
Seller is the exclusive record and beneficial owner of the ACEC Membership
Interest, and has good and valid title to such Membership Interest, free and
clear of any and all liens, pledges, encumbrances or claims of any kind
whatsoever, other than Seller's pledge of the Membership Interest (and any lien
or encumbrance created by such pledge) pursuant to the Pledge Agreement,
pledging the Membership Interest as collateral under the 1998 Credit Agreement.
Neither the Membership Interest nor any portion thereof is subject to preemptive
rights. There is no existing option, warrant, call, commitment or other
agreement requiring or relating to, and there are no convertible or exchangeable
securities outstanding which upon conversion or exchange would require, the
issuance of any additional membership interest(s) of ACEC or any other
instrument convertible into or exchangeable therefor. There are no voting
agreements, voting trust agreements, shareholder agreements, or other agreements
relating to the Membership Interest. Seller does not own or hold any record or
beneficial interest in any Person, other than the ACEC Membership Interest. Upon
the Closing, Seller will deliver good and valid title to the Membership Interest
to Buyer, free and clear of any and all liens, pledges, encumbrances or claims
of any kind whatsoever (provided that the 1998 Credit Agreement, and the Pledge
Agreement, shall have both been terminated upon the Closing), excluding any
liens, pledges or encumbrances that may be placed thereon by or on behalf of
Buyer in connection with the Closing.
5.3 ACEC's Valid Existence and Qualification.
ACEC is a limited liability company duly organized, validly existing and
in good
16
24
standing under the laws of the State of Delaware. ACEC has the requisite limited
liability company power and authority to own, lease, use and operate the
properties it currently owns, leases, uses or operates and to transact the
business in which it is engaged as presently transacted, and is qualified to do
business in all jurisdictions in which the nature of the business conducted by
it makes such qualification necessary. ACEC does not have any subsidiary.
5.4 Business of ACEC.
All of the tangible Assets are owned or leased (and all of the intangible
Assets are held) and operated directly by ACEC, and the operation of the Systems
has not been conducted by or through any direct or indirect Affiliate of Seller
(or by or through any direct or indirect Affiliate of ACEC) other than ACEC
itself; provided, however, that various management services have been provided
to ACEC by ACEC Management Company, Inc., a Delaware corporation of which Xxxxx
X. Xxxxxxxxx is the president and sole stockholder.
5.5 Authorization; Enforceability.
The execution and delivery of this Agreement and all other instruments or
documents executed by Seller or ACEC in connection herewith, as well as all
actions required to be taken hereunder or thereunder by Seller or ACEC, have
been duly authorized by Seller or ACEC, as the case may be, and upon execution
and delivery, each such document will constitute the valid and binding
obligation of Seller or ACEC, as the case may be, enforceable against Seller or
ACEC, as the case may be, upon and in accordance with its terms, subject to
applicable bankruptcy, insolvency, reorganization, moratorium or other laws
affecting the rights of creditors generally and general principles of equity.
All persons who have executed this Agreement on behalf of Seller are authorized
to do so under its organizational documents and the laws of its state of
creation.
5.6 Required Consents; Effect of Agreement; No Breach.
(a) All approvals, consents, filings and notices required under (i) any of
ACEC's Franchises, (ii) any of ACEC's permits, licenses, leases, contracts and
agreements, and (iii) any applicable government regulations, in order for the
sale and transfer of the ACEC Membership Interest to Buyer to be consummated
pursuant to this Agreement, are listed in Schedule 5.6, except for such
non-Franchise-related approvals, consents, filings and notices which, if not
obtained or made, would not in the aggregate be material. Each of the approvals
and consents listed on Schedule 5.6 shall be deemed to be a Required Consent.
(b) Subject to obtaining the Required Consents listed in Schedule 5.6, and
complying with the HSR Act and the regulations applicable thereto, neither the
execution, delivery and performance by Seller of this Agreement nor the
consummation of the transactions contemplated hereby will, with the passage of
time or the giving of notice or both, (i) contravene the respective operating
agreement of Seller or ACEC, (ii) conflict with, or result in a breach,
termination, suspension, modification or impairment of, any of the terms of, or
constitute a default under or a violation of, or create or impose any
Encumbrance (other than a Permitted Encumbrance) upon,
17
25
or give any other person any right of termination, acceleration or cancellation
of or with respect to, any Franchise or any other permit, license, lease,
contract or agreement to which Seller or ACEC is a party or by which Seller or
ACEC or any of Seller's or ACEC's properties is bound, or (iii) result in any
material violation of any law, rule, regulation, order, writ, judgment, decree,
determination or award presently in effect or having applicability to Seller or
ACEC. No event has occurred which, with the passage of time or the giving of
notice or both, would constitute a material breach or violation of or default
under any Franchise or Necessary Contract by ACEC or, to the best of Seller's or
ACEC's knowledge, any Third Party thereto, except as may otherwise be disclosed
in any of Schedules 5.10(A), 5.10(B) or 5.10(C).
5.7 Financial Statements.
Seller has delivered to Buyer a copy of ACEC's Balance Sheet at September
30, 1998 and related Statement of Operations and Statement of Changes in
Financial Position of ACEC for the nine months then ended (the "Financial
Statements"). The Financial Statements (i) are in accordance with the books and
records of ACEC, (ii) were prepared in conformity with GAAP, subject to normal
year-end audit adjustments and footnotes (none of which are expected to be
material in amount), and (iii) present fairly the financial position of ACEC at
September 30, 1998 and the results of operations and changes in financial
position of ACEC for the nine months then ended. The Additional Financial
Statements to be delivered pursuant to Section 9.1(ii) that are for quarterly
periods will (i) be prepared in conformity with GAAP applied consistently with
the Financial Statements, and (ii) present fairly the financial position of ACEC
at the dates indicated and the results of operations and changes in financial
position of ACEC for the periods indicated, subject to normal year-end audit
adjustments and footnotes (none of which are expected to be material in amount).
The Additional Financial Statements to be delivered pursuant to Section 9.1(ii)
that are for monthly periods will (i) be prepared in conformity with GAAP
applied consistently with the Financial Statements, and (ii) present fairly the
results of operations of ACEC for the periods indicated, subject to normal
year-end audit adjustments and footnotes (none of which are expected to be
material in amount). Whenever references are made throughout this Agreement to
financial statements, it will be understood that all notes and exhibits are
included therein, except as herein otherwise expressly provided.
5.8 Undisclosed Liabilities.
ACEC has no material liabilities or obligations, whether accrued,
absolute, contingent or otherwise, and whether due or to become due, and Seller
does not know of any basis for any claim against ACEC for any such liabilities
or obligations, except for obligations arising under the contracts, agreements,
licenses, permits, etc. listed on Schedules 5.10(A) and 5.10(B), and except to
the extent set forth in this Agreement (or which otherwise are not required to
be disclosed hereunder because they involve DeMinimus Agreements) or in the
Financial Statements.
5.9 Tax Matters.
There is not as of the date of this Agreement, and there will not be as of
the Closing Date,
18
26
any condition or occurrence of an event with respect to the payment or
withholding by Seller or ACEC of any Taxes which could interfere with the
consummation of the transactions contemplated by this Agreement or subject
Seller or ACEC or any of the Assets to any Encumbrances other than any Permitted
Encumbrances. Sellor or ACEC has filed with the appropriate agencies all Tax
Returns and tax reports required by law to be filed by Seller or ACEC, as the
case may be; and each of Seller and ACEC has timely paid, or will timely pay on
or before the Closing Date, all Taxes to the extent that the same have become
due and payable. Except as set forth on Schedule 5.9, there exists no unpaid
federal, state or local income or other tax with respect to the Business, the
existence or operations of the Systems, or the Assets, except for accrued Taxes
not yet due and payable. Each of Seller and ACEC is in substantial compliance
with all applicable sales and use tax laws and regulations. Neither Seller nor
ACEC is a "United States real property interest" or a "U.S. real property
holding corporation" within the meaning of Section 897 of the Tax Code. At all
times since ACEC's formation, (i) ACEC has had only one member, (ii) ACEC has
been disregarded as an entity separate from its sole member within the meaning
of Treasury Regulations Section 301.7701-2(c)(2)(i), and (iii) ACEC has never
been subject to any entity level income, franchise or similar income based
Taxes.
5.10 Franchises and Necessary Contracts.
(a) Attached as Schedule 5.10(A) is a true and accurate list of each
Franchise held by ACEC. Seller has delivered to Buyer true and correct copies of
all of the Franchise documents listed on Schedule 5.10(A). To the best of
Seller's and ACEC's knowledge, all of the Franchises were validly issued. ACEC
is the legal holder of each of the Franchises, and each of them is a valid and
subsisting instrument in full force and effect. There is no Franchise required
by law or used or held for use in the operation of the Systems which is not
described on Schedule 5.10(A). Each local franchising authority whose consent or
approval is required for the transfer of control of ACEC by Seller to Buyer
pursuant to the sale transaction contemplated by this Agreement is listed on
Schedule 5.6 hereto.
(b) Attached as Schedule 5.10(B) is a true and accurate list of each
Necessary Contract. Seller has delivered (or will, prior to Closing and subject
to Buyer's identification thereof, deliver) to Buyer true and correct copies of
all of the Necessary Contracts listed on Schedule 5.10(B). Except as otherwise
noted on Schedule 5.10(B), all of the Necessary Contracts were validly entered
into by ACEC (or, to the best of ACEC's or Seller's knowledge, by ACEC's
predecessor-in-interest), ACEC is a legal party thereto and each of them is a
valid and subsisting instrument in full force and effect; provided, that ACEC
makes no representation or warranty as to the validity, full force or effect of
any Necessary Contract that provides (or purports to provide) for any
right-of-entry or bulk or otherwise discounted service to any residential
development or any multi-dwelling units or commercial or institutional structure
(e.g., any bar, tavern, apartment building, dormitory, hospital, hotel or
motel). There is no Necessary Contract required by law or used or held for use
in the operation of the Systems which is not described on Schedule 5.10(B).
(c) Except as set forth on Schedules 5.10(A), 5.10(B) and 5.10(C), ACEC is
in substantial compliance (and the operations of the Systems and the Assets are
being conducted in
19
27
substantial compliance) with the provisions of all Franchises and Necessary
Contracts, and there are no pending (or to Seller's or ACEC's knowledge,
threatened) modifications, amendments or revocations of or to (i) any Franchise
by the respective issuer thereof or (ii) any Necessary Contract by any Third
Party thereto. Neither Seller nor ACEC has any knowledge of any material breach
(or of any anticipated material breach) of any Necessary Contract by any Third
Party thereto, except as disclosed in Schedule 5.10(C) with respect to the
Angelus Oaks headend site. Except as disclosed in Schedule 5.10(C) or as
specifically contained in the Franchises, Necessary Contracts, or other material
contracts which have been provided to Buyer by Seller, no promises or
commitments which are to be fulfilled after the Closing Date have been made with
respect to capital improvements relating to the Systems. (Note: Schedule 5.10(C)
reflects that ACEC has recently commenced franchise renewal negotiations with
the City of Rancho Cucamonga, which renewal negotiations will require the
franchise grantee's commitment to upgrade that portion of the Rancho System
serving the City of Rancho Cucamonga to 750 MHz by December 31, 2001 or such
other date (not to precede December 31, 2000) as that City and ACEC may
hereafter agree.) Pursuant to subsections (a) through (g) of Section 626 of the
Cable Communications Policy Act of 1984, as amended, ACEC (or the respective
System's predecessor owner) has timely submitted proposals for renewal of all
Franchises having a remaining term of thirty-six (36) months or less as of the
date hereof, and has provided Buyer with copies of all proposals for renewal,
preliminary assessments and franchisor determinations described in subsection
(c) of said Section 626.
(d) Except as otherwise disclosed in Schedule 5.13, as of the date of this
Agreement (i) ACEC has not received any notice from any utility or governmental
agency to relocate any pole attachments or cable lines that has not been and
cannot reasonably be complied with in the ordinary course of business prior to
the expiration of the time period (if any) specified therein, and (ii) there are
no pole attachments or cable lines of ACEC that are required to have been
relocated at or prior to the date hereof, but have not yet been relocated. In
the event that ACEC shall receive, subsequent to the date of this Agreement but
on or before the Closing Date, any written request from any utility or
governmental agency for the relocation of any of ACEC's cable lines or pole
attachments, ACEC shall give Buyer prompt written notice thereof and shall in
good faith undertake the scheduling, commencement and completion of such
relocation to the extent that similarly-located CATV operators would customarily
do so in the ordinary course of their business within the time remaining prior
to the Closing Date, it being agreed that neither Seller nor ACEC shall have any
other obligation (or any post-Closing obligation hereunder) with respect
thereto; provided, that the Seller shall reimburse Buyer for the costs and
expenses of any such relocation necessitated by such request received prior to
the Closing from any utility or governmental agency that is not completed prior
to the Closing Date and which is attributable to ACEC's not being in compliance
with the applicable clearance and spacing requirements of the respective pole
license.
5.11 No Other Agreements.
(a) All of ACEC's agreements and contracts, other than the DeMinimus
Agreements, are listed on Schedules 5.10(A), 5.10(B), 5.12 (as to free and
discounted subscribers), 5.23 and 5.24. Except for those agreements and
contracts listed on those five Schedules, ACEC is not a
20
28
party to any written or oral contract (other than any DeMinimus Agreements )
that is not cancelable without penalty upon 30 days' notice or less, including,
without limitation, any:
(i) bonus, incentive, pension, profit sharing, retirement,
hospitalization, insurance, or other plan providing for deferred or
other compensation to employees, or any other employee benefit or
"fringe benefit" plan, including, without limitation, vacation, sick
leave, medical or other insurance plans or any union collective
bargaining or any other contract with any labor union;
(ii) employment contract for any person or entity on a full-time,
part-time, consulting or other basis;
(iii) agreement or indenture relating to the borrowing of money or
to mortgaging, pledging or otherwise placing a lien on any asset or
group of assets of ACEC;
(iv) guarantee of any obligation;
(v) lease or agreement under which it is lessee or lessor, or holds
or operates any property, real or personal, owned by any other
party, except for any lease under which the aggregate annual rental
payments do not exceed $10,000; and
(vi) agreement or group of related agreements with the same party or
any group of affiliated parties which requires or may in the future
require aggregate consideration by or to ACEC in excess of $10,000.
(b) There is no term or provision of any mortgage, indenture, license,
permit, franchise, contract, agreement or instrument to which ACEC is a party or
by which it or any of its properties is bound, or of any provision of any
federal or state judgment, decree, order, statute, rule or regulation applicable
to or binding upon ACEC or its properties, which does or will materially
adversely affect ACEC, the Business, or the Systems, except for any matter
generally affecting the CATV industry within the United States, the State of
California or the County of San Bernardino. The foregoing assumes that the
System upgrade requirements of the City of Victorville's franchise, and the
anticipated System upgrade requirements of the City of Rancho Cucamonga
franchise renewal presently being negotiated by Seller with that City, are
satisfactory to Buyer and that ACEC's or Buyer's compliance therewith will not
materially adversely affect the Business or the respective Systems.
5.12 Systems' Capacity, Basic Subscribers and Rates.
Schedule 5.12 lists, as of October 31, 1998 (or as of the respective date
therein specified), (a) the material equipment used in the operation of the
Systems, (b) the system bandwidth and maximum National Television System
Committee ("NTSC") analog channel capacity for each System, (c) the programming
offered (and whether each broadcast television station carried by the Systems is
carried pursuant to a retransmission or "must carry" consent), (d) the
approximate linear miles of aerial and underground plant (i.e., main trunk and
distribution or feeder cable), (e)
21
29
the approximate number of Homes Passed, (f) the number of Basic Subscribers, (g)
the aggregate number of premium units subscribed to by ACEC's Premium
Subscribers, (h) the subscriber rates for all services including basic and
premium services, tier services, additional outlets and converter rental charges
in and for the Service Areas, and (i) all free or discount service obligations
of ACEC, with respect to the Systems as of the applicable date hereinbefore
specified in this sentence. ACEC has no obligation or liability for the refund
of monies to any subscribers other than as evidenced by such subscriber's
respective refund (including deposit) account credit balances or as may be
required under the rules and regulations relating to rates promulgated or to be
promulgated by the FCC under the Cable Act. ACEC has delivered to Buyer complete
and correct copies of all FCC forms relating to rate regulation filed with the
FCC with respect to the Systems, copies of all ACEC correspondence with any
Governmental Authority relating to rate regulation generally or specific rates
charged to subscribers with respect to the Systems, including, without
limitation, copies of any complaints filed with the FCC with respect to any
rates charged to any System's subscribers, and any other documentation
supporting an exemption from the rate regulation provisions of the Cable Act
claimed by ACEC with respect to any of the Systems.
5.13 Pole Attachments.
Schedule 5.13 sets forth, as of the date of this Agreement, the
approximate number of pole attachments used by the Systems and the names of the
utilities providing those attachments. ACEC has made all required payments for
its pole attachments and is not in material default under, or in material breach
of, or in receipt of any claim of material default under any agreement,
arrangement or understanding for pole attachments.
5.14 Employees.
Seller is not aware that any officer, executive employee or any group of
employees of ACEC has or have any plans to terminate his, her or their
employment with ACEC, except for all of ACEC's Stamford, Connecticut-based
officers and employees. ACEC has complied in all material respects with all
applicable laws relating to the employment of labor, including without
limitation provisions thereof relating to ERISA, wages, hours, insurance,
worker's compensation, equal opportunity, collective bargaining and the payment
of social security and other taxes. At the date of this Agreement, ACEC is not,
nor has ACEC ever been at any date prior to the date of this Agreement, a party
to any contract with any labor organization or involved in any labor discussion
with any unit or group seeking to become the bargaining unit for any of ACEC's
employees. As of the date of this Agreement, (i) ACEC has never experienced any
strikes, work stoppages or significant grievance proceedings or had any claims
of unfair labor practices filed or, to the knowledge of ACEC, threatened to be
filed with respect to the operation of the Systems, and (ii) to ACEC's
knowledge, no union representation claim exists with respect to the employees of
ACEC and no organizing activities are taking place. Schedule 5.14 sets forth, as
of January 1, 1999, with respect to each employee employed by ACEC in
California, such employee's name, position, and date of employment. Seller has,
for reasons of maintaining the confidentiality of the salary and wage
information therein, provided to Buyer a separate addendum to Schedule 5.14,
setting forth as of January 1, 1999 the current salary or hourly wage
22
30
of each of the employees listed in Schedule 5.14. If required by applicable law,
Seller has timely notified (or will have timely notified prior to the Closing)
all affected employees (as defined in the Worker Adjustment and Retraining Act,
29 U.S.C. Section 201 et. seq.) of ACEC who became "affected employees" on or
before the Closing Date.
5.15 Absence of Certain Developments.
Except as set forth on Schedule 5.15, and except for the transactions
contemplated by this Agreement, ACEC has not insofar as the Systems or the
Assets are concerned, since September 30, 1998:
(i) borrowed any amount or incurred, guaranteed or become subject to any
liabilities (absolute or contingent), except (x) current liabilities
incurred in the ordinary course of business and (y) borrowings under
the 1998 Credit Agreement;
(ii) mortgaged or pledged any of the Assets, or subjected them to any
lien, charge or other encumbrance, except liens for current property
taxes not yet due and payable and liens securing indebtedness under
the 1998 Credit Agreement;
(iii) sold, assigned or transferred any of its assets, except in the
ordinary course of business, or waived, released or cancelled any
debts or claims (other than unpaid subscriber debts and claims in
the ordinary course of business);
(iv) suffered any substantial losses or waived any material rights,
whether or not in the ordinary course of business;
(v) made any changes in personnel policies or compensation or declared,
paid or committed to pay any bonus or other additional salary or
compensation to any person (whether in the capacity of employee,
consultant or other- wise), except in the ordinary course of
business and consistent with past practices; provided, that ACEC has
made (and retains the right to make) certain pre-Closing performance
incentive and Closing-related pay and bonus commitments with respect
to the sale transaction contemplated by this Agreement, which
commitments ACEC shall fulfill immediately prior to the Closing and
shall not have any obligation or liability therefor subsequent to
the Closing;
(vi) entered into any transaction other than in the ordinary course of
business;
(vii) suffered any damage, destruction or casualty loss of any Asset,
whether or not covered by insurance, that materially and adversely
affects the financial condition, the Business or prospects of the
Systems;
23
31
(viii)undergone a material adverse change in the financial condition,
assets, liabilities, Business, results of operations or prospects of
the Systems, for any reason other than one attributable to
conditions affecting the CATV industry generally;
(ix) revalued any of the Assets;
(x) amended or terminated any agreement, contract, license or
understanding listed in any Schedule, except in the ordinary course
of business (it being understood that ACEC is presently negotiating
a franchise renewal with the City of Rancho Xxxx-xxxxx, which
franchise renewal is expected to include a commitment on the part of
ACEC to upgrade that portion of the Rancho System serving the City
of Rancho Cucamonga to 750 MHz by a specified date between January
1, 2001 and December 31, 2001);
(xi) taken, or permitted to be taken, any action that would affect or
change the capitalization of ACEC;
(xii) become aware of any other event or condition of any character that
has or might reasonably have a material and adverse effect on the
financial condition, business, assets, results of operations or
prospects of the Systems, taken as a whole, except for matters
affecting the CATV industry generally; or
(xiii)entered into any agreement or understanding to do any of the
foregoing.
24
32
5.16 Real Property.
Schedule 5.16 contains a list, including a legal description, of each
parcel of Real Estate owned by ACEC together with a description of the type of
use of each such parcel. Such list is true, complete and accurate in all
material respects. Seller has furnished to Buyer a copy of ACEC's title
insurance policy issued and currently in effect with respect to each parcel of
Real Estate owned by ACEC. Except for those Encumbrances listed on Schedule 5.16
(all of which are Permitted Encumbrances), ACEC is the sole owner (both legal
and equitable) of, and has good and marketable title to, each parcel of Real
Estate listed on Schedule 5.16 and to all Improvements thereon. All of the
structures on the Real Estate are structurally sound and in generally good
condition and repair (reasonable wear and tear excepted), and to Seller's and
ACEC's best knowledge, all of such Real Estate conforms in all material
respects, including use by ACEC, with all applicable deed restrictions,
covenants, contractual requirements and building, zoning, subdivision,
environmental, land-use, fire and other laws. The use (i.e., headend, tower or
office site) of each real property lease to which ACEC is a party is identified
on Schedule 5.10(B). All of the Real Estate, and all of the real property leased
by ACEC, utilized as a headend, office or tower site has unfettered access
(whether by public or private road, street or other right of way, or otherwise)
to public roads or streets and all utilities and services necessary for the
proper conduct and operation of the Systems. To Seller's knowledge, (i) neither
the whole nor any part of any real property owned or leased by Seller which is
included within the Assets is subject to any pending suit for condemnation or
other taking by any public authority and (ii) no such condemnation or other
taking is currently threatened or contemplated. None of the towers (including
any guy anchors or wires), buildings or other facilities located upon any parcel
of Real Estate or leased real property that is utilized as a headend or tower
site constitutes a trespass upon the property of any other person or entity.
5.17 Title to Assets; Personal Property.
ACEC is the sole owner (both legal and equitable) of and has good title to
the Assets constituting personal property, tangible and intangible, free and
clear of all mortgages, liens, security interests, charges, claims, restrictions
and other encumbrances of every kind other than with respect to indebtedness
under the 1998 Credit Agreement and the Permitted Encumbrances. Schedules 1.9
and 5.12 list all material equipment held or used in connection with or
necessary for the operation of the Systems, and Schedule 5.10(B) lists all
material contracts pursuant to which ACEC holds or uses any of such equipment,
which lists are true, complete and accurate in all respects. The equipment and
other tangible assets included in the Assets are in satisfactory operating
condition, reasonable wear and tear excepted, and conform in all material
respects to all applicable ordinances, rules, regulations and technical
standards, including the rules, regulations and technical standards of the FCC
and the local franchise authorities, and all applicable building, zoning and
other laws. None of the owners of any property on which any trunk or feeder
lines or other facilities of the Systems are located has notified ACEC in
writing of any objection to the placement of such cable, lines, or other
facilities on their property, nor have any such owners made any demand for
relocation, removal, reinstallation, or restoration of such cable, lines or
other facilities which might require material expenditures in connection
therewith.
25
33
5.18 Intangible Property. Schedule 5.18 contains a list of all intangible
property, including all intellectual property (other than the Systems'
subscriber lists, which lists will be and remain in the possession of ACEC upon
the Closing, and other than American Cable Entertainment, which name is an
Excluded Asset), necessary for use or used in the operation and conduct of the
Business as presently conducted, which list is true, complete and accurate in
all material respects. Except for the Excluded Assets, or such conditions as
affect the CATV industry generally, or as disclosed in Schedule 5.18 or Section
5.19, ACEC possesses or has the right to use all intangible property, including
all intellectual property, necessary for use or used in the operation and
conduct of the Business as presently conducted without any conflict with the
rights of any Third Party. ACEC (a) has not licensed any Person to use any
intellectual property; (b) has no knowledge of the infringement by any Person of
any of the intellectual property set forth on Schedule 5.18; and (c) this
Agreement and the sale of the ACEC Membership Interest will not materially
breach any contract or agreement governing any intellectual property right of
ACEC. Schedule 5.18 also lists all of the trade names (including the Hi-Desert
Cablevision name) owned or held by Seller, other than the name American Cable
Entertainment, and derivations thereof, which name and derivations are Excluded
Assets; provided that Buyer shall have the right to use the American Cable
Entertainment name, and derivations thereof, for a period of 120 days following
the Closing Date, or for such longer period of time as Buyer shall be using
commercially reasonable efforts to remove such name, and derivations thereof,
from any items of equipment or inventory of the Systems, but in no event for
more than 180 days after the Closing Date.
5.19 Necessary Property.
ACEC has no material properties or assets used, held for use or usable in
the operation of the Systems which are not set forth on the Schedules. The
Assets (including, without limitation, the Franchises), together with the
Excluded Assets, constitute all of the property used and reasonably necessary
for the operation of the Systems in the manner and to the extent presently
conducted by ACEC; provided, that (i) ACEC does not have at the date of this
Agreement (but may seek, although it can provide no assurances that it will in
that event be able to obtain, prior to the consummation of the Closing) any
necessary license(s) for its exhibition of the CATV signals being exhibited by
the Systems, other than those CATV programming licenses listed at the date of
this Agreement as Necessary Contracts on Schedule 5.10(B), and (ii) ACEC does
not have at the date of this Agreement (but will continue to seek, although it
can provide no assurances that it will be able to obtain, from General Telephone
Company of California and Southern California Edison Company prior to the
consummation of the Closing) any pole attachment agreement(s) or license(s).
5.20 Compliance with Laws.
(a) The operations of the Systems have been, and are being, conducted in
material compliance with all applicable laws, rules, regulations and other
requirements of all federal, state, county or local governmental authorities or
agencies.
(b) (i) ACEC is permitted under all applicable Franchises and FCC rules,
regulations and
26
34
orders to distribute the transmissions (whether television, satellite, radio or
otherwise) of video programming or other information that any System presently
transmits to its respective customers (the "Signals") and to utilize all carrier
frequencies generated by the operations of the Systems, and is licensed to
operate all the facilities required by law to be licensed, including without
limitation, any business radio and any CARS system being operated by ACEC as
part of the Systems; and (ii) other than requests for network nonduplication and
syndex protection and sports league (e.g., NBA, NHL, MLB) blackout requests, no
written requests have been received by ACEC from the FCC, the United States
Copyright Office, any local or other television station or system or from any
other Person challenging or questioning the legal right of ACEC to own or
operate any System or to own, operate or use any FCC licensed or registered
facility owned, operated and used by ACEC in conjunction with ACEC's operation
of any System.
(c) ACEC is in substantial compliance with the applicable Cumulative
Leakage Index requirements of the FCC.
(d) Each of the Angelus Oaks System, the Rancho System and the Yucaipa
System is delivering to its respective subscribers (i) the respective channel
line-up set forth as to that System on Schedule 5.12, which channel line-up is
capable of being viewed in its entirety by every subscriber to that System, and
(ii) signals that are at least equal in quality to those signals that such
System was delivering to its subscribers at the date of this Agreement; and each
of the foregoing three Systems will, on the Closing Date, be in compliance with
the FCC's CLI (Cumulative Leakage Index) requirements. The Victorville System,
when loaded with the number of analog channels presently being exhibited by that
System (as listed on that System's channel line-up as set forth on Schedule
5.12), is capable of operating in substantial compliance with the terms of the
applicable FCC rules and regulations currently in effect and is capable of
delivering such number of analog channels throughout all portions of the
respective System. The Victorville System will, on the Closing Date, be in
compliance with the FCC's CLI requirements.
(e) ACEC has deposited (or will, prior to the Closing, timely deposit)
with the United States Copyright Office all statements of account and other
documents and instruments, and has paid (or will, prior to the Closing, timely
pay) all such royalties, supplemental royalties, fees and other sums to the
United States Copyright Office with respect to the business and operations of
the Systems as are required under the Copyright Act to obtain, hold and maintain
the compulsory license for CATV systems prescribed in Section 111 of the
Copyright Act. To Seller's knowledge, ACEC and the Systems are in compliance
with the Copyright Act and the rules and regulations of the Copyright Office.
ACEC and the Systems are entitled to hold and do hold the compulsory copyright
license described in Section 111 of the Copyright Act, which compulsory
copyright license is in full force and effect and has not been revoked,
cancelled, encumbered or adversely affected in any manner. As disclosed above in
Section 5.19, ACEC does not have at the date of this Agreement (but may seek,
although it can provide no assurances that it will in that event be able to
obtain, prior to the consummation of the Closing) those programming license(s)
necessary for its exhibition of the CATV signals being exhibited by the Systems,
other than those CATV programming licenses listed at the date of this Agreement
as Necessary Contracts on Schedule 5.10(B).
27
35
(f) All necessary FAA approvals have been obtained with respect to the
height and location of those towers owned by ACEC which are used in connection
with the operation of the Systems and those towers are being operated in
accordance with applicable FCC and FAA rules.
(g) There is as of the date of this Agreement no inquiry, claim, action or
demand pending (or, to ACEC's knowledge, threatened) before the United States
Copyright Office or the Copyright Royalty Tribunal which questions the copyright
filings or payments made by ACEC with respect to the Systems, other than routine
inquiries or proposed corrections none of which routine inquiries or corrections
(individually or in the aggregate) is or will be material. Seller will provide
Buyer with copies of any and all additional inquiries, claims, actions or
demands during the period between the date of this Agreement and the Closing
Date .
(h) Copies of all aeronautical frequency notices filed with the FCC with
respect to the Systems have been (or will, within 45 days after the Signature
Date, be) delivered to Buyer.
(i) No basis exists under the 1992 Act (after giving effect to provisions
of the 1992 Act which otherwise would be effective but for the passage of time),
as in effect at the date of this Agreement, for any rollback of rates for basic
service, or any rollback or refund of rates for any premium or pay service, with
respect to the Systems.
5.21 Litigation and Legal Proceedings.
Schedule 5.21 sets forth a complete and accurate list and description of
all audits, suits, claims, actions and administrative, arbitration or other
similar proceedings pending or, to the knowledge of Seller or ACEC, threatened
against ACEC, the Assets, any of ACEC's Affiliates, directors, officers,
employees or agents relating to ACEC, the Business, the Systems, any of the
Assets or ACEC (including proceedings concerning labor disputes or grievances,
civil rights discrimination cases and affirmative action proceedings) and all
governmental investigations pending or, to the knowledge of ACEC, threatened, to
which ACEC is a party, or against its properties or business, and each judgment,
order, injunction, decree or award relating to ACEC, or the Assets (whether
rendered by a court or administrative agency, or by arbitration pursuant to a
grievance or other procedure) to which ACEC is a party or relating to the Assets
which is unsatisfied or requires continuing compliance therewith (such suits,
actions, claims, judgments, orders, injunctions, decrees and awards are herein
referred to as "Legal Proceedings"). Seller is not aware of any facts or
circumstances which would give rise to any unasserted possible material claims
against the Systems or the Assets. There is no action, suit, proceeding or (to
Seller's or ACEC's knowledge) investigation to restrain, prohibit or otherwise
challenge the legality or propriety of the transactions contemplated by this
Agreement pending or (to Seller's or ACEC's knowledge) threatened against Seller
or ACEC as of the date of this Agreement. The foregoing warranty specifically
excludes matters undertaken by or pending before Congress, the FCC, the
Copyright Royalty Tribunal or any state governmental authority in any state in
which any System is located which would have applicability to CATV systems in
general but to which ACEC is not expressly a party.
28
36
5.22 Brokers' Fees.
Except for Xxxxxx Capital and the brokerage fee due that firm in
connection with the transactions contemplated by this Agreement (which brokerage
fee will be paid by Seller at Closing out of the Closing proceeds), neither
Seller nor ACEC has entered into any agreement, arrangement or understanding, or
employed any broker or finder or incurred any liability of ACEC, for any
brokerage fees, commissions or finders' fees in connection with the negotiations
leading to or the transactions contemplated by this Agreement. Nor is either
Seller or ACEC, except as otherwise hereinbefore set forth in this Section,
aware of any claim, or any basis for any claim, for the payment by ACEC of any
agent's fees in connection with the negotiation or consummation of this
Agreement.
5.23 Pensions and Other Deferred Compensation; Benefits.
There are no (nor, within the past six years, have there been any)
employee pension benefit plans (as defined in ERISA Section 3(2)),
profit-sharing or deferred compensation plans or policies or employee welfare
benefit plans (as defined in ERISA Section 3(1)) for the benefit of employees of
ACEC or any entity that is in the control group of entities that includes ACEC
as determined under Section 4.14(b), (c) and (m) of the Tax Code, except as set
forth on Schedule 5.23 and, to the knowledge of ACEC, ACEC is not subject to any
liability resulting from the withdrawal by ACEC or any of its Affiliates from,
or the termination of, a multi-employer pension plan within the meaning of
section 3(37) of ERISA previously utilized by ACEC. All of the employee benefit
plans listed on Schedule 5.23 have been designed and administered in compliance
with the applicable provisions of ERISA and the Tax Code. Except with respect to
claims under the employee benefit plans listed on Schedule 5.23, no person has
asserted any claim under which ACEC would have any liability under any health
insurance, life insurance, disability, medical, surgical, hospital, death
benefit, or any other employee benefit plan, contract or arrangement maintained
by ACEC, or to which ACEC is a party or may be bound, or under any worker's
compensation or similar law, which is not fully covered by insurance maintained
with reputable, responsible financial insurers. None of the plans listed in
Schedule 5.23 provides for post-retirement health coverage (except as required
by ERISA Sections 601-609) or post-retirement life insurance benefits.
5.24 Insurance, Surety Bonds, Damages.
Schedule 5.24 lists all insurance policies and surety bonds of ACEC now in
effect and maintained or held by ACEC at the date hereof, which list is
accurate, true and complete in all material respects, and that list also sets
forth the names of the respective insureds and their addresses. The premiums on
such insurance policies and bonds have been currently paid, and such policies
and bonds are valid, outstanding and enforceable, in full force and effect.
Seller will cause ACEC to maintain coverage of similar kinds and amounts and to
pay the premium for such coverage through the Closing Date. As of the date of
this Agreement, no insurance carrier has denied any claim for insurance made by
ACEC in respect of any of the Assets or refused to renew any policy issued in
respect of any of the Assets.
29
37
5.25 Environmental Laws.
Except as set forth in Schedule 5.25: (i) ACEC is in compliance with all
Environmental Laws relating to its operation of the Systems, its ownership of
the Real Estate and its leasing of the real property it leases; (ii) no order,
directions or notices relating to the Systems have been issued pursuant to any
Environmental Law and no government agency has submitted to ACEC any request for
information pursuant to any Environmental Law relating to the Systems; (iii) to
the best of Seller's and ACEC's knowledge, there are no Environmental Permits
required under any Environmental Law in connection with the operation of the
Systems as presently operated or in connection with the Real Estate or leased
property; (iv) during the term that ACEC has occupied the Real Estate and any
leased real property, the Real Estate and such leased real property as has been
occupied by ACEC has not been utilized for (or, to ACEC's knowledge, affected
by) any industrial or commercial operation involving the generation, storage,
release or disposal of any Hazardous Substance, nor to Seller's knowledge has
any such utilization been made by any other present or previous owner, tenant,
occupant or user of such Real Estate or leased property; and (v) ACEC has
obtained all governmental authorizations under Environmental Laws necessary for
the operation of the Assets, which governmental authorizations are in full force
and effect (or ACEC or Buyer can readily obtain all such governmental
authorizations upon or promptly after the Closing in the ordinary course of
business and without disruption or delay of the operation of the Systems).
Except as set forth on Schedule 5.25, ACEC has received no notification pursuant
to any Environmental Laws that: (a) any work, repairs, construction or capital
expenditures are required to be made in respect of any of the Assets as a
condition of compliance with any Environmental Laws relating to the Systems; or
(b) any currently held material Environmental Permit relating to the Systems is
about to be made subject to materially different limitations or conditions, or
is about to be revoked, withdrawn or terminated. No claim or investigation based
on Environmental Laws which relate to any Real Estate or leased property or any
operations or conditions thereon (a) has been asserted or conducted in the past
or is currently pending against or with respect to ACEC or any other Person or
(to Seller's knowledge) is threatened or contemplated. To Seller's knowledge, no
release of Hazardous Substances outside the Real Estate or leased property has
entered or threatens to enter any Real Estate or leased property nor is there
any pending or threatened claim based on Environmental Laws which arises from
any condition of land surrounding Real Estate or leased property. Seller has
provided, or prior to Closing, will provide, Buyer with complete and correct
copies of all studies, reports or surveys in Seller's and ACEC's possession
relating to the presence or alleged presence of Hazardous Substances at, on or
affecting the Real Estate or leased real property. No underground or above
ground storage tanks are currently (and, to Seller's and ACEC's knowledge, no
such tanks have been) located on any Real Estate. To Seller's knowledge, (a) no
Real Estate or any property leased by ACEC has been used at any time as a
gasoline service station or any other facility for storing, pumping, dispensing,
or producing gasoline or any other petroleum products or wastes, and (b) no
building or other structure on any Real Estate or any property leased by ACEC
contains asbestos.
5.26 No Other Commitment to Sell.
No part of the Systems or any of the Assets is directly or indirectly
subject in any manner
30
38
to any written or oral commitment or any understanding or arrangement for the
sale, transfer, assignment, or disposition thereof, in whole or in part, except
(i) pursuant to this Agreement, (ii) as provided in any of ACEC's Franchises or
in the general security provisions of any of ACEC's debt instruments, (iii) the
sale of any Asset in the ordinary course of business which has been or will be
replaced by ACEC on or before the Closing Date with a replacement Asset of equal
or greater value, or (iv) as otherwise set forth in Schedule 5.26.
5.27 Disclosure.
No representation or warranty made herein by Seller, and no statement by
Seller contained in any certificate or other instrument furnished or to be
furnished by Seller to Buyer pursuant to this Agreement, contains or will
contain any untrue statement of a material fact.
5.28 Affiliate Agreements to be Terminated prior to or upon Closing.
Schedule 5.28 sets forth those contracts, agreements, arrangements and
understandings between ACEC and any Affiliate of ACEC which will be included in
ACEC's Assets immediately prior to or upon the Closing ("Affiliate Agreements").
Seller will cause ACEC to terminate all such Affiliate Agreements prior to or
upon the Closing, without payment by Buyer or ACEC of any penalty, premium,
liquidated damages or other compensation on account thereof (other than the
Purchase Price adjustments contemplated on the basis of Buyer's compliance with
clauses (i) and (ii) of Section 3.3(c)). Seller will also cause ACEC to use its
reasonable, good faith efforts to effect the termination as of the Closing Date
of any and all of ACEC's then existing programming licenses for any System's
distribution of CATV programming.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF BUYER
As an inducement to Seller to enter into this Agreement and to consummate
the transactions contemplated hereby, Buyer hereby makes the following
representations and warranties:
6.1 Organization.
Buyer is a corporation duly organized and validly existing under the laws
of the State of Delaware and has the power and authority to own and use its
properties and to transact the business in which it is engaged and to acquire
the ACEC Membership Interest pursuant to this Agreement. Buyer is (or will be,
prior to the Closing) qualified to do business in the State of California.
6.2 Authorization; Enforceability
The execution and delivery of this Agreement and all other instruments or
documents
31
39
executed by Buyer in connection herewith, as well as all action required to be
taken hereunder or thereunder by Buyer, have been duly authorized by Buyer, and
upon execution and delivery, each such document will constitute the valid and
binding obligation of Buyer enforceable upon and in accordance with its terms,
subject to applicable bankruptcy, insolvency, reorganization, moratorium or
other laws affecting the rights of creditors generally and by general principles
of equity. All Persons who have executed this Agreement on behalf of Buyer are
authorized to do so under its organizational documents and the laws of its state
of creation.
6.3 No Default.
The execution and delivery of this Agreement and all other instruments or
documents executed by Buyer in connection herewith and the consummation of the
transactions contemplated hereby will not violate any provision of, or
constitute a default under any provision in Buyer's Certificate of Incorporation
or Bylaws or any agreement or instrument to which Buyer is a party or which is
otherwise applicable to Buyer or result in the acceleration of any obligation,
or to the best of its knowledge, cause or give any reason for an adverse action
to be taken by any person or governmental authority under any mortgage, lien,
lease, agreement, instrument, order, judgment, or decree to which Buyer is a
party or by which it is bound and will not violate or conflict with any other
restriction to which Buyer is subject, including, to the best of Buyer's
knowledge, federal, state, and local laws and regulations.
6.4 Litigation.
As of the date hereof, there is no pending suit, claim, action or
proceeding to which Buyer is a party which individually or in the aggregate will
have a material adverse affect upon the business or condition, financial or
otherwise, of Buyer. As of the date hereof, no judgment, order or decree has
been entered nor any such liability incurred which has such effect. There is no
claim, action or proceeding pending as of the date hereof or threatened as of
the date hereof against Buyer of which Buyer has received notice which will
prevent or delay the consummation of the transactions contemplated by this
Agreement.
6.5 Finders' and Brokers' Fees.
Buyer has not employed any broker or finder or incurred any liability for
any brokerage fees, commissions or finders' fees in connection with the
transactions contemplated by this Agreement.
6.6 Disclosure.
No representation or warranty made herein by Buyer, and no statement
contained in any certificate or other instrument furnished or to be furnished by
Buyer to Seller pursuant to this Agreement, contains or will contain any untrue
statement of a material fact.
32
40
ARTICLE VII
CONDUCT OF BUSINESS OF ACEC PRIOR TO CLOSING
7.1 Restrictions on Operations Prior to Closing Date.
Following its execution hereof and to and including the Closing Date,
Seller shall cause ACEC to conduct ACEC's business and operations and maintain
all of the Assets according to ACEC's ordinary and usual course of business,
except as otherwise contemplated by the provisions of this Agreement.
Furthermore, without the prior written consent of Buyer, Seller agrees to cause
ACEC not to:
(i) Make any contract, incur any indebtedness or provide any
guarantee, other than in the ordinary course of business or under
the 1998 Credit Agreement;
(ii) Sell, transfer, lease, or assign any Asset, or take or agree to
take any action, other than in the ordinary course of business;
(iii) Increase in any manner the compensation of any of ACEC's
employees (except for normal increases in line with past practices,
and sale-related performance and Closing bonuses payable by ACEC to
those employees who remain in the employ of ACEC through the Closing
Date and for which Buyer shall have no liability) or commit (without
first making commercially reasonable efforts to avoid commiting) to
any employment or collective bargaining agreements;
(iv) Cancel or fail to renew any of the insurance policies referred
to in Schedule 5.24 except in compliance with Section 5.24;
(v) Fail to use its diligent efforts to keep the business of ACEC
intact, to keep in service the present officers and key employees of
ACEC consistent with good business practices and to preserve the
good will of ACEC's suppliers and customers and others having
business relations with it; or
(vi) Grant subscribers or potential subscribers any discounts or
waive any service or installation fees or grant any other promotion
in connection with marketing activities, which are not in accordance
with any System's past practices in the ordinary course of business.
7.2 Payment of Obligations.
Seller shall cause ACEC to pay ACEC's current liabilities consistent with
prior business practices as and when they become due, except those being
contested in good faith by appropriate proceedings.
33
41
7.3 Inventory.
Seller shall cause ACEC to continue to maintain ACEC's inventory of
equipment, cable and supplies consistent with ACEC's past practice, which has
been to maintain a 30-to-90 day inventory supply.
7.4 Compliance with Franchises.
Seller shall cause ACEC to continue to comply in all material respects
with the provisions of the Franchises.
7.5 Victorville Rebuild.
Seller shall cause ACEC to make available to Buyer (or Buyer's designated
on-site representative) continuous access to all Victorville Upgrade
construction sites and all information regarding the on-going costs and progress
of that Upgrade. As Seller's work on the Victorville Upgrade proceeds, Seller
shall keep Buyer informed of the progress thereof and shall notify Buyer, at
least five business days prior thereto, of that date on which (by Seller's
estimate) the Victorville Upgrade Completion Cost will reach and equal Three
Million Five Hundred Thousand dollars ($3,500,000). Buyer shall then have the
right, at Buyer's option to be exercised within three business days after
Buyer's receipt of Seller's foregoing notice, to direct Seller to continue with
all, or a designated dollar amount of, the Victorville Upgrade at Buyer's cost
and expense (as contemplated by the proviso set forth in the second sentence of
Section 3.3(d)).
ARTICLE VIII
INVESTIGATION BY BUYER
8.1 Access to Records.
Following its execution hereof and to and including the Closing Date,
Seller shall give Buyer and its representatives, including, without limitation,
advisors, accountants and attorneys designated by Buyer, full access during
ordinary business hours, upon reasonable notice, to its premises, assets,
properties, books of account, agreements and commitments, provided that Buyer's
investigation and use of the same shall not unreasonably interfere with ACEC's
normal operations. Seller shall permit Buyer to inspect, review and copy all
information with respect to the business and affairs of ACEC to which Buyer may,
from time to time, reasonably request access, including, without limitation, any
interim financial statements and reports of ACEC and the tax returns and
information relating to ACEC. Seller shall cause ACEC's employees to render to
Buyer and its representatives reasonable cooperation in connection with their
investigation of ACEC's premises, assets, properties, records, books of account,
agreements, commitments and other information relating to the CATV Business and
the Systems. No such investigation by Buyer or its representatives of the assets
and other information relating to ACEC's affairs shall affect the continuing
validity or effect of the representations and warranties
34
42
of Seller contained in this Agreement. In the event that Buyer discovers any
fact which would result in a Seller's representation or warranty being
inaccurate, or any other breach of this Agreement by Seller, Buyer will give
prompt notice of such breach to Seller, specifying the nature of such breach in
reasonable detail and Seller shall have the right (but not the obligation) to
cure such breach prior to the Closing.
8.2 Publicity.
Except as required by applicable law, (i) Seller and Buyer shall consult
with and cooperate with the other with respect to the content and timing of all
press releases and other public announcements concerning this Agreement and the
transactions contemplated hereby and (ii) neither Buyer nor Seller shall make
any such release or announcement without the prior written consent and approval
of the other, which consent and approval shall not be unreasonably withheld.
ARTICLE IX
FURTHER COVENANTS
9.1 Delivery of Documents to Buyer.
Seller covenants that, to the extent that it has not already done so,
Seller will insofar as practicable deliver or otherwise make available (or cause
ACEC to deliver or otherwise make available) to Buyer for inspection, at
Stamford, Connecticut or San Bernardino, California, the following within thirty
(30) days after the Signature Date, or as specifically delineated below:
(i) ACEC's most recently prepared managerial reports and subscriber
accounting records, which shall include a subscriber accounts
receivable aging report summarizing, respectively, subscribers whose
accounts are at least one, two, and three or more Monthly Billing
Periods overdue, for the last (or then most recently concluded)
regular Monthly Billing Period.
(ii) Copies of the Additional Financial Statements as soon as
practicable after completion, but in any case, within forty-five
(45) days of the end of the period covered by any such Additional
Financial Statement, and monthly statements of operating income
within 30 days after the end of each month.
(iii) Copies of such as-built engineering drawings as ACEC has in
its possession for the Systems, or, if not available, such design
maps and plant drawings and as-built engineering drawings as ACEC
has in its possession will be made available to Buyer for inspection
and at the Closing will be left on site at a System office for
Buyer.
(iv) Copies of any and all bonds in force with regard to the Systems
and ACEC.
35
43
(v) Copies of all written franchises, contracts, agreements and
other documents listed in the Schedules, together with a certificate
of a duly authorized executive officer, certifying that to the best
of such officer's knowledge the copies so delivered are true and
complete in all material respects.
(vi) Copies of any required Registration Statements filed with the
FCC pursuant to 47 C.F.R. Section 76.12.
(vii) The Initial Notice of Identity and Signal Carriage, and all
subsequent statements of account filed with the Copyright Office
within the past three years and all Notices of Change of Identity or
Signal Carriage filed within the past three years shall be made
available for inspection by Buyer or its representatives upon
reasonable notice.
(viii)Copies of radio licenses, earth station licenses and CARS
licenses.
(ix) Copies of must carry elections and retransmission consent
agreements;
To the extent that any of the items referred to above are received or
filed after a date which is 30 days from the Signature Date, Seller covenants to
deliver such items to Buyer as soon as practicable after receipt or filing.
9.2 Transfer of Franchises and Necessary Contracts Prior to Closing.
Seller shall cause ACEC to file, within 45 days after the Signature Date,
all necessary and appropriate Form 394's and all other submissions to
governmental authorities in connection with the transfer of control of the
Franchises, and shall also cause ACEC to use its diligent good faith efforts,
prior to the Closing Date (including, without limitation, attendance at City
Council or similar meetings and hearings before local and county administrative
bodies) to obtain at ACEC's expense all requisite consents, approvals and
authorizations required to be received by or on the part of ACEC or Buyer for
the transfer of control of the Franchises and the Necessary Contracts, provided
that neither Seller nor ACEC shall be required to incur any material expense or
obligation in connection therewith (other than the commitment to be undertaken
by ACEC to upgrade that portion of the Rancho System serving the City of Rancho
Cucamonga to 750 MHz, as hereinbefore provided, in the event that ACEC obtains a
renewal of its Franchise issued by the City of Rancho Cucamonga). Seller shall
cause ACEC to commence its efforts to obtain such Required Consents as soon as
practicable after the Signature Date. Buyer agrees to prepare and deliver the
requisite Form 394's to ACEC within thirty (30) days after the Signature Date
and to cooperate fully with and to assist Seller and ACEC, subject to all the
terms and conditions of this Agreement, in obtaining such approvals, including,
without limitation, attendance at City Council or similar meetings and hearings
before local and county administrative bodies and to promptly return to ACEC any
reasonably requested documents required to be executed or delivered by Buyer to
the franchisors in the normal course of the transfer proceedings.
9.3 Further Assurances.
36
44
Each of the parties hereto shall, subject to the fulfillment at or before
the Closing Date of each of the conditions to its performance set forth herein
or the waiver thereof, perform such further acts and execute such documents as
reasonably may be required to effectuate the transactions contemplated hereby.
Each of the parties hereto shall use all reasonable efforts to expeditiously
fulfill or obtain the fulfillment of the conditions precedent of the other party
set forth below, provided that nothing herein shall be deemed to expand any
parties' obligations hereunder.
9.4 Environmental Reports.
Within sixty (60) days after the Signature Date, Seller shall cause to be
prepared and delivered a Phase I environmental report and, if recommended in
such report, within forty-five (45) days thereafter, a Phase II environmental
report for each parcel of Real Estate that is listed on Schedule 5.16. The cost
for the Phase I environmental reports shall be borne fifty percent (50%) by
Seller and fifty percent (50%) by Buyer. The cost of any Phase II environmental
reports shall be borne entirely (100%) by Seller. Seller shall deliver to Buyer
a copy of each environmental report within three (3) business days of receipt of
such report by Seller. Subject to Section 14(a) hereof, if such environmental
reports disclose one or more adverse environmental conditions, Seller shall
assume full responsibility for remediation of each such environmental condition
and shall bear all expenses incurred in connection therewith.
9.5 HSR Notification.
As promptly as practicable after the Signature Date, and in any event
within thirty (30) days after the Signature Date, Seller and Buyer shall
complete and file, or cause to be completed and filed, any required notification
and report required to be filed under the Xxxx-Xxxxx-Xxxxxx Anti-Trust
Improvements Act of 1976, as amended (the "HSR Act"). Each of the parties will
take or cause to be taken any additional action that may be necessary, proper or
advisable, will cooperate to prevent inconsistencies between their respective
filings and will furnish to each other such necessary information and reasonable
assistance as the other may reasonably request in connection with its
preparation of necessary filings or submissions under the HSR Act. Buyer and
Seller shall use commercially reasonable efforts (including the filing of a
request for early termination) to obtain the early termination of the waiting
period under the HSR Act. Seller and Buyer shall each bear one-half (50%) of the
entire cost of any filing fees in connection therewith.
9.6 Diligent, Good Faith Efforts.
Upon the terms and subject to the conditions of this Agreement, Buyer and
Seller shall each use its diligent, good faith efforts to fulfill the respective
conditions precedent to Closing hereunder that are to be fulfilled by such party
and to take, or cause to be taken, and to do all things reasonably necessary,
proper or advisable under any applicable law to consummate and make effective in
the most expeditious manner practicable, the transactions contemplated hereby.
9.7 No Solicitation.
37
45
From and after the Signature Date to the earlier of the Closing Date or
the termination of this Agreement by either Seller or Buyer, neither Seller nor
any of its Affiliates (including ACEC) nor any officer, director, employee,
agent (including without limitation, any investment banker, financial advisor,
attorney or accountant) or other representative of Seller or any of its
Affiliates shall, directly or indirectly for or on behalf of Seller or ACEC,
initiate any contact with, or solicit, encourage, negotiate or enter into any
agreement with, or enter into or continue any discussions or negotiations with
or provide any information to, any Third Party in connection with any possible
sale or acquisition of the ACEC Membership Interest, the Assets or any part
thereof.
9.8 Closing Notice.
Seller shall deliver to Buyer the Closing notice referred to in Section
4.1 promptly upon, and in any event within ten (10) business days after, the
satisfaction (or waiver) of all conditions to Buyer's obligation to consummate
the Closing.
9.9 Termination of ACEC's 401(k) Plan.
Seller shall cause ACEC to terminate ACEC's 401(k) plan prior to the
Closing.
9.10 Transfer Tax Return Filings.
Each party legally obligated to file any Tax Return (or any exemption,
clearance or similar filing or certificate) with respect to any Transfer Taxes
required to be paid to any relevant taxing authority (or for which an exemption
is being sought) in connection with the transactions contemplated by this
Agreement shall timely file such Tax Return (or exemption, clearance or similar
filing or certificate) with respect thereto.
9.11 Revision of ACEC Operating Agreement.
ACEC shall revise its Operating Agreement within fifteen (15) business
days after the date hereof, so as to provide for the continuation of ACEC's
valid existence notwithstanding (i) any sale of the ACEC Membership Interest and
(ii) any change in the identity of ACEC's respective member(s).
ARTICLE X
CONDITIONS PRECEDENT TO THE OBLIGATIONS OF ALL PARTIES
The obligations of each of the parties to consummate the transaction
contemplated hereby are subject to the conditions that:
10.1 Orders Prohibiting Consummation of Transactions.
At the Closing Date, there shall exist no applicable law, rule,
regulation, order, judgment
38
46
or injunction the effect of which is to prohibit consummation of the
transactions contemplated by this Agreement.
10.2 HSR Act.
All necessary pre-merger notification filings required under the HSR Act
will have been made with the Federal Trade Commission and the United States
Department of Justice and the prescribed waiting periods (and any extensions
thereof) will have expired or been terminated.
10.3 Closing Date Subscriber Total.
The Closing Date Subscriber Total shall not be less than 66,000; provided,
that Buyer shall have the right, at its sole option, unilaterally to effect the
joint waiver of the foregoing condition by and on behalf of both Buyer and
Seller, provided, further, that in the event of any such joint waiver effected
by Buyer, Buyer shall be deemed to have waived any right to any Purchase Price
adjustment (whether pursuant to Section 3.3(b) or otherwise) on account of the
Closing Date Subscriber Total's being less than 66,000; provided, further, that
any such joint waiver effected by Buyer shall not be deemed to waive or limit
Buyer's right to a Purchase Price adjustment pursuant to Section 3.3(b) hereof
on account of the Closing Date Subscriber Total's being less than 68,200 (any
such adjustment in that event to be limited to an aggregate total of 2,200 Basic
Subscribers).
ARTICLE XI
CONDITIONS PRECEDENT TO BUYER'S OBLIGATIONS
All obligations of Buyer under this Agreement are subject to the
fulfillment in all material respects (or waiver in whole or in part by Buyer in
writing) on or before the Closing Date (or such earlier date as may be
specified), of each of the following conditions:
11.1 Compliance with Agreement.
Seller shall have performed and complied with its obligations under this
Agreement to be performed by it at or prior to Closing.
11.2 Correctness of Representations and Warranties.
The representations and warranties of Seller contained in this Agreement,
and in the certificates delivered to Buyer pursuant hereto, shall be true in all
respects on the date hereof and on the Closing Date as though such
representations and warranties were made on and as of the Closing Date, except
to the extent that any inaccuracies do not, in the aggregate, constitute a
material adverse effect with respect to the Assets, or the Systems, taken as a
whole.
11.3 No Adverse Change in Business or Properties.
39
47
Since September 30, 1998, neither the Business, the Systems nor the Assets
have been affected in the aggregate adversely to a material extent or interfered
with in any material way, except for matters affecting the CATV industry
generally.
11.4 Termination of Affiliate Agreements.
ACEC shall have terminated the Affiliate Agreements (including, without
limitation, the 1998 Credit Agreement, the Pledge Agreement and the Security
Agreement) prior to the Closing, or shall have arranged for the termination
thereof subject to and effective upon the consummation of the Closing and the
repayment pursuant to Section 3.3(c) of the long-term debt, management fees and
other sums referred to in clauses (i) and (ii) of that Section (including,
without limitation, all of the debt and accrued interest outstanding under the
1998 Credit Agreement).
11.5 Instrument of Transfer.
Seller shall deliver to Buyer the Assignment, duly executed by Seller, in
substantially the form of Exhibit 2.2, selling, assigning and transferring to
Buyer all right, title and interest in and to the ACEC Membership Interest.
11.6 Certificate of Officer.
Seller shall deliver to Buyer a certificate of an authorized executive
officer of Seller dated the Closing Date, certifying as to the fulfillment of
the conditions set forth in Sections 11.1, 11.2 and 11.3 above, together with a
certified authorizing resolution and incumbency certificate.
11.7 Rancho Cucamonga Franchise.
ACEC shall not have executed, entered into or otherwise accepted any
renewal of the Franchise for the City of Rancho Cucamonga without the prior
written consent of Buyer, which consent Buyer shall not unreasonably withhold;
provided, that it is expressly agreed that ACEC shall not have any obligation
under this Agreement to execute, enter into or otherwise accept any renewal of
its Franchise with the City of Rancho Cucamonga, except at ACEC's sole
discretion (and only then subject to Buyer's foregoing consent), and the
execution, entry into or other acceptance of any renewal of the foregoing
Franchise, whether by ACEC or the City of Rancho Cucamonga or both of them,
shall not be a condition under this Article XI.
11.8 Pole Attachments.
ACEC shall have used its reasonable good faith efforts to have obtained
and entered into pole attachment agreements, in substantially such form as the
respective utility shall have required or provided, for the pole attachments
referenced in Section 5.13 hereof.
11.9 Opinion of Counsel.
40
48
Buyer shall have received from Seller's Senior Vice President and General
Counsel, Day X. Xxxxxxxxx, or from Seller's counsel, Xxxx Marks & Xxxxx LLP, a
favorable opinion of Xx. Xxxxxxxxx or such counsel, addressed to Buyer and its
lenders dated as of the Closing Date, substantially in the form of Exhibit 11.9.
11.10 Opinion of FCC Counsel.
Buyer shall have received from Seller's FCC counsel, Cole Raywid &
Xxxxxxxxx, a favorable opinion of such counsel, addressed to Buyer and its
lenders dated as of the Closing Date, in the form of Exhibit 11.10.
11.11 Members' Indemnity.
Buyer shall have received from Seller an indemnity in substantially the
form of Exhibit 11.11, duly executed by each of Seller's members, together with
one or more legal opinions of the members' respective legal counsel as to the
respective member's due execution and authorization of that indemnity and the
enforceability thereof as to such member upon and in accordance with its terms,
subject to applicable bankruptcy, insolvency, reorganization, moratorium or
other laws affecting the rights of creditors generally and general principles of
equity.
11.12 Consents.
All consents or approvals of franchisors, governmental authorities and
other Third Parties which are Required Consents in connection with the transfer
of the ACEC Membership Interest to Buyer and the other transactions contemplated
by this Agreement shall have been obtained in substantially the form set forth
in Exhibit 11.12 (subject to the asterisked provisions thereof and footnote
therein), or in such other form as the respective Third Party may reasonably
request (but without any terms or provisions materially adverse to Buyer, other
than those terms and provisions set forth in Exhibit 11.12), and Seller shall
have delivered to Buyer copies of all such Required Consents (and any other
consents and approvals) so obtained. Without Buyer's approval, the Required
Consents (and any other consents and approvals) shall not contain any materially
adverse changes to the underlying documents to which they apply.
11.13 Resignations of ACEC Officers
Buyer shall have received from Seller the resignations of each officer of
ACEC, effective the Closing Date.
ARTICLE XII
CONDITIONS PRECEDENT TO SELLER'S OBLIGATIONS
All obligations of Seller under this Agreement are subject to fulfillment
in all material respects (or waiver in whole or in part by Seller in writing) on
or before the Closing Date (or
41
49
such earlier date as may be specified) of each of the following conditions:
12.1 Correctness of Representations and Warranties.
The representations and warranties of Buyer contained in this Agreement,
and in the certificates delivered to Seller pursuant hereto, shall be true in
all respects on the date hereof and on the Closing Date as though such
representations and warranties were made on and as of the Closing Date, except
to the extent that any inaccuracies do not, in the aggregate, constitute a
material adverse effect with respect to the transactions contemplated hereby or
Buyer's ability to consummate same.
12.2 Compliance with Agreement.
Buyer shall have performed and complied with its obligations under this
Agreement to be performed by it at or prior to Closing.
12.3 Certificate of Officer.
Buyer shall have delivered to Seller a certificate signed by an executive
officer of Buyer, dated the Closing Date, certifying as to the fulfillment of
the conditions set forth in Sections 12.1 and 12.2 above, together with a
certified authorizing board resolution and incumbency certificate.
12.4 Opinion of Counsel.
Seller shall have received from Buyer's counsel, Paul, Hastings, Xxxxxxxx
& Xxxxxx LLP, a favorable opinion of such counsel, addressed to Seller dated as
of the Closing Date, substantially in the form of Exhibit 12.5.
ARTICLE XIII
EXPENSES OF NEGOTIATION AND TRANSFER
13.1 Expenses.
Except as otherwise provided in this Agreement, each party shall pay its
own expenses, taxes and other costs incident to or resulting from this Agreement
whether or not the transactions contemplated hereby are consummated. Costs of
Seller include, but are not limited to, all filing and application fees paid to
governmental and regulatory authorities in connection with the transactions
contemplated by this Agreement (with the exception of the HSR filing fees
referred to in Section 9.6 hereof, which fees shall be paid one-half by by
Seller and one-half by Buyer at the time of filing), and documentary taxes.
Buyer's costs include, but are not limited to, fees for the filing or recording
of instruments of transfer. In accordance with Section 3.3(g), the Purchase
Price shall be decreased by one-half of (and Buyer and Seller shall thereby
divide equally between them) the aggregate amount of all Transfer Taxes.
42
50
ARTICLE XIV
RIGHTS TO TERMINATE; BREACH; LIQUIDATED DAMAGES
14. Termination.
(a) This Agreement may be terminated prior to the Closing:
(i) at any time by mutual consent of Seller and Buyer;
(ii) by either Seller or Buyer if there shall be in effect a final,
nonappealable order restraining, enjoining, or otherwise prohibiting
the consummation of the transactions contemplated hereby;
(iii) by Seller (provided that Seller is not then in material breach
of any representation, warranty, covenant or other agreement
contained herein), in the event that Buyer shall be in material
breach or default under this Agreement or the Deposit Escrow
Agreement, and shall have failed to cure such breach or default
within thirty (30) days after receiving written notice thereof from
Seller; provided, that if Buyer shall fail to make the Deposit
pursuant to Section 3.2(a) hereof, then Seller shall have the right
to terminate this Agreement upon written notice to Buyer, effective
immediately;
(iv) by Seller, if all the conditions set forth in Section 12 have
not been satisfied (or waived by Seller) by the Outside Date other
than due, in whole or in part, to a breach or default by Seller; and
(v) by Seller, if any Phase I environmental report or Phase II
environmental report for any Phase I property obtained pursuant to
Section 9.5 discloses one or more adverse environmental conditions
and Seller concludes, in its reasonable judgment, that the cost of
remediation of such condition(s) will exceed One Million dollars
($1,000,000); provided that termination pursuant to this Section
14(a)(v) shall not be effective, and shall be void ab initio, in the
event that within ten (10) business days after receipt of Seller's
notice of termination Buyer delivers notice to Seller that Buyer
will bear all costs in connection with such remediation in excess of
One Million dollars ($1,000,000).
(vi) by Buyer (provided that Buyer is not then in material breach of
any representation, warranty, covenant or other agreement contained
herein), in the event that Seller shall be in material breach or
default under this Agreement or the Deposit Escrow Agreement, and
shall have failed to cure such breach or default within thirty (30)
days after receiving written notice thereof from Buyer; and
(vii) by Buyer, if all the conditions set forth in Section 11 have
not been satisfied (or waived by Buyer) by the Outside Date other
than due, in whole or in part, to a breach or default by Buyer.
43
51
(b) In the event either party shall terminate this Agreement pursuant to
Section 14(a), the terminating party shall give prompt written notice thereof to
the other party hereto and this Agreement shall thereupon terminate, without
further action by either of the parties hereto. If the Agreement is terminated
as provided herein: (i) except as otherwise provided herein, the termination of
this Agreement shall not relieve any party of any liability for breach of this
Agreement prior to the date of termination; and (ii) all filings, applications
and other submissions relating to the transfer of the Assets made pursuant to
this Agreement shall, to the extent practicable, be withdrawn from the agency
or other person to which made. In the event of a termination of this Agreement
by Buyer or Seller, the provisions of this Section 14(b) shall survive any such
termination.
(c) Nothing in this Article XIV is intended or shall be construed to limit
any right either party may have under any other provision of this Agreement with
respect to the remedy of specific performance.
ARTICLE XV
INDEMNIFICATION
15.1 Indemnification by Seller.
(a) Seller shall indemnify Buyer against and hold it harmless from any and
all Indemnifiable Damages which Buyer may suffer or incur by reason of (i)
Seller's breach of any of Seller's representations and warranties contained in
this Agreement or any document, certificate or agreement delivered pursuant
hereto, (ii) Seller's breach of any of Seller's covenants or agreements
contained in this Agreement or any document, certificate or agreement delivered
pursuant hereto, or (iii) any liabilities for obligations, whether accrued,
absolute, contingent or otherwise, and whether due or to become due, of Seller
(or of ACEC, other than those ACEC liabilities for which Buyer receives a
purchase price adjustment pursuant to Section 3.3 hereof) or arising out of any
acts occurring (or the operation of the Business) prior to the Closing. Without
limiting the generality of the foregoing, with respect to the measurement of
Indemnifiable Damages, Buyer shall have the right to be put in the same
financial position as it would have been in had Seller not breached the
respective representation, warranty, covenant or agreement. However,
notwithstanding anything contained in this Agreement to the contrary, if Buyer
makes any claim for damages, Buyer will use reasonable efforts to mitigate the
amount and nature thereof in accordance with customary industry procedures and
all reasonable costs and expenses that Buyer incurs in mitigating those damages
shall be considered Indemnifiable Damages.
(b) Seller's obligation to indemnify Buyer pursuant to Section 15.1(a)
shall be subject to and limited by each of the following qualifications:
(i) Each of the Title Interest Representations made by Seller in this
Agreement or pursuant hereto shall survive the Closing hereunder for the
respective statute of limitations governing the survival thereof, unless (and
then only to the extent) a claim shall have been
44
52
commenced by Buyer's providing Seller (and the Escrow Agent, if there shall then
be an Escrow Agent) with written notice thereof prior to the expiration of that
statute of limitations. In any notice delivered by Buyer pursuant to the
preceding sentence, Buyer shall identify the claim, set forth the basis thereof
and its good faith estimate of the amount of damages thereof, and in that event
the applicable Title Interest Representations shall survive solely with respect
to such claim until such claim has been resolved, and thereafter shall be
extinguished as to such claim. No legal action or proceeding for the enforcement
of any Title Interest Representation may be commenced after the expiration of
the respective statute of limitations governing the survival of that
representation or warranty.
(ii) Each of the other representations and warranties made by Seller in
this Agreement or pursuant hereto (i.e., other than any Title Interest
Representation) shall survive the Closing hereunder for a period of fifteen (15)
months from and after the Closing Date, unless (and then only to the extent) a
claim shall have been commenced by Buyer's providing Seller and the Escrow Agent
with written notice thereof within fifteen (15) months after the Closing Date.
In any notice delivered by Buyer pursuant to the preceding sentence, Buyer shall
identify the claim, set forth the basis thereof and its good faith estimate of
the amount of damages thereof, and in that event the applicable representations
and warranties shall survive solely with respect to such claim until such claim
has been resolved, and thereafter shall be extinguished as to such claim. No
legal action or proceeding for the enforcement of any foregoing claim may be
commenced more than fifteen (15) months following the Closing Date.
(iii) Seller shall have no liability to Buyer for or on account of any of
the Indemnifiable Damages provided in Section 15.1(a)(i) (except with respect to
any broker's fee payable by ACEC or Seller pursuant to Section 5.22) unless and
until such damages in the aggregate (exclusive of and without reference to any
and all damages attributable to any breach of any representation or warranty
attributable to Seller's breach of any covenant, provided that the breach of
such covenant is indemnifiable by Seller under Section 15.1(a)(ii)) exceed Five
Hundred Thousand dollars ($500,000) (the "Basket"), in which case such damages
shall include the entire amount of the Indemnifiable Damages, including those
not in excess of the Basket.
(iv) The total aggregate liability of Seller, whether pursuant to its
indemnity obligation under this Section 15.1 or otherwise under this Agreement,
shall be limited in all respects to, and shall be payable solely from, the
Indemnity Fund; provided, that (a) the total aggregate liability of Seller as to
any and all breaches of any and all of Seller's representations or warranties
(other than any Title Asset Representation or any Title Interest Representation)
shall be limited in all respects to Seven Million Two Hundred Thousand dollars
($7,200,000) of the Indemnity Fund and (b) the total liability of Seller as to
any breach of any Title Interest Representation shall not be limited to or by
the Indemnity Fund but shall instead be limited solely to the amount of the
Purchase Price. Upon the occurrence of an event to which Seller's indemnity
obligations under this Section 15.1 applies, Buyer's sole and exclusive remedy
shall be recourse to the Indemnity Fund (except as hereinabove expressly
provided otherwise with respect to any Title Interest Representation).
(v) In the event that Buyer shall submit any claim for indemnification by
Seller under
45
53
this Agreement, the basis for which claim could or might reasonably support any
claim by ACEC against any one or more of Booth Communications Of Southern
California Assets, Inc., Booth Communications Of Southern California, Inc.,
Booth American Company, DCA Cablevision and The Marks Partners, L.P. (whether in
any such Person's capacity as seller, guarantor or otherwise), Buyer shall
diligently pursue such claim and shall credit any recovery thereon to and
against Buyer's foregoing claim for indemnification against Seller, and Seller
shall cooperate fully with Buyer's prosecution of any such claim.
15.2 Indemnification by Buyer.
(a) Buyer shall indemnify Seller against and hold it harmless from any and
all Indemnifiable Damages which Seller may suffer or incur by reason of (i)
Buyer's breach of any of Buyer's representations and warranties contained in
this Agreement or any document, certificate or agreement delivered pursuant
hereto, (ii) Buyer's breach of any of Buyer's covenants or agreements contained
in this Agreement or any document, certificate or agreement delivered pursuant
hereto, or (iii) any liabilities for obligations, whether accrued, absolute,
contingent or otherwise, and whether due or to become due, assumed by Buyer
pursuant to this Agreement or any document, certificate or agreement delivered
pursuant hereto or arising out of any acts occurring (or the operation of the
Business) after the Closing. Without limiting the generality of the foregoing,
with respect to the measurement of Indemnifiable Damages, Seller shall have the
right to be put in the same financial position as it would have been in had
Buyer not breached the respective representation, warranty, covenant or
agreement. However, notwithstanding anything contained in this Agreement to the
contrary, if Seller makes any claim for damages, Seller will use reasonable
efforts to mitigate the amount and nature thereof in accordance with customary
industry procedures and all reasonable costs and expenses that Seller incurs in
mitigating those damages shall be considered Indemnifiable Damages.
(b) Buyer's obligation to indemnify Seller pursuant to Section 15.2(a)
shall be subject to and limited by each of the following qualifications:
(i) Each of the representations and warranties made by Buyer in this
Agreement or pursuant hereto shall survive the Closing hereunder for a period of
fifteen (15) months from and after the Closing Date, unless (and then only to
the extent) a claim shall have been commenced by Seller's providing Buyer and
the Escrow Agent with written notice thereof within fifteen (15) months after
the Closing Date. In any notice delivered by Seller pursuant to the preceding
sentence, Seller shall set forth the basis of its claim for damages and its good
faith estimate of the amount thereof, in which case the applicable
representations and warranties shall survive with respect to such claim until
such claim has been resolved, and thereafter all such representations and
warranties shall be extinguished, and no action for the enforcement of the
foregoing obligation may be commenced with respect to any claim made more than
fifteen (15) months following the Closing Date.
(ii) Buyer shall have no liability to Seller for or on account of any of
the Indemnifiable Damages provided in Section 15.2(a)(i) unless and until such
damages in the aggregate (exclusive of and without reference to any and all
damages attributable to any breach
46
54
of any representation or warranty attributable to Buyer's breach of any
covenant, provided that the breach of such covenant is indemnifiable by Buyer
under Section 15.2(a)(ii)) exceed the Basket (i.e., $500,000), in which case
such damages shall include the entire amount of the Indemnifiable Damages,
including those not in excess of the Basket.
(iii) The total aggregate post-Closing liability of Buyer, whether
pursuant to its indemnity obligation under this Section 15.1 or otherwise under
this Agreement, shall be limited in all respects to Seven Million Two Hundred
Thousand dollars ($7,200,000).
15.3 Notice and Right to Defend Third Party Claims.
Promptly, upon receipt of notice of any claim, demand or assessment made
by any Third Party or the commencement of any suit, action or proceeding brought
by any Third Party in respect of which indemnity may be sought on account of any
provision of Article XV hereof, the party seeking indemnification (the
"Indemnitee") will give written notice thereof to the party from whom
indemnification is sought (the "Indemnitor") promptly and in any event within
sufficient time to enable the Indemnitor to respond to such claim or answer or
otherwise plead in such action. The failure or omission of such Indemnitee to
notify promptly the Indemnitor of any such Third Party claim or action shall not
relieve such Indemnitor from any liability which it may have to such Indemnitee
in connection therewith, on account of any indemnity agreement contained in
Article XV hereof, except to the extent that the Indemnitor shall have been
materially prejudiced thereby. In case any Third Party claim, demand or
assessment shall be asserted or Third Party suit, action or proceeding commenced
against an Indemnitee, and such Indemnitee shall notify the Indemnitor of the
commencement thereof, the Indemnitor shall be entitled to participate therein,
and, to the extent that it may wish, to assume the defense, conduct or
settlement thereof, with counsel reasonably satisfactory to the Indemnitee by
providing the Indemnitee with written notice within 10 days after receipt of the
Indemnitee's notice of the claim, demand or assessment. After notice from the
Indemnitor to the Indemnitee of its election so to assume the defense, conduct
or settlement thereof within such 10-day period, the Indemnitor will not be
liable to the Indemnitee for any legal or other expenses subsequently incurred
by the Indemnitee in connection with the defense, conduct or settlement thereof.
The Indemnitee will cooperate with the Indemnitor in connection with any such
claim, and make personnel, books and records relevant to the claim available to
the Indemnitor. In the event that the Indemnitor does not assume the defense,
conduct or settlement of any Third Party claim, demand, or assessment within the
foregoing 10- day period, the Indemnitee will not settle such claim, demand, or
assessment without the consent of the Indemnitor, which shall not be
unreasonably withheld. A claim shall be deemed conceded, unless the Indemnitor
shall contest it by giving written notice thereof to the Indemnitee within
thirty (30) days after such claim is made.
15.4 Characterization of Indemnity Payments. Any indemnification payment
made pursuant to this Agreement shall be treated for tax purposes as an
adjustment to the Purchase Price, unless otherwise required by applicable law.
47
55
ARTICLE XVI
CASUALTY OR LOSS
16.1 Repairs or Replacement of Assets.
In the event that any of the Assets is damaged or destroyed between the
date hereof and the Closing Date (an "Event of Loss"), then Seller shall cause
ACEC to use such commercially reasonable efforts as would customarily be applied
in the ordinary course of business to repair or replace the respective damaged
or destroyed Asset(s) with comparable property of like value and quality before
the Closing Date. In the event that any such damaged or destroyed Asset(s)
cannot reasonably be repaired or replaced prior to the Closing Date, the
Purchase Price shall be decreased by the replacement cost of any such damaged or
destroyed Asset(s) and all insurance proceeds and claims to insurance proceeds
or other rights of ACEC against any Third Parties arising from such Event of
Loss shall (to the extent assignable under applicable state law and the
applicable insurance policy) be separately assigned to Seller by ACEC. If the
Event of Loss shall have had a material adverse effect on the Systems and the
repair or replacement thereof cannot be accomplished by the Closing Date, the
Closing shall be postponed for a period of up to 60 days to the extent
reasonably necessary to permit Seller to accomplish that repair or replacement;
if, however, the Event of Loss shall have had a material adverse effect on the
Systems and the repair or replacement thereof cannot be accomplished prior to
the expiration of the foregoing 60-day extension period, Seller shall give Buyer
written notice thereof and Buyer may thereupon elect, by written notice to
Seller within thirty (30) days after Buyer's receipt of Seller's foregoing
notice, as follows:
(i) to postpone the Closing, but not more than 90 days beyond the date for
Closing originally scheduled pursuant to Section 4.1, until such date as the
damaged or destroyed Asset(s) can be repaired or replaced in all material
respects as aforesaid;
(ii) to close the sale transaction on the scheduled date of the Closing
and accept the Assets as is (in which event no decrease shall be made to the
Purchase Price in respect of such casualty or loss except to the extent of the
amount of any deductibles under ACEC's insurance policies); or
(iii) to terminate this Agreement without liability on the part of either
Buyer or Seller.
16.2 Risk of Loss.
The risk of any loss, damage or destruction with respect to any of the
Assets (whether from fire, casualty or other cause) shall be borne by and remain
with Seller until the Closing.
ARTICLE XVII
MISCELLANEOUS
17.1 Assignment.
48
56
Neither this Agreement, nor any right hereunder, may be assigned by any of
the parties hereto, except that: (i) Buyer may, upon at least ten (10) days
prior written notice to Seller, assign all of its rights hereunder to an
Affiliate; provided, that such assignment will not delay, impede or otherwise
interfere with Seller's efforts to obtain any Required Consent; and provided,
further, that notwithstanding any such assignment, Buyer shall (with such
Affiliate) be and remain liable to Seller for the performance and fulfillment of
all of Buyer's covenants, duties and obligations hereunder; and (ii) Buyer may
assign all of its rights, duties, covenants and obligations hereunder to any
successor or assign at any time after the Closing, upon ten (10) days prior
written notice to Seller.
17.2 Successors.
This Agreement shall be binding upon and inure to the benefit of Buyer and
Seller and their respective successors or assigns, subject in all respects to
Section 17.1.
17.3 Entire Agreement.
This Agreement, including the Schedules and Exhibits hereto, constitutes
the entire agreement of the parties, and supercedes all prior documents,
agreements, promises, covenants, arrangements, communications, representations
or warranties, whether oral or written, by or on behalf of either party hereto
or any officer, employee, representative or agent of either party hereto.
17.4 Third Parties.
Except as specifically set forth or referred to herein, nothing herein
expressed or implied is intended or shall be construed to confer upon or give to
any person or other entity, other than the parties hereto and their permitted
successors or assigns, any rights or remedies under or by reason of this
Agreement.
17.5 Amendments in Writing.
The terms of this Agreement may not be amended, modified or waived except
by written agreement executed by Buyer and Seller.
17.6 Arbitration.
None of the terms or provisions of this Agreement shall be subject to
arbitration, except as otherwise expressly provided in Schedule 1.87 with
respect to the Victorville Upgrade and the Victorville Upgrade Completion Cost.
49
57
17.7 Governing Law; Enforcement.
This Agreement shall be governed by and construed in accordance with the
laws of the State of New York, without reference to such State's laws governing
conflicts of laws, and the parties covenant and agree to bring any action or
proceeding arising out of or in connection with this Agreement or any agreement
or instrument executed with respect hereto in the Federal or State courts in New
York County, New York State and consent to the jurisdiction of any such court,
except as otherwise expressly provided in the Closing Escrow Agreement or
Schedule 1.87 hereto. The parties further agree that any service of process with
respect to any such action or proceeding served in accordance with Section 17.9
shall for all purposes be deemed valid service.
17.8 Interpretation.
The headings of the Articles and Sections of this Agreement are inserted
for convenience of reference only and shall not constitute a part hereof or
affect in any way the meaning or interpretation of this Agreement. Each of
Seller and Buyer acknowledges that it has actively participated in the
preparation, drafting and review of this Agreement, and each party hereby waives
any claim that this Agreement or any provision hereof (or any Exhibit or
Schedule hereto) is to be construed against the other party hereto as the
draftsperson thereof.
17.9 Notices.
All notices hereunder shall be in writing, and shall (i) be transmitted
(or be attempted to be transmitted) by facsimile to the respective facsimile
numbers set forth below (or such other facsimile number as either party may
designate to the other by written notice in accordance herewith) and, in
addition to any such facsimile transmittal, (ii) be delivered (and shall be
deemed to have been delivered on the date of the first attempted delivery) by a
reputable overnight delivery service, to the respective party at its address set
forth below or such other address as either party may designate to the other by
written notice in accordance herewith:
If to Seller:
American Cable Entertainment
Attention: Xxxxx X. Xxxxxxxxx,
President and CEO
Four Xxxxxxxx Xxxxxx, Xxxxx 000
Xxxxxxxx, XX 00000
Facsimile Number: (000) 000-0000
with a complete copy under separate cover (which copy by itself
shall not constitute notice) to:
American Cable Entertainment
Attention: Day X. Xxxxxxxxx,
50
58
SVP and General Counsel
Four Xxxxxxxx Xxxxxx, Xxxxx 000
Xxxxxxxx, Xxxxxxxxxxx 00000
Facsimile Number: (000) 000-0000
If to Buyer:
Charter Communications, Inc.
Attention: Xxxxxx X. Xxxx,
President and CEO
00000 Xxxxxxxxxxx Xxxxx, Xxxxx 000
Xx. Xxxxx, XX 00000
Facsimile Number: (000) 000-0000
with a complete copy under separate cover (which copy by itself
shall not constitute notice) to:
Charter Communications, Inc.
Attention: Xxxxxx X. Xxxx,
SVP and General Counsel
00000 Xxxxxxxxxxx Xxxxx, Xxxxx 000
Xx. Xxxxx, XX 00000
Facsimile Number: (000) 000-0000
17.10 Severability.
Any provision hereof which is prohibited or unenforceable shall be
ineffective only to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof.
17.11 Counterparts.
This Agreement may be executed in one or more counterparts, each of which
executed counterparts shall be deemed to constitute an original and all of
which, taken together, shall be deemed to constitute one and the same
instrument.
51
59
IN WITNESS WHEREOF, the parties hereunto have duly executed this
Agreement.
SELLER:
ACEC HOLDING COMPANY, LLC
By: /s/ Xxxxx X. Xxxxxxxxx
------------------------------------------
Xxxxx X. Xxxxxxxxx,
President and CEO
Signature Date: January 15, 1999
BUYER:
CHARTER COMMUNICATIONS, INC.
By: /s/ Xxxxxx X. Xxxx
------------------------------------------
Xxxxxx X. Xxxx,
SVP and General Counsel
Signature Date: January 15, 1999
52
