EXHIBIT 10.25
ASSET PURCHASE AGREEMENT
BY AND BETWEEN
TCI CABLE PARTNERS OF ST. LOUIS, L.P.
AND
NORTHLAND CABLE TELEVISION, INC.
DATED AS OF
OCTOBER 25, 2001
TABLE OF CONTENTS
1. DEFINITIONS. 1
1.1. Defined Terms. 1
1.2. Other Definitions. 6
1.3. Usage. 7
2. SALE OF ASSETS. 8
2.1. Purchase and Sale of Assets. 8
3. CONSIDERATION. 8
3.1. Purchase Price. 8
3.2. Adjustments to Purchase Price. 8
3.3. Determination of Adjustments. 9
3.4. Allocation of Consideration. 10
4. ASSUMED LIABILITIES AND EXCLUDED ASSETS. 10
4.1. Assignment and Assumption. 10
4.2. Excluded Assets. 11
5. REPRESENTATIONS AND WARRANTIES OF SELLER. 11
5.1. Organization and Qualification. 11
5.2. Authority and Validity. 12
5.3. No Breach or Violation. 12
5.4. Assets. 12
5.5. Governmental Permits. 13
5.6. Seller Contracts. 13
5.7. Real Property. 13
5.8. Environmental Matters. 14
5.9. Compliance with Law. 15
5.10. Patents, Trademarks and Copyrights. 16
5.11. Financial Statements. 16
5.12. Legal Proceedings. 17
5.13. Tax Returns; Other Reports. 17
5.14. Employment Matters. 17
5.15. Systems Information. 18
5.16. Finders and Brokers. 19
5.17. Bonds. 19
5.18. Disclosure. 19
6. BUYER'S REPRESENTATIONS AND WARRANTIES. 20
6.1. Organization and Qualification. 20
6.2. Authority and Validity. 20
6.3. No Breach or Violation. 20
6.4. Financial Capability of Buyer. 21
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6.5. Finders and Brokers. 21
7. ADDITIONAL COVENANTS. 21
7.1. Access to Premises and Records. 21
7.2. Continuity and Maintenance of Operations; Financial Statements. 21
7.3. Employee Matters. 23
7.4. Leased Equipment. 28
7.5. Required Consents, Estoppel Certificates, Nondisturbance
Agreements and Franchise Renewals. 28
7.6. MDU Agreements. 29
7.7. Title Commitments and Surveys. 29
7.8. HSR Notification. 30
7.9. No Shopping. 30
7.10. Notification of Certain Matters. 30
7.11. Risk of Loss; Condemnation. 31
7.12. Lien and Judgment Searches. 31
7.13. Transfer Taxes. 32
7.14. Distant Broadcast Signals. 32
7.15. Letter to Programmers. 32
7.16. Updated Schedules. 32
7.17. Use of Seller's Name. 32
7.18. Subscriber Billing Services. 33
7.19. Certain Notices. 33
7.20. Satisfaction of Conditions. 33
7.21. Confidentiality. 33
7.22 Covenant Not to Compete 33
7.23 Retention of Books and Records 34
8. CLOSING. 35
9. CONDITIONS TO CLOSING. 35
9.1. Conditions to the Obligations of Buyer and Seller. 36
9.2. Conditions to the Obligations of Buyer. 38
9.3. Conditions to Obligations of Seller. 38
9.4. Waiver of Conditions. 38
10. TERMINATION. 38
10.1. Events of Termination. 39
10.2. Liabilities in Event of Termination. 39
10.3. Procedure Upon Termination. 39
11. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION. 39
11.1. Survival of Representations and Warranties. 39
11.2. Indemnification by Seller. 40
11.3. Indemnification by Buyer. 40
11.4. Limitations on Indemnity. 40
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11.5. Third Party Claims. 41
11.6. Payments for Indemnification Amounts. 42
12. MISCELLANEOUS. 42
12.1. Parties Obligated and Benefited. 42
12.2. Notices. 43
12.3. Attorneys' Fees. 43
12.4. Right to Specific Performance. 44
12.5. Waiver. 44
12.6. Captions. 44
12.7. Choice of Law. 44
12.8. Rights Cumulative. 44
12.9. Further Actions. 44
12.10. Time. 44
12.11. Late Payments. 44
12.12. Counterparts. 45
12.13. Entire Agreement. 45
12.14. Severability. 45
12.15. Construction. 45
12.16. Expenses. 45
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EXHIBITS:
Exhibit A -- Bill of Sale and Assignment and Assumption Agreement
Exhibit B -- Forms of Nondisturbance and Attornment Agreement
Exhibit C -- Form of Lease Assignment
Exhibit D -- Form of MDU Agreement
Exhibit E -- Letter to Programmers
Exhibit F -- FIRPTA Certificate
SCHEDULES:
Schedule 1 -- Systems
Schedule 2 -- Governmental Permits
Schedule 3 -- Systems Contracts
Schedule 4 -- Required Consents
Schedule 5 -- Equipment
Schedule 6 -- Real Property
Schedule 7 -- Encumbrances
Schedule 8 -- Compliance with Legal Requirements
Schedule 9 -- Towers
Schedule 10 -- Litigation
Schedule 11 -- Tax Matters
Schedule 12 -- Employees
Schedule 13 -- Excluded Assets
Schedule 14 -- Systems Information
Schedule 15 -- System Rate Cards and Channel Lineups
Schedule 16 -- Bonds
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ASSET PURCHASE AGREEMENT
This Asset Purchase Agreement ("Agreement") is made as of the 25th day of
October, 2001, by and between TCI Cable Partners of St. Louis, L.P., a Colorado
limited partnership ("Buyer"), and Northland Cable Television, Inc, a Washington
corporation ("Seller").
RECITALS
Seller is engaged in the business of providing cable television service to
subscribers in and around Bainbridge Island, Washington. Buyer desires to
purchase and Seller desires to sell substantially all of the assets of Seller
used or useful in connection with that business.
AGREEMENT
In consideration of the above recitals and the mutual agreements stated in
this Agreement, the parties agree as follows:
1. DEFINITIONS.
1.1. Defined Terms. In addition to terms defined elsewhere in this
Agreement, the following capitalized terms, when used in this Agreement, will
have the meanings set forth below:
1.1.1. Affiliate. With respect to any Person, any other Person controlling,
controlled by or under common control with such Person, with "control" for such
purpose meaning the possession, directly or indirectly, of the power to direct
or cause the direction of the management and policies of a Person, whether
through the ownership of voting securities or voting interests, by contract or
otherwise.
1.1.2. Assets. All properties, privileges, rights, interests and claims,
real and personal, tangible and intangible, of every type and description that
are owned, leased, held, used or useful in the Business in which Seller has any
right, title or interest or in which Seller acquires any right, title or
interest on or before the Closing Date, including Governmental Permits,
Intangibles, Seller Contracts, Equipment, Books and Records, Real Property and
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deposits relating to the Business that are held by third parties for the account
of Seller or for security for Seller's performance of its obligations, but
excluding any Excluded Assets.
1.1.3. Basic Services. The lowest tier of service offered to
subscribers of a System.
1.1.4. Basic Subscribers. Any private residential customer account
that is billed by individual unit and pays the standard monthly rate (without
discount) for Basic Service.
1.1.5. Books and Records. All engineering records, files, data,
drawings, blueprints, schematics, reports, lists, plans and processes and all
other files of correspondence, lists, records and reports to the extent
concerning Seller's Business, including subscribers and prospective subscribers
of the System, signal and program carriage and dealings with Governmental
Authorities with respect to the System, including all reports filed with respect
to the System by or on behalf of Seller or any of its Affiliates with the FCC
and statements of account filed with respect to the System by or on behalf of
Seller or any of its Affiliates with the U.S. Copyright Office, but excluding
all documents, reports and records relating to the employees of the System.
Reference to any Books and Records will be deemed to refer to the Books and
Records included among the Assets.
1.1.6. Business. The cable television business conducted by Seller on
the date of this Agreement through one or more Systems in the Service Areas.
1.1.7. Business Day. Any day other than Saturday, Sunday or a day on
which banking institutions in Denver, Colorado or New York, New York are
required or authorized to be closed.
1.1.8. Closing. The consummation of the transactions contemplated by
this Agreement, as described in Section 8.
1.1.9. Closing Date. The date upon which Closing occurs.
1.1.10. Closing Time. 12:01 a.m., local time on the Closing Date.
1.1.11. Encumbrance. Any mortgage, lien, security interest, security
agreement, conditional sale or other title retention agreement, limitation,
pledge, option, charge, assessment, restrictive agreement, restriction,
encumbrance, adverse interest, restriction on transfer or any exception to or
defect in title or other ownership interest (including reservations, rights of
way, possibilities of reverter, encroachments, easements, rights of entry,
restrictive covenants, leases and licenses).
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1.1.12. Environmental Law. Any Legal Requirement relating to pollution
or protection of public health, safety or welfare or the environment, including
those relating to emissions, discharges, releases or threatened releases of
Hazardous Substances into the environment (including ambient air, surface water,
ground water or land), or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling of
Hazardous Substances.
1.1.13. Equipment. All electronic devices, trunk and distribution
coaxial and optical fiber cable, amplifiers, power supplies, conduit, vaults and
pedestals, grounding and pole hardware, subscriber's devices (including
converters, encoders, transformers behind television sets and fittings), headend
hardware (including origination, earth stations, transmission and distribution
system), test equipment, vehicles and other tangible personal property owned,
leased, used or held for use in the Business, as described on SCHEDULE 5 (and
with respect to leased Equipment, on SCHEDULE 3).
1.1.14. Equivalent Basic Subscribers (or EBSs). The sum of (i) the
number of Basic Subscribers of the System, and (ii) the number obtained by
dividing (A) the aggregate monthly billings for all tiers of basic television
service provided by the Systems to any private residential customer account
which pays less than the standard monthly residential rate for such service and
each commercial establishment or multiple dwelling unit that pays a bulk rate
(excluding any charges for premium service, pay-per-view programming, internet
access, franchise fees, taxes, second connects, additional outlets, installation
fees, deposits and other non-recurring items and any charges for rental
converters, remote control devices and other like charges for equipment), by (B)
the Systems' standard, combined monthly rate for such tiers of basic television
service. The number of Equivalent Basic Subscribers of a System shall not
include any Basic Subscriber or commercial or bulk account which (I) has not
received and paid in full for at least one full month of Basic Service at the
Systems' standard rates, (II) is more than 60 days delinquent in payment for any
service provided by the Systems with a balance in excess of $7.50, (III) is
pending disconnection for any reason, or (IV) was solicited during the 60-day
period preceding Closing by extraordinary promotions or offers or discounts.
1.1.15. ERISA. The Employee Retirement Income Security Act of 1974, as
amended, and the rules and regulations promulgated thereunder and published
interpretations with respect thereto.
1.1.16. ERISA Affiliate. As to any Person, any trade or business,
whether or not incorporated, which together with such Person would be deemed a
single employer within the meaning of Section 4001 of ERISA.
1.1.17. Expanded Basic Service. Any video programming provided over a
cable television system, regardless of service tier other than Basic Services
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and Pay TV.
1.1.18. FCC. Federal Communications Commission.
1.1.19. GAAP. Generally accepted accounting principles as in effect
from time to time in the United States of America.
1.1.20. Governmental Authority. (a) The United States of America, (b)
any state, commonwealth, territory or possession of the United States of America
and any political subdivision thereof (including counties, municipalities and
the like), (c) any foreign (as to the United States of America) sovereign entity
and any political subdivision thereof, or (d) any agency, authority or
instrumentality of any of the foregoing, including any court, tribunal,
department, bureau, commission or board.
1.1.21. Governmental Permits. All franchises, approvals,
authorizations, permits, licenses, easements, registrations, qualifications,
leases, variances and similar rights obtained by Seller from any Governmental
Authority in connection with the System, including those set forth on SCHEDULE
2.
1.1.22. Hazardous Substances. Any pollutant, contaminant, chemical,
industrial, toxic, hazardous or noxious substance or waste which is regulated by
any Governmental Authority, including (a) any petroleum or petroleum compounds
(refined or crude), flammable substances, explosives, radioactive materials or
any other materials or pollutants which pose a hazard or potential hazard to the
Real Property or to Persons in or about the Real Property or cause the Real
Property to be in violation of any laws, regulations or ordinances of federal,
state or applicable local governments, (b) asbestos or any asbestos-containing
material of any kind or character, (c) polychlorinated biphenyls ("PCBs"), as
regulated by the Toxic Substances Control Act, 15 U.S.C. Section 2601 et seq.,
(d) any materials or substances designated as "hazardous substances" pursuant to
the Clean Water Act, 33 U.S.C. Section 1251 et seq., (e) "economic poison," as
defined in the Federal Insecticide, Fungicide and Rodenticide Act, 7 U.S.C.
Section 135 et seq., (f) "chemical substance," "new chemical substance" or
"hazardous chemical substance or mixture" pursuant to the Toxic Substances
Control Act, 15 U.S.C. Section 2601 et seq., (g) "hazardous substances" pursuant
to the Comprehensive Environmental Response, Compensation, and Liability Act, 42
U.S.C. Section 9601 et seq. and (h) "hazardous waste" pursuant to the Resource
Conservation and Recovery Act, 42 U.S.C. Section 6901 et seq.
1.1.23. Intangibles. All intangible assets, including subscriber
lists, accounts receivable, claims (excluding any claims relating to Excluded
Assets), patents, copyrights and goodwill, if any, owned, used or held for use
in the Business.
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1.1.24. Legal Requirement. Any statute, ordinance, code, law, rule,
regulation, order or other requirement, standard or procedure enacted, adopted
or applied by any Governmental Authority, including judicial decisions applying
common law or interpreting any other Legal Requirement.
1.1.25. Pay TV. Premium programming services selected by and sold to
subscribers on an a la carte basis for monthly fees in addition to the fee for
Basic Services or Expanded Basic Services.
1.1.26. Permitted Encumbrances. The following Encumbrances: (a) liens
for taxes, assessments and governmental charges not yet due and payable; (b)
zoning laws and ordinances and similar Legal Requirements; (c) rights reserved
to any Governmental Authority to regulate the affected property; and (d) as to
Real Property interests, any easements, rights-of-way, servitudes, permits,
restrictions and minor imperfections or irregularities in title which are
reflected in the public records and which do not individually or in the
aggregate interfere with the right or ability to own, use or operate the Real
Property or to convey good, marketable and indefeasible title to such Real
Property; provided that (i) Permitted Encumbrances will not include any item
which could adversely affect in any material way the conduct of the Business and
(ii) classification of any item as a Permitted Encumbrance will not affect any
liability Seller may have for such item, including pursuant to any indemnity
obligation under this Agreement.
1.1.27. Person. Any natural person, corporation, partnership, trust,
unincorporated organization, association, limited liability company,
Governmental Authority or other entity.
1.1.28. Plans. Each employee benefit plan (as defined in Section 3(3)
of ERISA) or any multiemployer plan (as defined in Section 3(37) of ERISA) which
is sponsored or maintained by Seller or to which Seller contributes, and which
benefits System Employees.
1.1.29. Principals. Gary S. Jones and John S. Whetzell.
1.1.30. Real Property. All assets consisting of realty, including
appurtenances, improvements and fixtures located on such realty, and any other
interests in real property, including fee interests, leasehold interests and
easements, wire crossing permits, rights of entry (except agreements related to
multiple dwelling units) described on SCHEDULE 6.
1.1.31. Required Consents. All franchises, licenses, authorizations,
approvals and consents required under Governmental Permits, Seller Contracts or
otherwise for (a)
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Seller to transfer the Assets and the Business to Buyer, (b) Buyer to conduct
the Business and to own, lease, use and operate the Assets at the places and in
the manner in which the Business is conducted as of the date of this Agreement
and on the Closing Date and (c) Buyer to assume and perform the Governmental
Permits and Seller Contracts.
1.1.32. Seller Contracts. All contracts and agreements, other than
Governmental Permits and those relating to Real Property, pertaining to the
ownership, operation and maintenance of the Assets or the Business or used or
held for use in the Business, as described on SCHEDULE 3.
1.1.33. Service Area. Each area in which Seller operates the Business
served by the Assets, specifically in Bainbridge Island and certain portions of
Kitsap County, Washington.
1.1.34. System. A complete cable television reception and distribution
system operated in the conduct of the Business, consisting of one or more
headends, subscriber drops and associated electronic and other equipment, and
which is, or is capable of being without modification, operated as an
independent system without interconnections to other systems. Any systems which
are interconnected or which are served in total or in part by a common headend
will be considered a single System. SCHEDULE 1 describes each System by headend
location and city, town, county or other political subdivision served by such
headend.
1.1.35. Third Party. Any Person other than Seller and it Affiliates or
Buyer and its Affiliates.
1.2. Other Definitions. The following terms are defined in the
Sections indicated:
Term Section
---- -------
Action 11.4
Agreement Preamble
Antitrust Division 7.8
Approved Leave of Absence 7.3.1
Assumed Liabilities 4.1
Buyer Preamble
Cable Act 5.9.2
Cause 7.3.6
Code Recitals
Communications Act 5.9.4
Cost of Service Election 5.9.4
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Excluded Assets 4.2
Extended Franchises 7.5.3
Final Adjustments Report 3.3.2
Financial Statements 5.11
FTC 7.8
Hired Employee 7.3.1
Holdback 3.1
HSR Act 7.8
Indemnified Party 11.4
Indemnifying Party 11.4
Preliminary Adjustments Report 3.3.1
Prime Rate 11.4
PTO 7.3.1
Purchase Price 3.1
Rate Regulation Documents 5.9.4
Retained Employees 7.3.1
Seller Preamble
Taking 7.11.2
Transaction Documents 5.2
Transitional Billing Services 7.3.1.
1.3. Usage. The definitions in Article 1 shall apply equally to both the
singular and plural forms of the terms defined. Whenever the context may
require, any pronoun shall include the corresponding masculine, feminine and
neuter forms. All references herein to Articles, Sections, Exhibits and
Schedules shall be deemed to be references to Articles and Sections of, and
Exhibits and Schedules to, this Agreement unless the context shall otherwise
require. All Exhibits and Schedules attached hereto shall be deemed incorporated
herein as if set forth in full herein and, unless otherwise defined therein, all
terms used in any Exhibit or Schedule shall have the meaning ascribed to such
term in this Agreement. The words "include," "includes" and "including" shall be
deemed to be followed by the phrase "without limitation." The words "hereof,"
"herein" and "hereunder" and words of similar import when used in this Agreement
shall refer to this Agreement as a whole and not to any particular provision of
this Agreement. Unless otherwise expressly provided herein, any agreement,
instrument or statute defined or referred to herein or in any agreement or
instrument that is referred to herein means such agreement, instrument or
statute as from time to time amended, modified or supplemented, including (in
the case of agreements or instruments) by waiver or consent and (in the case of
statutes) by succession of comparable successor statutes and references to all
attachments thereto and instruments incorporated therein. All accounting terms
not otherwise defined in this Agreement will have the meanings ascribed to them
under
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GAAP.
2. SALE OF ASSETS.
2.1. Purchase and Sale of Assets. Subject to the terms and conditions set
forth in this Agreement, at the Closing, Seller will sell to Buyer, and Buyer
will purchase from Seller, all of Seller's rights, titles and interests in, to
and under the Assets. Except as otherwise specifically provided in this
Agreement, all the Assets are intended to be transferred to Buyer, whether or
not described in the Schedules.
3. CONSIDERATION.
3.1. Purchase Price. Buyer will pay to Seller total cash consideration of
$19,680,000 (the "Purchase Price"), of which (a) $18,680,000, subject to
adjustment as provided in Sections 3.2 and 3.3, will be paid on the Closing Date
(as adjusted, the "Base Purchase Price") and (b) $1,000,000, subject to
adjustment as provided in Section 3.3.3 and to Seller's obligation under
Sections 11.2 and 11.5 (the "Holdback"), will be paid on the date or dates
prescribed by Section 3.3.3. Such consideration will be paid by wire transfer of
immediately available funds.
3.2. Adjustments to Purchase Price.
3.2.1. The Purchase Price will be reduced by an amount equal to $3,075
multiplied by the positive difference between (a) 6,400 and (b) the aggregate
number of System EBSs as of the Closing Date.
3.2.2. The Purchase Price will be adjusted on a pro rata basis as of
the Closing Date for all prepaid expenses (but only to the extent the full
benefit thereof will be realizable by Buyer within twelve (12) months after the
Closing Date), accrued expenses (including real and personal property taxes),
prepaid income, subscriber prepayments and accounts receivable related to the
Business, all as determined in accordance with GAAP consistently applied, and to
reflect the principle that all expenses and income attributable to the Business
for the period prior to the Closing Date are for the account of Seller, and all
expenses and income attributable to the Business for the period on and after the
Closing Date are for the account of Buyer. Seller will receive no credit for any
accounts receivable (i) any portion of which is 60 days or more past due from
the billing date as of the Closing Date or (ii) from subscribers whose accounts
are inactive or whose service is pending disconnection for any reason as of the
Closing Date.
3.2.3 All advance payments to, or funds of third parties on deposit
with, Seller as of the Closing Date, relating to the Business, including advance
payments and
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deposits by subscribers served by the Business for converters, encoders,
decoders, cable television service and related sales, will be retained by Seller
and will reduce the Purchase Price accordingly.
3.2.4 In addition, the economic value of vacation time pursuant to
Section 7.4.2 to the extent accrued as of the Closing Date and permitted to be
taken after the Closing Date by the System Employees employed at the System who
become employees of Buyer or one of its Affiliates, upon Closing, will increase
the Purchase Price accordingly.
3.3. Determination of Adjustments. Preliminary and final adjustments to
the Purchase Price will be determined as follows:
3.3.1. Not later than a date Seller reasonably believes is at least 10
Business Days prior to the Closing, Seller will deliver to Buyer a report (the
"Preliminary Adjustments Report"), certified as to completeness and accuracy by
Seller, showing in detail the preliminary determination of the adjustments
referred to in Section 3.2, which are calculated as of the Closing Date (or as
of any other date agreed by the parties) and any documents substantiating the
adjustments proposed in the Preliminary Adjustments Report. The Preliminary
Adjustments Report will include a complete list of subscribers, a detailed
calculation of the number of Equivalent Basic Subscribers and a schedule setting
forth advance payments and deposits made to or by Seller, as well as accounts
receivable information relating to the Business (showing sums due and their
respective aging as of the Closing Date). Seller also will furnish to Buyer its
billing report for the most current period as of the Closing Date. Following
receipt of such schedule, Buyer shall have five Business Days to review such
schedule and supporting information and to notify Seller of any disagreements
with Seller's estimates. If Buyer provides a notice of disagreement with
Seller's estimates of the adjustments referred to in Section 3.2 within such
five Business Day period, Buyer and Seller shall negotiate in good faith to
resolve any such dispute and to reach an agreement prior to the Closing Date on
such estimated adjustments as of the Closing Date. The estimate so agreed upon
by Buyer and Seller or (if the parties do not reach such an agreement on the
estimated amount of the adjustments set forth in the Preliminary Adjustments
Report prior to the Closing Date or if Buyer fails to provide a notice of
disagreement with Seller's estimates of such adjustments within the time
provided) the estimates of such adjustments set forth in the Preliminary
Adjustments Report shall be the basis for determining the Base Purchase Price.
3.3.2. Within 45 days after the Closing, Seller will deliver to Buyer
a report (the "Final Adjustments Report"), similarly certified by Seller,
showing in detail the final determination of all adjustments which were not
calculated as of the Closing Date and containing any corrections to the
Preliminary Adjustments Report, together with any documents substantiating the
adjustments proposed in the Final Adjustments Report. Buyer will provide Seller
with reasonable access to all records which Buyer has in its possession
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and which are necessary for Seller to prepare the Final Adjustments Report.
3.3.3. Within 30 days after receipt of the Final Adjustments Report,
Buyer will give Seller written notice of Buyer's objections, if any, to the
Final Adjustments Report. If Buyer makes any such objection, the parties will
agree on the amount, if any, which is not in dispute within 30 days after
Seller's receipt of Buyer's notice of objections to the Final Adjustments
Report. Any undisputed amount will serve as an adjustment to the Holdback. The
Holdback, as so adjusted (but excluding any amounts disputed by Buyer), will be
further adjusted for the amount, if any, of any claim for which Buyer is
indemnified pursuant to Section 11.2 and the amount of such claim is satisfied
with the Holdback under Section 11.5, and will be paid by Buyer to Seller within
180 days after the Closing Date or within three Business Days after agreement on
the undisputed portion of the Final Adjustments Report, if later. Any disputed
amounts will be determined within 120 days after the Closing Date by an
independent accounting firm acceptable to both parties whose determination will
be conclusive. Seller and Buyer will bear equally the fees and expenses payable
to such firm in connection with such determination, unless the determination of
such firm results in a net decrease in the Purchase Price of more than 10%
thereof, in which case the fees and expenses payable to such firm will be paid
by Seller. The payment required after determination of all disputed amounts will
be made by the responsible party by wire transfer of immediately available funds
to the other party within three Business Days after the final determination.
3.4. Allocation of Consideration. The consideration payable by Buyer under
this Agreement will be allocated among the Assets as set forth in a schedule
furnished by Buyer to Seller not later than 180 days after the Closing Date (or
April 1 of the year following the Closing Date if earlier). Buyer and Seller
agree to be bound by the allocation and will not take any position inconsistent
with such allocation and will file all returns and reports with respect to the
transactions contemplated by this Agreement, including all federal, state and
local tax returns, on the basis of such allocation.
4. ASSUMED LIABILITIES AND EXCLUDED ASSETS.
4.1. Assignment and Assumption. Seller will assign, and Buyer will assume
and perform, the "Assumed Liabilities," which are defined as: (a) Seller's
obligations to subscribers of the Business for (i) subscriber deposits held by
Seller as of the Closing Date and which are refundable, in the amount for which
Buyer received credit under Section 3.2, (ii) subscriber advance payments held
by Seller as of the Closing Date for services to be rendered by a System after
the Closing Date, in the amount for which Buyer received credit under Section
3.2 and (iii) the delivery of cable television service to subscribers of the
Business after the Closing Date; and (b) obligations accruing and relating to
periods after the Closing Date under Governmental Permits listed on SCHEDULE 2
(to the extent that such Governmental Permits are transferrable) and Seller
Contracts listed on SCHEDULE 3. Buyer will not assume or have any responsibility
for any liabilities or obligations of Seller other
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than the Assumed Liabilities. In no event will Buyer assume or have any
responsibility for any liabilities or obligations associated with the Excluded
Assets.
4.2. Excluded Assets. The "Excluded Assets," which will be retained by
Seller, will consist of the following: (a) programming contracts, retransmission
consent agreements and pole attachment agreements (except for those set forth on
SCHEDULE 3); (b) contracts regarding any aspect of the receipt and delivery of
internet services, telephony or digital programming (except for those set forth
on SCHEDULE 3); (c) insurance policies and rights and claims thereunder (except
as otherwise provided in Section 7.11.1); (d) bonds, letters of credit, surety
instruments and other similar items; (e) cash and cash equivalents; (f) Seller's
trademarks, trade names, service marks, service names, logos and similar
proprietary rights (subject to Buyer's rights under Section 7.17); (g)
subscriber billing contracts and related equipment (subject to Buyer's rights
under Section 7.18); (h) capital and vehicle leases; (i) Seller's Plans as
defined in 5.14.2 and any cash, reserve, trust or funding arrangement held or
set aside for the payment of benefits; (j) any employment, compensation, bonus,
deferred compensation, consulting, agency or management agreements; (k) account
books of original entry, general ledgers, financial records and personnel files
and records used in connection with the System; provided that copies of any such
personnel files will be made available to Buyer for a period of three years from
the Closing Date upon reasonable request by Buyer accompanied by a waiver and
release from the employee whose records are sought in form and substance
reasonably satisfactory to Seller; (l) advertising sales agency or
representation contracts providing any Third Party or Seller Affiliate the right
to sell available advertising time for any System (except for those set forth on
SCHEDULE 3); (m) Seller's rights under any agreement governing or evidencing an
obligation of Seller for borrowed money; (n) Seller's rights under any contract,
license, authorization, agreement or commitment other than those creating or
evidencing Assumed Liabilities; (o) the assets described on SCHEDULE 13.
5. REPRESENTATIONS AND WARRANTIES OF SELLER.
To induce Buyer to enter into this Agreement, Seller represents and warrants to
Buyer, as of the date of this Agreement and as of the Closing, as follows:
5.1. Organization and Qualification. Seller is a corporation duly
organized, validly existing and in good standing under the laws of Washington
and has all requisite corporate power and authority to own, lease and use the
Assets as they are currently owned, leased and used and to conduct the Business
as it is currently conducted. Seller is duly qualified or licensed to do
business and is in good standing under the laws of each jurisdiction in which
the character of the properties owned, leased or operated by it or the nature of
the activities conducted by it makes such qualification necessary, except any
such jurisdiction where the failure to be so qualified or licensed and in good
standing would not have a material adverse effect on Seller or on the validity,
binding effect or enforceability of this Agreement.
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5.2. Authority and Validity. Seller has all requisite corporate power and
authority to execute and deliver, to perform its obligations under, and to
consummate the transactions contemplated by, this Agreement and all other
documents and instruments to be executed and delivered in connection with the
transactions contemplated by this Agreement (collectively, the "Transaction
Documents") to which Seller is a party. The execution and delivery by Seller of,
the performance by Seller of its obligations under, and the consummation by
Seller of the transactions contemplated by, this Agreement and the Transaction
Documents to which Seller is a party have been duly authorized by all requisite
corporate action of Seller. This Agreement is, and when executed and delivered
by Seller the Transaction Documents will be, the valid and binding obligation of
Seller, enforceable against Seller in accordance with its terms, except insofar
as enforceability may be affected by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws now or hereafter in effect affecting
creditors' rights generally or by principles governing the availability of
equitable remedies.
5.3. No Breach or Violation. Subject to obtaining the Required Consents,
all of which are listed on SCHEDULE 4, the execution, delivery and performance
of this Agreement and the Transaction Documents to which Seller is a party by
Seller will not: (a) violate any provision of the organizational documents of
Seller; (b) violate any Legal Requirement; (c) require any consent, approval or
authorization of, or any filing with or notice to, any Person; or (d) (i)
violate, conflict with or constitute a breach of or default under, (ii) permit
or result in the termination, suspension or modification of, (iii) result in the
acceleration of (or give any Person the right to accelerate) the performance of
Seller under, or (iv) result in the creation or imposition of any Encumbrance
under, any Seller Contract or any other instrument evidencing any of the Assets
or any instrument or other agreement to which Seller is a party or by which
Seller or any of its assets is bound or affected, except for purposes of this
clause (d) such violations, conflicts, breaches, defaults, terminations,
suspensions, modifications, and accelerations as would not, individually or in
the aggregate, have a material adverse effect on any System, the Business or
Seller or on the ability of Seller to perform its obligations under this
Agreement or the Transaction Documents to which Seller is a party.
5.4. Assets. Seller has exclusive, good and marketable title to (or, in the
case of Assets that are leased, valid leasehold interests in) the Assets (other
than Real Property, as to which the representations and warranties in Section
5.7 apply). The Assets are free and clear of all Encumbrances of any kind or
nature, except (a) Permitted Encumbrances, (b) restrictions stated in the
Governmental Permits and (c) Encumbrances disclosed on SCHEDULE 7, which will be
removed and released at or prior to the Closing. Except as set forth on
SCHEDULES 2 OR 3, none of the Equipment is leased by Seller from any other
Person. The Assets are all the assets necessary to permit Buyer to conduct the
Business substantially as it is being conducted on the date of this Agreement
and in compliance with all Legal Requirements and Seller Contracts and to
perform all the Assumed Liabilities. All the
12
Equipment is in good operating condition and repair, ordinary wear and tear
excepted and is suitable and adequate for continued use in the manner in which
it is presently used. All inventories are at normal historical levels. No Third
Party has been granted or has applied for a cable television franchise in any
Service Area or is operating a cable television system or other non-satellite
multichannel video programming distribution system in any Service Area.
5.5. Governmental Permits. Complete and correct copies of the Governmental
Permits, all of which are listed on SCHEDULE 2 or SCHEDULE 13, have been
delivered by Seller to Buyer. The Governmental Permits are currently in full
force and effect, are not in default, and are valid under all applicable Legal
Requirements according to their terms. There is no legal action, governmental
proceeding or investigation, pending or threatened, to terminate, suspend or
modify any Governmental Permit and Seller is in compliance with the terms and
conditions of all the Governmental Permits and with other applicable
requirements of all Governmental Authorities (including the FCC and the Register
of Copyrights) relating to the Governmental Permits, including all requirements
for notification, filing, reporting, posting and maintenance of logs and
records.
5.6. Seller Contracts. All Seller Contracts are described on SCHEDULE 3 or
SCHEDULE 13. Complete and correct copies of all Seller Contracts have been
provided to Buyer. Each Seller Contract is in full force and effect and
constitutes the valid, legal, binding and enforceable obligation of Seller and
Seller is not and to Seller's knowledge, each other party thereto is not in
breach or default of any terms or conditions thereunder.
5.7. Real Property.
5.7.1. All the Assets consisting of Real Property interests are
described on SCHEDULE 6. Except as otherwise disclosed on SCHEDULE 6, Seller
holds good, marketable and indefeasible fee simple title to the Real Property
shown as being owned by Seller on SCHEDULE 6 and the valid and enforceable right
to use and possess such Real Property, subject only to the Permitted
Encumbrances. Seller has valid and enforceable leasehold interests in Real
Property shown as being leased by Seller on SCHEDULE 6 and, with respect to
other Real Property not owned or leased by Seller, Seller has the valid and
enforceable right to use all other Real Property pursuant to the easements,
licenses, rights-of-way or other rights described on SCHEDULE 6, subject only to
Permitted Encumbrances.
5.7.2. The documents delivered by Seller to Buyer as evidence of each
lease of Real Property constitute the entire agreement with the landlord in
question. There are no leases or other agreements, oral or written, granting to
any Person other than Seller the right to occupy or use any Real Property,
except as described on SCHEDULE 6. All easements, rights-of-way and other rights
appurtenant to, or which are necessary for Seller's current use of, any owned
Real Property are valid and in full force and effect, and Seller has not
received
13
any notice with respect to the termination, breach or impairment of any of those
rights. Each parcel of Real Property, any improvements constructed thereon and
their current use conform to (a) all applicable Legal Requirements, including
zoning requirements and the Americans With Disabilities Act, and (b) all
restrictive covenants, if any, or other Encumbrances affecting all or part of
such parcel.
5.8. Environmental Matters.
5.8.1. The Real Property currently complies with and, to Seller's best
knowledge, has previously been operated in compliance with, all Environmental
Laws. Seller has not generated, released, stored, used, treated, handled,
discharged or disposed of any Hazardous Substances at, on, under, in or about,
or in any other manner affecting, any Real Property, transported any Hazardous
Substances to or from any Real Property or discharged any Hazardous Substances
from any Real Property into any body of water, directly or indirectly, and, to
Seller's best knowledge, no other present or previous owner, tenant, occupant or
user of any Real Property or any other Person has committed or suffered any of
the foregoing. To Seller's best knowledge, no release of Hazardous Substances
outside the Real Property has entered or threatens to enter any Real Property,
nor is there any pending or threatened claim based on Environmental Laws which
arises from any condition of the land surrounding any Real Property. No claim or
investigation based on Environmental Laws which relates to any Real Property or
any operations on it (a) has been asserted or conducted during the period of
Seller's ownership or is currently pending against or with respect to Seller or,
to Seller's best knowledge, any other Person, or (b) to Seller's best knowledge,
is threatened or contemplated.
5.8.2. To Seller's best knowledge, (a) no underground storage tanks
are currently or have been located on any Real Property, (b) no Real Property
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 (c) no building or other structure on any Real Property
contains asbestos containing material. There are no incinerators, septic tanks
or cesspools on the Real Property and all waste is discharged into a public
sanitary sewer system.
5.8.3. Seller has provided Buyer with complete and correct copies of
(a) all studies, reports, surveys or other materials in Seller's possession or
to which Seller has access relating to the presence or alleged presence of
Hazardous Substances at, on or affecting the Real Property, (b) all notices or
other materials in Seller's possession or to which Seller has access that were
received from any Governmental Authority having the power to administer or
enforce any Environmental Laws relating to current or past ownership, use or
operation of the Real Property or activities at the Real Property and (c) all
materials in Seller's possession or to which Seller has access relating to any
claim, allegation or action by any private Third Party under any Environmental
Law.
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5.9. Compliance with Law.
5.9.1. The ownership, leasing and use of the Assets as they are
currently owned, leased and used and the conduct of the Business as it is
currently conducted do not violate any Legal Requirement, which violation,
individually or in the aggregate, would have a material adverse effect on a
System, the Business or Seller. Seller has received no notice claiming a
violation by Seller or the Business of any Legal Requirement applicable to
Seller or the Business as it is currently conducted and to Seller's best
knowledge, there is no basis for any claim that such a violation exists, which
violation, in each case, individually or in the aggregate, would have a material
adverse effect on a System, the Business or Seller.
5.9.2. A valid request for renewal has been duly and timely filed
under Section 626 of the Cable Communications Policy Act of 1984 (the "Cable
Act") with the proper Governmental Authority with respect to all cable
television franchises of the Business that have expired or will expire within 36
months after the date of this Agreement.
5.9.3. Seller has complied, and the Business is in compliance, in all
material respects, with the specifications set forth in Part 76, Subpart K of
the rules and regulations of the FCC, Section 111 of the Copyright Act of 1976
and the rules and regulations of the U.S. Copyright Office, the Register of
Copyrights and the Copyright Royalty Tribunal, the Communications Act of 1934,
the rules and regulations of the FCC, including provisions of any thereof
pertaining to signal leakage, to utility pole make ready and to grounding and
bonding of cable television systems (in each case as the same is currently in
effect), and all other applicable Legal Requirements relating to the
construction, maintenance, ownership and operation of the Assets, the Systems
and the Business.
5.9.4. Notwithstanding the foregoing, Seller has used its best efforts
to comply in all material respects with the provisions of the Communications
Act, as amended, and the FCC rules and regulations promulgated thereunder (the
"Communications Act") as such laws relate to the operation of the Business.
Except as provided in SCHEDULE 8, Seller has complied in all material respects
with the must carry, retransmission consent, and commercial leased access
provisions of the Communications Act. Except with respect to the System's tier
of Basic Services, Seller is not subject to rate regulation pursuant to a
specific exemption from rate regulation contained in the Communications Act.
Except as provided in SCHEDULE 8, Seller has received no notice from any
Governmental Authority with respect to an intention to enforce customer service
standards pursuant to the Communications Act and Seller has not agreed with any
Governmental Authority to establish customer service standards that exceed the
standards in the Communications Act. Except as set forth on SCHEDULE 8, Seller
has not made any election with respect to any cost of service proceeding
conducted in accordance with Part 76.922 of Title 47 of the Code of Federal
Regulations or any similar proceeding (a "Cost of Service Election") with
respect to any of the Systems.
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5.9.5 Except as set forth on SCHEDULE 9, all necessary FAA approvals
have been obtained and all necessary FCC tower registrations have been filed
with respect to the height and location of towers used in connection with the
operation of the Systems, and such towers are being operated in compliance in
all material respects with applicable FCC and FAA rules. The ownership, height
(with and without appurtenances), location (address, latitude, longitude and
ground elevation), structure type and FCC call signs of each tower used in
connection with the operation of the Systems are correctly described on SCHEDULE
9. To the extent applicable, Seller has delivered to Buyer true and correct
copies of the FAA final determinations that are available and FCC registrations
for all such towers.
5.10. Patents, Trademarks and Copyrights. Seller has timely and accurately
made all requisite filings and payments with the Register of Copyrights and is
otherwise in compliance with all applicable rules and regulations of the
Copyright Office. Seller has delivered to Buyer complete and correct copies of
all current reports and filings, and all reports and filings for the past five
years, made or filed pursuant to copyright rules and regulations with respect to
the Business. Seller does not possess any patent, patent right, trademark or
copyright and is not a party to any license or royalty agreement with respect to
any patent, trademark or copyright except for licenses respecting program
material and obligations under the Copyright Act of 1976 applicable to cable
television systems generally. The operation of the Business as currently
conducted does not violate or infringe upon the rights of any Person in any
copyright, trademark, service mark, patent, license, trade secret or other
intellectual property.
5.11. Financial Statements. Seller has delivered to Buyer copies of its
unaudited statements of income related to the Business for the years ended
December 31, 1999 and December 31, 2000, and the related unaudited statement of
income for the nine-month period ended September 30, 2001 (collectively, the
"Financial Statements"). The Financial Statements were prepared in accordance
with GAAP applied on a consistent basis throughout the periods covered thereby
and fairly present the results of operations for the periods indicated, subject
to normal year-end adjustments (none of which will be material in amount) and
the omission of footnotes. Seller did not have as of the date of this Agreement,
any liability or obligation, whether accrued, absolute, fixed or contingent
(including liabilities for taxes or unusual forward or long-term commitments),
which was or would be material to the business, results of operations or
financial condition of Seller, nor to Seller's best knowledge does any aspect of
the Business form a basis for any claim by a Third Party which, if asserted,
could result in a liability not disclosed by Seller. Since December 31, 2000 (i)
the Business has been operated only in the ordinary course, (ii) Seller has not
sold or disposed of any assets other than in the ordinary course of business,
(iii) there has been no material adverse change in, and no event has occurred
which is likely, individually or in the aggregate, to result in any material
adverse change in, the business, operations, assets, prospects or condition
(financial or otherwise) of the Business, other than changes affecting
16
the cable television industry generally.
5.12. Legal Proceedings. Except as set forth on SCHEDULE 10, there is no
judgment or order outstanding, or any action, suit, complaint, proceeding or
investigation by or before any Governmental Authority or any arbitrator pending,
or to Seller's best knowledge, threatened, materially involving or materially
affecting all or any part of the Assets or the Business.
5.13. Tax Returns; Other Reports. Seller has duly and timely filed in
proper form all income, franchise, sales, use, property, excise, payroll,
unclaimed property and other tax returns and all other reports (whether or not
relating to taxes) required to be filed with the appropriate Governmental
Authority. All taxes, fees and assessments of whatever nature due and payable by
Seller have been paid, except such amounts as are being contested diligently and
in good faith and are not in the aggregate material. Except as set forth on
SCHEDULE 11, there are no outstanding agreements or waivers extending the
statutory period of limitations applicable to any federal, state, local or
foreign income tax return for any period, and except as set forth on SCHEDULE
11, there are no tax audits pending.
5.14. Employment Matters.
5.14.1. SCHEDULE 12 contains a complete and correct list of the names
and positions of all employees engaged in the Business and located at the
Systems as of a recent date (a "System Employee"). Except to the extent that any
noncompliance would not, individually or in the aggregate, reasonably be
expected to have a material adverse effect on the financial condition or
operations of the Business or Systems, Seller has complied in all material
respects with all applicable Legal Requirements relating to the employment of
labor, including the Worker Adjustment and Restraining Notification Act (29
U.S.C. Section 2101), et seq. ("WARN"), ERISA, continuation coverage
requirements with respect to group health plans, and those relating to wages,
hours, collective bargaining, unemployment insurance, worker's compensation,
equal employment opportunity, age, sex, race and disability discrimination,
immigration control and the payment and withholding of Taxes.
5.14.2. For purposes of this Agreement, "Seller's Plans" means each
employee benefit plan (as defined in Section 3(3) of ERISA) or benefit
arrangement, including each pension or welfare benefit plan, employment
agreement, incentive compensation arrangement or multiemployer plan (as defined
in Section 3(37) of ERISA) which is sponsored or maintained by the Seller or to
which Seller contributes, and which benefits Seller's System Employees. The
Seller Plans in which any System Employee participates are disclosed on SCHEDULE
12. Except to the extent that any violation would not reasonably be expected to
have a material adverse effect on the financial condition or operations of
Seller's Business or the System, and none of the Seller's Plan other than a
17
multiemployer plan (as defined in Section 3(37) of ERISA), or, to the knowledge
of Seller, any Seller Plan that is a multiemployer plan (as defined in Section
3(37) of ERISA), is in material violation of any provision of ERISA or the
Internal Revenue Code (the "Code"). Each Seller Plan is intended to qualify
under Section 401 of the Code is so qualified and the trusts maintained pursuant
thereto are exempt from federal taxation under Section 501 of the Code, and
nothing has occurred with respect to the operation of such Seller Plan which
could cause the loss of such qualification or exemption or the imposition of any
liability, penalty, or tax under ERISA or the Code. No material (i) "reportable
event" described in Sections 4043(c)(1), (2), (3), (5), (6), (7), (10) and (13)
of ERISA, (ii) non-exempt "prohibited transaction" (as defined in Section 406 of
ERISA or Section 4975 of the Code), (iii) "accumulated funding deficiency" (as
defined in Section 302 of ERISA) or (iv) "withdrawal liability" (as determined
under Section 4201 et seq. of ERISA) has occurred or exists and is continuing
with respect to any Seller Plan other than a multiemployer plan (as defined in
Section 3(37) of ERISA), or, to the Knowledge of Seller, any Seller Plan that is
a multiemployer plan (as defined in Section 3(37) of ERISA in which any System
Employee participates). After the Closing, Buyer will not be required, under
ERISA, the Code or any collective bargaining agreement or this Agreement to
establish, maintain or continue any Seller Plan currently maintained by the
Seller.
5.14.3. Except as disclosed on SCHEDULE 12, as of the date of this
Agreement, no collective bargaining agreements applicable to any System Employee
and Seller has no duty to bargain with any labor organization with respect to
any System Employees. Except as disclosed on SCHEDULE 12, there are not pending
any unfair labor practice charges against Seller, any demand for recognition or
any other request or demand from a labor organization for representative status
with respect to any System Employee. Seller has no employment agreements, either
written or oral, with any System Employee.
5.15. Systems Information.
5.15.1. SCHEDULE 14 sets forth a true and accurate description in all
material respects, on a System-by-System basis, of the following information
relating to the Systems as of the date or dates set forth on such Schedule:
(a) the approximate number of aerial and underground miles of
plant included in the Assets and served by each headend;
(b) the approximate number of single family homes and residential
multiple dwelling units passed by each System;
(c) the approximate miles of plant operating at the applicable
MHz capacity and channel capacity of each headend; and
18
(d) the approximate number of EBSs served by each System.
5.15.2. SCHEDULE 15 sets forth a true and accurate description in all
material respects of the following information relating to the Systems as of the
date of this Agreement:
(a) a description of the Basic Services, the Expanded Basic
Services, Pay TV and a la carte services available from each System, and the
rates charged by Seller therefor, including all rates, tariffs and other charges
for cable television or other services provided by each System; and
(b) the stations and signals carried by each System and the
channel position of each such signal and station.
5.15.3. To its best knowledge, Seller has no obligation or liability
for the refund of monies to subscribers of the Systems, other than as evidenced
by their 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 1992 Cable Act.
5.15.4. Each of the Systems is capable of providing all channels,
stations and signals reflected as being carried on such System on SCHEDULE 15.
5.16. Finders and Brokers. Seller has not employed any financial advisor,
broker or finder or incurred any liability for any financial advisory,
brokerage, finder's or similar fee or commission in connection with the
transactions contemplated by this Agreement for which Buyer could be liable.
5.17. Bonds. Except as set forth on SCHEDULE 16, there are no franchise,
construction, fidelity, performance, or other bonds, letters of credit,
guarantees or escrow accounts posted, delivered or established by Seller in
connection with its operation or ownership of any of the Systems or Assets.
5.18. Disclosure. No representation or warranty by Seller in this Agreement
or in any Schedule or Exhibit to this Agreement, or any statement, list or
certificate furnished or to be furnished by Seller pursuant to this Agreement,
contains or will contain any untrue statement of material fact, or omits or will
omit to state a material fact required to be stated therein or necessary to make
the statements contained therein not misleading in light of the circumstances in
which made. Without limiting the generality of the foregoing, the information
set forth in the Schedules concerning the Business is accurate and complete in
all
19
material respects.
6. BUYER'S REPRESENTATIONS AND WARRANTIES.
To induce Seller to enter into this Agreement, Buyer represents and warrants to
Seller, as of the date of this Agreement and as of the Closing, as follows:
6.1. Organization and Qualification. Buyer is a limited partnership duly
organized and validly existing under the laws of Colorado and has all requisite
power and authority to carry on its business as currently conducted and to own,
lease, use and operate its assets. Buyer is duly qualified or licensed to do
business under the laws of each jurisdiction in which the character of the
properties owned, leased or operated by it or the nature of the activities
conducted by it makes such qualification necessary, except any such jurisdiction
where the failure to be so qualified or licensed would not have a material
adverse effect on Buyer or on the validity, binding effect or enforceability of
this Agreement.
6.2. Authority and Validity. Buyer has all requisite power and authority to
execute and deliver, to perform its obligations under, and to consummate the
transactions contemplated by, this Agreement and the Transaction Documents.
Subject to approval by Buyer's partners, the execution and delivery by Buyer of,
the performance by Buyer of its obligations under, and the consummation by Buyer
of the transactions contemplated by, this Agreement and the Transaction
Documents to which Buyer is a party have been duly authorized by all requisite
action of Buyer, and this Agreement is and when executed and delivered by Buyer,
the Transaction Documents will be the valid and binding obligation of Buyer,
enforceable in accordance with its terms, except insofar as enforceability may
be limited or affected by applicable bankruptcy, insolvency, reorganization,
moratorium or similar laws now or hereafter in effect affecting creditors'
rights generally or by principles governing the availability of equitable
remedies.
6.3. No Breach or Violation. Subject to Seller obtaining the Required
Consents and Buyer obtaining approval of its partners, the execution, delivery
and performance of this Agreement by Buyer will not: (a) violate any provision
of the partnership agreement of Buyer; (b) violate any Legal Requirement; (c)
require any consent, approval or authorization of, or any filing with or notice
to, any Person; or (d) (i) violate, conflict with or constitute a breach of or
default under (without regard to requirements of notice, passage of time or
elections of any Person), (ii) permit or result in the termination, suspension,
modification of, (iii) result in the acceleration of (or give any Person the
right to accelerate) the performance of Buyer under, or (iv) result in the
creation or imposition of any Encumbrance under, any instrument or other
agreement to which Buyer is a party or by which Buyer or any of its assets is
bound or affected, except for purposes of this clause (d) such violations,
conflicts, breaches, defaults, terminations, suspensions, modifications and
accelerations as would not, individually or in the aggregate, have a material
adverse effect on Buyer or on the validity,
20
binding effect or enforceability of this Agreement.
6.4. Financial Capability of Buyer. Buyer has the financial capability to
consummate the transaction contemplated herein.
6.5. Finders and Brokers. Except for Daniels & Associates, Buyer has not
employed any financial advisor, broker or finder or incurred any liability for
any financial advisory, brokerage, finder's or similar fee or commission in
connection with the transactions contemplated by this Agreement for which Seller
could be liable.
7. ADDITIONAL COVENANTS.
7.1. Access to Premises and Records. Between the date of execution and
delivery of this Agreement and the Closing Date, Seller will give Buyer and its
counsel, accountants and other representatives reasonable access during normal
business hours and upon reasonable advance notice to all the premises and Books
and Records of the Business and to all the Assets and the personnel engaged in
the management or operations of the System; and will furnish to Buyer and its
representatives all such documents, financial information and other information
regarding the Business and Assets as Buyer may from time to time reasonably
request; provided that no investigation will affect or limit the scope of any of
the representations, warranties or covenants and indemnities of Seller in this
Agreement or in any Transaction Document or limit liability for any breach of
any of the foregoing. Notwithstanding any investigation that Buyer may conduct
of the Business and the Assets, Buyer may fully rely on Seller's
representations, warranties, covenants and indemnities, which will not be waived
or affected by or as a result of such investigation.
7.2. Continuity and Maintenance of Operations; Financial Statements. Except
as Buyer may otherwise agree in writing, until the Closing:
7.2.1. Seller will continue to operate the Business in the ordinary
course consistent with past practices (including completing line extensions,
placing conduit or cable in new developments and fulfilling installation
requests) and will use its best efforts to keep available the services of its
employees employed in connection with the Systems and to preserve any beneficial
business relationships with key customers, suppliers and others having business
dealings with Seller relating to the Business. Without limiting the generality
of the foregoing, Seller will maintain the Assets in good condition and repair,
will maintain inventories at normal historical levels, will maintain insurance
as in effect on the date of this Agreement and will keep all of its business
books, records and files in the ordinary course of business in accordance with
past practices. Seller will not itself, and will not permit any of its officers,
directors, shareholders, agents or employees to, pay any of Seller's subscriber
accounts receivable (other than for their own residences) prior to the Closing
Date. Seller
21
will continue to implement its procedures for disconnection and discontinuance
of service to subscribers whose accounts are delinquent in accordance with those
in effect on the date of this Agreement. Seller will not, outside of the
ordinary course of business consistent with normal salary reviews, increase the
rate of compensation of System Employees. Seller will not except in the ordinary
course of business or to fulfill legal obligations engage in any hiring or
employee compensation practices except for changes in such practices implemented
by such party and its Affiliates on a company-wide basis.
7.2.2. Seller will not, without the prior written consent of Buyer:
(a) change the rate charged for Basic Services, Expanded Basic Services or Pay
TV and will not add or delete any program services except to the extent required
under the Cable Act or any other Legal Requirement provided however if Seller
changes such rates in order to so comply, Seller will provide Buyer with a copy
of any FCC forms (even if not filed with any Governmental Authority) that Seller
used to determine that the rates to which it was changing were allowable; (b)
file a Cost of Service Election with respect to any of the Systems; (c) sell,
transfer or assign any of the Assets or permit the creation of any Encumbrance
on any Asset except in the ordinary course; (d) permit the amendment or
cancellation of any of the Governmental Permits, Seller Contracts or any other
contract or agreement (other than those constituting Excluded Assets) which
affects or is applicable to any System or the Business; (e) enter into any
contract or commitment or incur any indebtedness or other liability or
obligation of any kind relating to any System or the Business involving an
expenditure in excess of $10,000 unless such contract or commitment has a term
expiring prior to Closing or can be terminated upon 30 days notice without
liability to Seller or Buyer; (f) enter into any commitment with an internet
access or online service provider with respect to the use or lease of the system
to deliver such services; (g) enter into any agreement pursuant to which any
System would receive and utilize signals in a digital format; (h) enter into any
agreement of any nature regarding telephony; (i) enter into any agreement with a
billing service; (j) engage in any marketing, subscriber installation,
collection or disconnection practices outside the ordinary course or
inconsistent with past practices; (k) take any actions that would cause the
transactions contemplated hereby to fail to qualify as a like-kind exchange
under Section 1031 of the Code; (l) except as may be consistent with normal
salary reviews, increase the rate of compensation or benefits payable or to
become payable to any System employees or make any material change in personnel
policies; or (m) take or omit to take any action that would cause Seller to be
in breach of any of its representations or warranties in this Agreement.
7.2.3. Seller will deliver to Buyer correct and complete copies of (a)
monthly and quarterly financial statements and operating reports for the
Business and any reports with respect to the operations of a System prepared by
or for Seller and (b) all rate regulation documents that become available at any
time between the date of this Agreement and the Closing. All financial
statements so delivered will be prepared in accordance with GAAP on a basis
consistent with the Financial Statements.
22
7.2.4. Seller will cause its appropriate Affiliates to be bound by and
comply with the provisions of this Section 7.2 to the extent such Affiliates
own, operate or manage any of the Assets or Systems.
7.2.5. Seller will not, outside of the ordinary course of business
consistent with normal salary reviews, increase the rate of compensation of its
employees.
7.2.6. Seller will not, except in the ordinary course of business or
to fulfill legal obligations, engage in any hiring or employee compensation
practices except for changes in such practices implemented by Seller on a
company-wide basis.
7.3. Employee Matters.
7.3.1. Except as set forth in this Section 7.3.1, Buyer may, but will
have no obligation to, employ or offer employment to, all System Employees.
Within 30 days after the date of execution of this Agreement, Seller will
provide to Buyer a list of all System Employees by work location as of a recent
date, showing the original hire date, the then-current positions and rates of
compensation, rate type (hourly or salary) and scheduled hours per week, and
whether the employee is subject to an employment agreement, a collective
bargaining agreement or represented by a labor organization. The list will also
indicate which of such employees Seller desires to retain as Seller's employees
(the "Retained Employees"). Buyer will maintain such list in strict confidence.
Nothing in this paragraph precludes Seller from making any offers to System
Employees in order for such System Employee to remain an employee of Seller.
Such list will be updated as necessary to reflect new hires or other personnel
changes. Within 60 days after receipt of such list, or such other date as the
parties may agree, Buyer will provide Seller in writing a list of the System
Employees who Buyer will offer to employ following the Closing, subject only to
the pre-hire evaluations permitted by this Section 7.3.1, which list will not
include any Retained Employees. Buyer will provide in writing notification of
such offer, subject only to the pre-hire evaluations permitted by this Section
7.3.1, to each System Employee included on the list no later than 30 days prior
to the Closing. Seller will, and will cause its appropriate Affiliates to,
cooperate in all reasonable respects with Buyer to allow Buyer or its Affiliates
to evaluate the System Employees to make hiring decisions. In this regard, Buyer
will have the opportunity to make such appropriate pre-hire investigation of the
System Employees as it deems necessary, including the right to review personnel
files and the right to interview such employees during normal working hours so
long as such interviews are conducted after notice to Seller and do not
unreasonably interfere with Seller's operations and such investigations and
interviews do not violate any Legal Requirement. Except as otherwise required by
law, all employment offers will be for employment with substantially similar
responsibilities at a geographic location within a 35-mile radius of such System
Employee's primary place of employment and with the same base compensation as of
the Closing Date;
23
provided, however, that Buyer will offer and provide such System Employee
employee benefits that are no less favorable than those that are available to
similarly situated employees of Buyer including, but not limited to, such System
Employee's base compensation and other compensation Buyer provides for its
employees with comparable experience and length of service as of the Closing
Date. Buyer or its Affiliates may, if it wishes, condition any offer of
employment upon the employee's being an active employee at Closing, performance
and conduct remaining at a satisfactory level or above through Closing, passing
a pre-employment drug screening test, the completion of a satisfactory
background check and, if the employee is on Approved Leave of Absence, upon the
employee's return to full-time active service (with or without reasonable
accommodations) within 12 weeks after the Closing Date or, if earlier, on the
first Business Day following expiration of the employee's Approved Leave of
Absence. For purposes of this Agreement, employees on "Approved Leave of
Absence" means employees absent from work on the Closing Date and unable to
perform their regular job duties by reason of illness or injury under approved
plans or policies of the employer (other than an employee's absence for fewer
than 7 calendar days due to short term illness or injury not requiring written
approval by the employer) or otherwise absent from work under approved or unpaid
leave policies of the employer. Buyer will bear the expense of such examination
but Seller will, upon reasonable notice, cooperate in the scheduling of such
examinations so long as the examinations do not unreasonably interfere with
Seller's operations. The selection of employees to be offered employment by
Buyer will be made at the sole and absolute discretion of Buyer. As of the
Closing Date, Buyer will have no obligation to Seller, its Affiliates or to the
System Employees, with regard to any employee it has determined not to hire. As
of the Closing Date, Seller will, and will cause its appropriate Affiliates to,
terminate the employment of all System Employees who are hired by Buyer or its
Affiliates (the "Hired Employees") as of the Closing Date. Notwithstanding any
of the foregoing, from the date hereof until the Closing, and other than in
connection with offers of employment to such System Employees to take effect at
the Closing, Buyer will not solicit any System Employee for employment prior to
the Closing (other than through general advertisements), without the written
consent of Seller.
7.3.2. As of the Closing Date, Seller will be responsible for and will
cause to be discharged and satisfied in full all amounts due and owing to each
System Employee (whether or not such employees are hired by Buyer as of or after
the Closing) with respect to and in accordance with the terms of all
compensation plans or Seller Plans, including without limitation, any
compensation including salaries, commissions, deferred compensation, severance
(if applicable), insurance, pension, profit sharing, disability payment,
medical, sick pay, holiday, accrued and unused vacation or paid time off ("PTO")
in excess of the amount Buyer assumes pursuant to this Section, payments under
any incentive compensation or bonus agreement, in each case, which has accrued
prior to the Closing Date and other compensation or benefits to which they are
entitled for periods prior to the Closing Date (and, for Employees on Approved
Leave of Absence, such amounts accrued
24
through the date of their termination by Seller, or its appropriate Affiliate,
or their employment by Buyer, or its appropriate Affiliate, as set forth in
Section 7.3.1). Seller will satisfy any legal obligation with respect to
continuation of group health coverage required pursuant to Section 4980B of the
Code or Section 601, et seq., of ERISA, and shall specifically retain any and
all liability for such continuation coverage for any System Employee who does
not become employed by Buyer pursuant to this Agreement and any former employee
of Seller whose employment with Buyer terminated at any time prior to the
Closing Date. Any liability under the Worker Adjustment and Retraining
Notification Act, 29 U.S.C. Section 2101, et seq. ("WARN") with regard to any
employee terminated on or prior to the Closing Date, or not hired by Buyer on or
after the Closing Date, will, as a matter of contract between the parties, be
the responsibility of Seller. Buyer will cooperate with Seller and Seller's
Affiliates, if requested, in the giving of WARN notices on behalf of Seller.
7.3.3. If the transactions contemplated by this Agreement do not
result in a permissible distribution event under Section 401(k) of the Code, and
if the parties mutually agree to do so, Buyer and Seller will cooperate in
arranging transfers of the Hired Employee's balances between Seller's 401(k)
plan and any applicable 401(k) plan of Buyer. If such plan-to-plan transfers do
not occur, and if no permissible distribution is allowed, Buyer will notify
Seller of the date of termination, for any reason, of any former System Employee
who becomes a Hired Employee, in order to permit Seller, or its appropriate
Affiliate, to allow distribution of such employee's 401(k) account balance, as
soon as legally permitted.
7.3.4. Except as otherwise expressly provided pursuant to the terms of
this Agreement, Buyer will not have or assume any obligation or liability under
or in connection with any Seller Plan. In regard to any System Employee on an
Approved Leave of Absence, the responsibility for benefit coverage of such
System Employee, and liability for payment of benefits, will remain that of
Seller, or the appropriate Affiliate of Seller, until such employee becomes an
employee of the Buyer after the Closing pursuant to Section 7.3.1 or is
terminated by Seller or its appropriate Affiliate. For purposes of this
Agreement, the following claims and liabilities will be deemed to be incurred as
follows: (i) medical, dental and/or prescription drug benefits upon the
rendering of the medical, dental, pharmacy or other services giving rise to the
obligation to pay such benefits except with respect to such benefits provided in
connection with a continuous period of hospitalization, which will be deemed to
be incurred at the time of admission to the hospital; (ii) life, accidental
death and dismemberment and business travel accident insurance benefits and
workers' compensation benefits, upon the occurrence of the event giving rise to
such benefits; and (iii) salary continuation or other short-term disability
benefits, or long-term disability, upon commencement of the disability giving
rise to such benefit.
25
7.3.5. (a) Notwithstanding anything to the contrary herein, Buyer
will, unless otherwise required by law:
(i) upon receipt of a Schedule showing the vacation or PTO
balances and value of such balances of each Hired Employee (as defined below),
which Schedule will be delivered by Seller to Buyer within 10 days after the
Closing, credit each Hired Employee the amount of vacation or PTO time permitted
to be accrued by employees of Buyer in accordance with Buyer's standard
practices (to a maximum of four weeks) accrued and unused by him or her as a
System Employee through and including the Closing Date to the extent Buyer has
received an adjustment to the Purchase Price therefor; provided, however, that
if any Hired Employee has accrued vacation or PTO time in excess of the amount
transferred to Buyer, then Seller will, and will cause its appropriate Affiliate
to, pay to such employee the amount of such excess and Buyer will not assume any
liability or obligation in respect of such excess;
(ii) give each Hired Employee credit for such employee's
past service with Seller and its Affiliates as of the Closing Date as reflected
on the list required by Section 6.3.1 (which may include past service with any
prior owner or operator of the Systems or the Business) ("Past Service") for
purposes of eligibility to participate in Buyer's employee welfare benefit
(including medical, dental, flexible spending accounts, accident, life insurance
plans and programs, disability plans, and other employee welfare benefits) plans
("Buyer's Welfare Plans") that are generally available to similarly situated
employees of Buyer and such employees' dependents;
(iii) give each Hired Employee credit for such employee's
Past Service for purposes of (A) participation and vesting under Buyer's
employee 401(k) plan and other stock plans (but not for purposes of vesting or
benefit accruals under any such pension plan), savings plan, and/or
profit-sharing plan, and (B) participation, but not vesting, in other stock
plans that are generally available to similarly situated employees of Buyer;
(iv) give each Hired Employee credit for such employee's
Past Service for any waiting periods under Buyer's Welfare Plans that are
generally available to similarly situated employees of Buyer, and not subject
any Hired Employees to any limitations on benefits for any preexisting
conditions or requirements for evidence of insurability, provided that the
treatment is covered or level of benefit is available under Buyer's Welfare
Plans;
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(v) credit each Hired Employee under any Buyer group health
plan for any deductible amount and out-of-pocket expenses and similar limits
applicable and previously met by such Hired Employee as of the Closing Date
under any of the group health plans of Seller or its Affiliates for the plan
year in which the transfer of employment occurs; and
(vi) provide the Hired Employees as of the Closing Date with
employee benefits and cash compensation no less favorable in the aggregate than
those employee benefits and cash compensation that are generally available to
similarly situated employees of Buyer, and with respect to cash compensation
taking into account such Hired Employees' Past Service and his or her experience
and responsibilities as though such Hired Employees had been employed by Buyer
for the period of their Past Service.
(b) Notwithstanding anything set forth in Section 7.3.5(a),
Buyer will have no obligation to System Employees who are Employees on Approved
Leave of Absence until they become employees of Buyer pursuant to Section 6.3.1
hereof.
7.3.6. If Buyer discharges any Hired Employee without "Cause" within
120 days after the Closing Date, then Buyer will pay severance benefits to such
Hired Employee in accordance with Seller's severance benefit plan in effect as
of the Closing Date, the schedules of benefits of which are to be provided to
Buyer at the time of the Closing, and shall count such Hired Employee's Past
Service as well as such Hired Employee's period of employment with Buyer for
purposes of calculating severance benefits under such plan. Following such
120-day period, each Hired Employee will be covered under Buyer's severance
benefit plan and Buyer will count the period of employment with Buyer as well as
such Hired Employee's Past Service for purposes of calculating benefits under
such plan. For purposes of this Agreement, "cause" means (a) conviction
(including a plea of guilty or nolo contendere) of a crime involving theft,
fraud, dishonesty or moral turpitude, (b) intentional or grossly negligent
disclosure of confidential or trade secret information of Buyer (or any of its
Affiliates) to anyone who is not entitled to receive such information; (c) gross
omission or gross dereliction of any statutory or common law duty of loyalty to
Buyer or any of its Affiliates; (d) willful violation of Buyer's code of conduct
or other written policies or procedures; (e) repeated failure to carry out the
duties of the employee's position despite specific instruction to do so; or (f)
such other matters consistent with Buyer's employment policies, procedures or
agreements applicable to Buyer's employees who are similarly situated to the
discharged Hired Employee.
27
7.3.7. If Seller has, or acquires, a duty to bargain with any labor
organization with respect to any System Employees, then Seller will (i) give
prompt written notice of such development to Buyer, and (ii) not, without
Buyer's written consent, enter into any contract with such labor organization
that purports to bind Buyer, including any successor clause or other clause that
would have this purpose or effect. Seller acknowledges and agrees that Buyer has
not agreed to be bound, and will not be bound, without an explicit assumption of
such liability or responsibility by Buyer, by any provision of any collective
bargaining agreement or similar contract with any labor organization to which
Seller or any of Seller's Affiliates is or may become bound. Nothing in this
Section 7.3.7 will be deemed a waiver of either party's attorney-client
privilege.
7.3.8. Nothing in this Section 7.3 or elsewhere in this Agreement will
be deemed to make any employee of Seller a third party beneficiary of this
Agreement.
7.4. Leased Equipment. Seller will pay the remaining balances on any leases
for Equipment used in the Business and deliver title to such Equipment free and
clear of all Encumbrances (other than Permitted Encumbrances) to Buyer at the
Closing.
7.5. Required Consents, Estoppel Certificates, Nondisturbance Agreements
and Franchise Renewals.
7.5.1. Seller will use its best efforts to obtain, as soon as possible
and at its expense, all the Required Consents, in form and substance reasonably
satisfactory to Buyer. Buyer will cooperate with Seller to obtain all Required
Consents, but Buyer will not be required to agree to any changes in, or the
imposition of any condition to the transfer to Buyer of, any Seller Contract or
Governmental Permit as a condition to obtaining any Required Consent. Seller
also will use its best efforts to obtain, at its expense, such estoppel
certificates or similar documents from lessors and other Persons who are parties
to Seller Contracts that require third party consents as Buyer may request.
7.5.2. Seller shall use its commercially reasonable efforts to obtain
with respect to each lease of Real Property set forth on SCHEDULE 6, (i) if such
lease is identified by Buyer as being subordinate to the rights of any holder of
an Encumbrance on the affected leased premises securing an obligation of the
owner of the fee interest in such leased premises, a nondisturbance and
attornment agreement substantially to the effect of EXHIBIT B (mortgagor),
executed by each holder of such an Encumbrance; and if such lease is a sublease,
a nondisturbance and attornment agreement substantially to the effect of EXHIBIT
B (landlord), executed by the landlord under the prime or master lease; (ii) for
each lease that has not been recorded in the public records, execution of a
document suitable for recording in the public records and sufficient after
recording to constitute a memorandum of lease.
28
7.5.3. Seller will use its best efforts to obtain, and will cooperate
with Buyer to obtain, renewals or extensions, at the option of Buyer, of any
franchises which expire prior to the date which is three years following the
Closing Date or for which a valid notice of renewal pursuant to the formal
renewal procedures established by Section 626 of the Cable Act has not been
timely delivered to the appropriate Governmental Authority ("Extended
Franchises"), for terms running at least three years after the Closing Date and
upon other terms and conditions satisfactory to Buyer.
7.5.4. Seller will execute and deliver to the appropriate Governmental
Authority, the FCC Forms 394 prepared by Buyer with respect to each franchise as
to which such Form 394 is required within two Business Days after it receives
each such Form 394 from Buyer.
7.6. MDU Agreements. If requested by Buyer, Seller will use its
commercially reasonable efforts to obtain and deliver to Buyer prior to Closing,
for each multiple unit dwelling project that is subject to common ownership
which currently receives cable television service from the Business, a fully
executed MDU Agreement in substantially the form attached to this Agreement as
EXHIBIT D and having a term running at least 5 years after the Closing Date.
7.7. Title Commitments and Surveys.
7.7.1. After the execution of this Agreement, Buyer will order, at an
expense to be shared equally between Seller and Buyer, (a) commitments for
owner's title insurance policies on all Real Property owned by Seller, (b)
commitments for lessee's title insurance policies for all Real Property leased
by Seller which is used for headend or tower sites and (c) an ALTA survey
(including such items on Table A of the Minimum Standard Detail Requirements and
Classifications thereto that Buyer in its reasonable judgment determines are
desirable or necessary) on each parcel of owned Real Property for which a title
insurance policy is to be obtained. The title commitments will evidence a
commitment to issue an ALTA title insurance policy insuring good, marketable and
indefeasible fee simple (or leasehold, if applicable) title to each parcel of
the Real Property, subject only to Permitted Encumbrances, for such amount as
Buyer directs and will contain no exceptions except for items which in Buyer's
reasonable opinion do not adversely affect (other than in an immaterial way as
to any individual parcel) the good, marketable and indefeasible title to or
Buyer's access or quiet use or enjoyment of such Real Property in the manner the
Real Property is presently used or in the normal conduct of the Business. At the
Closing, Seller will cause Buyer to receive, at Seller's expense, title
commitments redated to the date and time of Closing. In the event Seller has not
eliminated or caused to be eliminated all unacceptable exceptions from such
policies or commitments prior to Closing, and Buyer elects to proceed with the
Closing, Buyer will be entitled to indemnification with respect to
29
such exceptions as provided in Section 11.2.
7.7.2. Title insurance policies on all Real Property in such amounts
as Buyer directs will be delivered to Buyer at Seller's expense within 30 days
after the Closing Date evidencing title to the Real Property vested in Buyer
consistent with the commitments delivered at the Closing pursuant to Section
7.7.1.
7.8. HSR Notification. If applicable, as soon as practicable after the
execution of this Agreement, but in any event no later than 30 days after such
execution, Seller and Buyer will each complete and file, or cause to be
completed and filed, any notification and report required to be filed under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR
Act"); and each such filing shall request early termination of the waiting
period imposed by the HSR Act. The parties shall use their reasonable best
efforts to respond as promptly as reasonably practicable to any inquiries
received from the Federal Trade Commission (the "FTC") and the Antitrust
Division of the Department of Justice (the "Antitrust Division") for additional
information or documentation and to respond as promptly as reasonably
practicable to all inquiries and requests received from any other Governmental
Authority in connection with antitrust matters. The parties shall use their
respective reasonable best efforts to overcome any objections which may be
raised by the FTC, the Antitrust Division or any other Governmental Authority
having jurisdiction over antitrust matters. Notwithstanding the foregoing, Buyer
shall not be required to make any significant change in the operations or
activities of the business (or any material assets employed therein) of Buyer or
any of its Affiliates, if Buyer determines in good faith that such change would
be materially adverse to the operations or activities of the business (or any
material assets employed therein) of Buyer or any of its Affiliates having
significant assets, net worth, or revenue. Notwithstanding anything to the
contrary in this Agreement, if Buyer, in its sole opinion, considers a request
from a governmental agency for additional data and information in connection
with the HSR Act to be unduly burdensome, Buyer may terminate this Agreement.
Within 10 days after receipt of a statement therefor, Seller will reimburse
Buyer for one-half of the filing fees payable by Buyer in connection with
Buyer's filing under the HSR Act.
7.9. No Shopping. None of Seller, its shareholders or any agent or
representative of any of them will, during the period commencing on the date of
this Agreement and ending with the earlier to occur of the Closing or the
termination of this Agreement, directly or indirectly (a) solicit or initiate
the submission of proposals or offers from any Person for, (b) participate in
any discussions pertaining to or (c) furnish any information to any Person other
than Buyer relating to, any direct or indirect acquisition or purchase of all or
any portion of the Assets.
7.10. Notification of Certain Matters. Seller will promptly notify Buyer of
any fact, event, circumstance or action (a) which, if known on the date of this
Agreement, would have
30
been required to be disclosed to Buyer pursuant to this Agreement or (b) the
existence or occurrence of which would cause any of Seller's representations or
warranties under this Agreement not to be correct and complete.
7.11. Risk of Loss; Condemnation.
7.11.1. Seller will bear the risk of any loss or damage to the Assets
resulting from fire, theft or other casualty (except reasonable wear and tear)
at all times prior to the Closing. If any such loss or damage is so substantial
as to prevent normal operation of any material portion of a System or the
replacement or restoration of the lost or damaged property within 20 days after
the occurrence of the event resulting in such loss or damage, Seller will
immediately notify Buyer of that fact and Buyer, at any time within 10 days
after receipt of such notice, may elect by written notice to Seller either (a)
to waive such defect and proceed toward consummation of the acquisition of the
Assets in accordance with terms of this Agreement or (b) terminate this
Agreement. If Buyer elects so to terminate this Agreement, Buyer and Seller will
be discharged of any and all obligations hereunder. If Buyer elects to
consummate the transactions contemplated by this Agreement notwithstanding such
loss or damage and does so, there will be no adjustment in the consideration
payable to Seller on account of such loss or damage but all insurance proceeds
payable as a result of the occurrence of the event resulting in such loss or
damage will be delivered by Seller to Buyer, or the rights to such proceeds will
be assigned by Seller to Buyer if not yet paid over to Seller, and Seller will
pay to Buyer (or Buyer may withhold from the Base Purchase Price) an amount
equal to the difference between the amount of such insurance proceeds and the
mutually agreed upon cost to return the damaged or lost Assets to the condition
immediately preceding such loss or damage.
7.11.2. If, prior to the Closing, any part of or interest in the
Assets is taken or condemned as a result of the exercise of the power of eminent
domain, or if a Governmental Authority having such power informs Seller or Buyer
that it intends to condemn all or any part of the Assets (such event being
called, in either case, a "Taking"), then Buyer may terminate this Agreement. If
Buyer does not elect to terminate this Agreement, then (a) Buyer will have the
sole right, in the name of Seller, if Buyer so elects, to negotiate for, claim,
contest and receive all damages with respect to the Taking, (b) Seller will be
relieved of its obligation to convey to Buyer the Assets or interests that are
the subject of the Taking, (c) at the Closing Seller will assign to Buyer all of
Seller's rights to all damages payable with respect to such Taking and will pay
to Buyer all damages previously paid to Seller with respect to the Taking and
(d) following the Closing, Seller will give Buyer such further assurances of
such rights and assignment with respect to the taking as Buyer may from time to
time reasonably request.
7.12. Lien and Judgment Searches. Seller will obtain (a) the results of a
lien search conducted by a professional search company of records in the offices
of the secretaries of
31
state in each state and county clerks in each county where there exist tangible
Assets, and in the state and county where Seller's principal offices are
located, including copies of all financing statements or similar notices or
filings (and any continuation statements) discovered by such search company and
(b) the results of a search of the dockets of the clerk of each federal and
state court sitting in the city, county or other applicable political
subdivision where the principal office or any material assets of Seller may be
located, with respect to judgments, orders, writs or decrees against or
affecting Seller or any of the Assets. The cost of such searches will be shared
equally between Buyer and Seller.
7.13. Transfer Taxes. Seller and Buyer will share equally the payment of
any state or local sales, use, transfer, excise, documentary or license taxes or
fees or any other charge (including filing fees) imposed by any Governmental
Authority with respect to the transfer of any of the Assets pursuant to this
Agreement.
7.14. Distant Broadcast Signals. If requested by Buyer, Seller will delete
prior to the Closing Date any distant broadcast signals which Buyer determines
will result in liability on the part of Buyer for copyright payments after
Closing in excess of those payable by Seller with respect to carriage of such
signals.
7.15. Letter to Programmers. Not later than 30 Business Days before the
Closing Date, Seller will transmit a letter in the form of EXHIBIT E to all
programmers from which Seller purchases programming.
7.16. Updated Schedules. Not less than five Business Days prior to Closing,
Seller will deliver to Buyer revised copies of SCHEDULES 1 through 13 which
shall have been updated and marked to show any changes occurring between the
date of this Agreement and the date of delivery; provided, however, that for
purposes of Seller's representations and warranties and covenants in this
Agreement, all references to the Schedules will mean the version of the
Schedules attached to this Agreement on the date of signing, and provided
further that if the effect of any such updates to Schedules is to disclose any
one or more additional properties, privileges, rights, interests or claims as
Assets, Buyer, at or before Closing, will have the right (to be exercised by
written notice to Seller) to cause any one or more of such items to be
designated as and deemed to constitute Excluded Assets for all purposes under
this Agreement.
7.17. Use of Seller's Name. For a period of 90 days after the Closing Date,
Buyer may continue to operate the Systems using the name Northland Cable
Television, Inc. and all derivations and abbreviations of such name and related
marks. Within 90 days after the Closing Date, Buyer will discontinue using and
will dispose of all items of stationery, business cards and literature bearing
such names or marks. Notwithstanding the foregoing, Buyer will not be required
to remove or discontinue using any such name or mark that is affixed to
converters or other items in or to be used in subscriber homes or properties, or
as
32
are used in a similar fashion making such removal or discontinuation
impracticable for Buyer.
7.18. Subscriber Billing Services. Seller will provide to Buyer, upon
request, access to and the right to use its billing system computers, software
and related fixed assets ("Transitional Billing Services") in connection with
the System acquired by Buyer for a period of up to 180 days following the
Closing to allow for conversion of existing billing arrangements. Buyer will
notify Seller at least 10 days prior to the Closing as to whether it desires
Transitional Billing Services from Seller. Buyer shall be responsible for the
reasonable out of pocket costs of Seller to provide Transitional Billing
Services; Provided, however, that for Transitional Billing Services continuing
after the 90th day from Closing, Buyer shall also pay $.28 per subscriber per
month.
7.19. Certain Notices. Seller will duly and timely file a valid request for
renewal under Section 626 of the Cable Act with the proper Governmental
Authority with respect to all cable television franchises of the Business that
will expire within 36 months after any date between the date of this Agreement
and the Closing Date.
7.20. Satisfaction of Conditions. Each party will use its best efforts to
satisfy, or to cause to be satisfied, the conditions to the obligations of the
other party to consummate the transactions contemplated by this Agreement, as
set forth in Section 9, provided that Buyer will not be required to agree to any
increase in the amount payable with respect to, or any modification that makes
more burdensome in any material respect, any of the Assumed Liabilities.
7.21. Confidentiality. Neither party will issue any press release or make
any other public announcement regarding this Agreement or the transactions
contemplated hereby without the consent of the other party. Each party will
hold, and will cause its employees, officers, consultants, advisors and agents
to hold, in confidence, the terms of this Agreement and any non-public
information concerning the other party obtained pursuant to this Agreement.
Notwithstanding the preceding provisions, a party may disclose such information
to the extent required by any Legal Requirement (including disclosure
requirements under federal and state securities laws), but the party proposing
to disclose such information will first notify and consult with the other party
concerning the proposed disclosure, to the extent reasonably feasible. Each
party also may disclose such information to employees, officers, consultants,
advisors, agents and actual or potential lenders whose knowledge is necessary to
facilitate the consummation of the transactions contemplated by this Agreement.
Each party's obligation to hold information in confidence will be satisfied if
it exercises the same care with respect to such information as it would exercise
to preserve the confidentiality of its own similar information.
7.22. Covenant Not to Compete.
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7.22.1 Except as permitted under Section 7.22.2, neither Seller nor
any Principal will engage, directly or indirectly, in any business (a
"Restricted Business") that owns or operates a cable television business in any
Service Area; except that this Section 7.22.1 will not prohibit (a) Seller or
any Principal from engaging in a Restricted Business in any community in which
Buyer and its Affiliates do not provide cable television service immediately
following the Closing Date and in which Seller or such Principal owns or
operates a cable television business on the date upon which Buyer or its
Affiliate first provides cable television service in such community, (b) Seller
or any Principal from acquiring or holding for investment purposes 5% or less of
any class or series of equity securities of any Person, which class is
registered under Section 12 of the Securities Exchange Act of 1934, as amended,
even if that Person is principally engaged in a Restricted Business, or (c)
Seller or any Principal from holding any interest less than a controlling
interest in any Person which after the date of acquisition of such interest
becomes engaged (but not principally engaged) in a Restricted Business. A Person
will be deemed to be principally engaged in a Restricted Business if a majority
of the operating revenues of such Person and its consolidated subsidiaries for
the most recent twelve-month period ended before the date of determination were
revenues derived from the Restricted Business.
7.22.2 The restrictions set forth in Section 7.22.1 will terminate and
have no further force or effect as of the second anniversary of the Closing
Date.
7.22.3 Each of the Principals are principals of Seller, will derive a
direct benefit from the transactions contemplated by this Agreement and, along
with Seller, acknowledge that Buyer has paid full and fair consideration for
their respective obligations under this Section 7.22. Seller and each of the
Principals acknowledge and agree that: (a) the obligations under this Section
7.22 are undertaken by Seller and the Principals in accord with Section
8-2-113(2)(a), Colorado Revised Statutes, and all other applicable Legal
Requirements, including all applicable statutes, ordinances and legal decisions
in each of the states of legal residence of each of the Principals; and (b) the
restrictions set forth in this Section 7.22 are fair and reasonable under the
circumstances.
7.22.4 Seller and each of the Principals acknowledge and agree that
any breach or threatened breach of any of the obligations under this Section
7.22, would cause immediate and irreparable harm to Buyer and that monetary
damages would not provide adequate relief. Without prejudice to other rights and
remedies that may be available to Buyer, Buyer will be entitled to obtain an
injunction or other equitable relief if Seller or any Principal breaches or
threatens to breach any of the terms of this Section 7.22, including temporary
injunctive relief without notice or opportunity to be heard and without the
requirement for the posting of a bond.
7.23. Retention of Books and Records. Following the Closing, Seller
shall give
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access to Buyer, its counsel, accountants and other authorized representatives
during normal business hours to Seller's materials, books, records and documents
which relate to the operations of the Business with respect to the System prior
to the Closing Date as may be reasonably necessary in connection with any
legitimate purpose (including the preparation of tax reports and returns and the
preparation of financial statements). Such access will be subject to the
generally applicable document retention policies of Seller, shall be subject to
reasonable advance written notice, will be conducted in a manner that is not
disruptive to Seller's business, and will be subject to any other reasonable
limitations imposed by Seller. Buyer shall have the right to make copies of such
materials at its own expense.
8. CLOSING.
The Closing will be held on a date specified by Buyer (upon five Business
Days prior notice to Seller) that is the last day of the month during which all
conditions to the Closing contained in this Agreement (other than those based on
acts to be performed at the Closing) have been satisfied or waived provided that
if Closing is in December, 2001, the Closing shall be December 27, 2001. The
Closing will be held at 10:00 a.m. local time at Buyer's office located at 188
Inverness Drive West, Englewood, Colorado 80112, or will be conducted by mail or
at such place and time as Buyer and Seller may agree.
9. CONDITIONS TO CLOSING.
9.1. Conditions to the Obligations of Buyer and Seller. The obligations of
each party to consummate the transactions contemplated by this Agreement to take
place at the Closing are subject to the satisfaction or waiver, to the extent
permitted by applicable Legal Requirements, at or prior to the Closing Date of
each of the following conditions:
9.1.1. If applicable, all filings required under the HSR Act have been
made and the applicable waiting period has expired or been earlier terminated
without the receipt of any objection or the commencement or threat of any
litigation by a Governmental Authority of competent jurisdiction to restrain the
consummation of the transactions contemplated by this Agreement.
9.1.2. No action, suit or proceeding is pending or threatened by or
before any Governmental Authority and no Legal Requirement has been enacted,
promulgated or issued or become or deemed applicable to any of the transactions
contemplated by this Agreement by any Governmental Authority, which would (a)
prohibit Buyer's ownership or operation of all or a material portion of any
System, the Business or the Assets, (b) compel Buyer to dispose of or hold
separate all or a material portion of any System, the Business or the Assets as
a result of any of the transactions contemplated by this Agreement, (c) if
determined adversely to Buyer's interest, materially impair the ability of Buyer
to realize the benefits of
35
the transactions contemplated by this Agreement or have a material adverse
effect on the right of Buyer to exercise full rights of ownership of the Systems
or (d) prevent or make illegal the consummation of any transactions contemplated
by this Agreement.
9.2. Conditions to the Obligations of Buyer. The obligations of Buyer to
consummate the transactions contemplated by this Agreement to take place at the
Closing are subject to the satisfaction or waiver, to the extent permitted by
applicable Legal Requirements, at or prior to the Closing Date, of each of the
following conditions:
9.2.1. All representations and warranties of Seller contained in this
Agreement are, if specifically qualified by materiality, true in all respects
and, if not so qualified, are true in all material respects, in each case on and
as of the Closing Date with the same effect as if made on and as of the Closing
Date.
9.2.2. Seller has performed and complied with each obligation,
agreement, covenant and condition required by this Agreement to be performed or
complied with by Seller at or prior to the Closing.
9.2.3. Seller has executed (or caused to be executed) and delivered to
Buyer each of the following items:
(a) a Bill of Sale and Assignment and Assumption Agreement in
the form attached as EXHIBIT A;
(b) a general warranty deed in a form reasonably acceptable to
Buyer (and complying with applicable state laws) with respect to each parcel of
owned Real Property, duly executed and acknowledged and in recordable form,
warranting good and clear record and marketable and indefeasible fee simple
title to such Real Property against all persons claiming by, through or under
Seller, subject only to Permitted Encumbrances, and in form sufficient to permit
the title company to issue the title policy described in Section 7.7.1 to Buyer
with respect to such Real Property;
(c) one or more Assignments of Leases in the form attached as
EXHIBIT C and, if requested by Buyer, short forms or memoranda of such
Assignments in recordable form;
(d) a memorandum of lease for each lease described in clause
(ii) of Section 7.5.2;
(e) with respect to each lease described in clause (i) of
Section 7.5.2 a Nondisturbance and Attornment Agreement in the appropriate form
attached as EXHIBIT B;
36
EXHIBIT B;
(f) an affidavit of Seller, under penalty of perjury, that
Seller is not a "foreign person" (as defined in the Foreign Investment in Real
Property Tax Act and applicable regulations) and that Buyer is not required to
withhold any portion of the consideration payable under this Agreement under the
provisions of such Act in the form attached as EXHIBIT F; and
(g) motor vehicle title certificates and such other transfer
instruments as Buyer may deem necessary or advisable to transfer the Assets to
Buyer and to perfect Buyer's rights in the Assets.
9.2.4. Seller has delivered to Buyer: (a) evidence, in form and
substance reasonably satisfactory to Buyer, that all of the Required Consents
have been obtained or given and are in full force and effect; and (b) to the
extent obtained, the estoppel certificates or similar documents described in
Section 7.5.1.
9.2.5. The Extended Franchises have been obtained on terms and
conditions satisfactory to Buyer.
9.2.6. The Systems shall have no less than 5,760 EBSs in the aggregate
as determined as of the last day of the calendar month immediately preceding the
Closing Date.
9.2.7. With respect to any retransmission consent agreements for
broadcast signals carried on the Systems that are included as part of the
Excluded Assets, all required retransmission consents for continued carriage of
such broadcast signals shall have been obtained on terms and conditions
reasonably acceptable to Buyer.
9.2.8. Buyer has received documentation satisfactory to it of the
termination of all programming agreements and retransmission consent agreements
as they relate to the Systems or deletion of the Systems from Seller's ongoing
programming agreements that are not being assumed by Buyer, without obligation
for payment of any amounts under such programming agreements and retransmission
consent agreements by Buyer.
9.2.9. Seller has delivered releases, in form satisfactory to Buyer,
of all Encumbrances affecting any of the Assets (other than Permitted
Encumbrances) and a certificate of no taxes due with respect to Seller and the
Assets issued by appropriate state taxing authorities as of a date no earlier
than 10 days prior to the Closing.
9.2.10. Buyer has received the title insurance commitments described
in Section 7.7.1.
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9.2.11. Seller has delivered to Buyer: (a) a certificate, dated the
Closing Date, signed by Seller's chief executive officer and president, stating
that to their knowledge, the conditions set forth in Sections 9.2.1 and 9.2.2
are satisfied; and (b) such other documents as Buyer may reasonably request in
connection with the transactions contemplated by this Agreement.
9.3. Conditions to Obligations of Seller. The obligations of Seller to
consummate the transactions contemplated by this Agreement to take place at the
Closing are subject to the satisfaction or waiver by Seller, to the extent
permitted by applicable law, at or prior to the Closing Date, of each of the
following conditions:
9.3.1. Buyer has paid the portion of the Base Purchase Price required
to be paid at the Closing, as adjusted in accordance with this Agreement.
9.3.2. All representations and warranties of Buyer contained in this
Agreement are, if specifically qualified by materiality, true and correct in all
respects and, if not so qualified, are true and correct in all material
respects, in each case on and as of the Closing Date with the same effect as if
made on and as of the Closing Date, except for changes permitted or contemplated
by this Agreement.
9.3.3. Buyer has performed and complied with each obligation,
agreement, covenant and condition required by this Agreement to be performed or
complied with by Buyer at or prior to the Closing.
9.3.4. Buyer has executed and delivered to Seller an Assumption
Agreement in the form attached as EXHIBIT D.
9.3.5. Buyer has delivered to Seller the following: (a) a certificate,
dated the Closing Date, signed by an executive officer of Buyer, stating that to
his or her knowledge, the conditions set forth in Sections 9.3.2 and 9.3.3, are
satisfied; and (b) such other documents as Seller may reasonably request in
connection with the transactions contemplated by this Agreement.
9.3.6. The Systems shall have no less than 5,760 EBSs in the aggregate
as determined as of the last day of the calendar month immediately preceding the
Closing Date.
9.4. Waiver of Conditions. Any party may waive in writing any or all of the
conditions to its obligations under this Agreement.
10. TERMINATION.
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10.1. Events of Termination. This Agreement may be terminated and the
transactions contemplated by this Agreement may be abandoned at any time
prior to the Closing:
10.1.1. by the mutual written consent of Buyer and Seller;
10.1.2. by either party, if the transactions contemplated by this
Agreement to take place at the Closing have not been consummated by December 31,
2001, for any reason other than (i) a breach or default by such party in the
performance of any of its obligations under this Agreement or (ii) the failure
of any representation or warranty of such party to be accurate;
10.1.3. by Buyer under the conditions described in Section 7.8 or
Section 7.11; or
10.1.4 by Buyer if the Closing has not been consummated by December
27, 2001.
10.2. Liabilities in Event of Termination. The termination of this
Agreement will in no way limit any obligation or liability of any party based on
or arising from a breach or default by such party with respect to any of its
representations, warranties, covenants or agreements contained in this
Agreement, except that Buyer will have no liability in any event upon exercise
of its right to terminate pursuant to Section 10.1.3 or 10.1.4.
10.3. Procedure Upon Termination. In the event of the termination of this
Agreement by Buyer or Seller pursuant to this Section 10, written notice of such
termination will promptly be given by the terminating party to the other.
11. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION.
11.1. Survival of Representations and Warranties. The covenants,
representations and warranties of Seller in this Agreement will survive the
Closing until 11:59 p.m. on the first anniversary of the Closing Date; except
for representations and warranties set forth in Section 5.2 (solely with respect
to Authority), Section 5.4 (solely with respect to title to the Assets (other
than Real Property)), Section 5.8 (Environmental Matters), Section 5.13 (Taxes)
and Section 5.14 (Employment Matters), which shall survive without limitation.
The covenants, representations and warranties of Buyer in this Agreement will
survive the Closing until 11:59 PM on the first anniversary of the Closing Date;
except for representations and warranties set forth in Section 6.2 (solely with
respect to Authority).
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11.2. Indemnification by Seller. Seller will indemnify, defend and hold
harmless Buyer and its shareholders and its and their respective Affiliates, and
the shareholders, directors, officers, employees, agents, successors and assigns
of any of such Persons, from and against:
11.2.1. all losses, damages, liabilities, deficiencies or obligations
of or to Buyer or any such other indemnified Person resulting from or arising
out of (a) any breach of any representation or warranty made by Seller in this
Agreement, (b) any breach of any covenant, agreement or obligation of Seller
contained in this Agreement, (c) any act or omission of Seller with respect to,
or any event or circumstance related to, the ownership or operation of the
Assets or the conduct of the Business, which act, omission, event or
circumstance occurred or existed prior to or at the Closing Date, without regard
to whether a claim with respect such matter is asserted before or after the
Closing Date, including any matter described on SCHEDULES 8 through 11, (d) any
liability or obligation not included in the Assumed Liabilities, (e) any title
defect Seller fails to eliminate as an exception from a title insurance
commitment referred to in Section 7.7.1, (f) any claim that the transactions
contemplated by this Agreement violate the Worker Adjustment and Retraining
Notification Act, as amended, or any similar state or local law or any bulk
transfer or fraudulent conveyance laws of any jurisdiction, (g) the presence,
generation, removal or transportation of a Hazardous Substance on or from any of
the Real Property prior to the Closing Date, including the costs of removal or
clean-up of such Hazardous Substance and other compliance with the provisions of
any Environmental Laws (whether before or after Closing), or (h) any rate refund
ordered by any Governmental Authority for periods prior to the Closing Date; and
11.2.2. all claims, actions, suits, proceedings, demands, judgments,
assessments, fines, interest, penalties, costs and expenses (including
settlement costs and reasonable legal, accounting, experts' and other fees,
costs and expenses) incident or relating to or resulting from any of the
foregoing.
11.3. Indemnification by Buyer. Buyer will indemnify, defend and hold
harmless Seller and Seller's shareholders and its and their respective
Affiliates, and the shareholders, directors, officers, employees, agents,
successors and assigns, from and against:
11.3.1. all losses, damages, liabilities, deficiencies or obligations
of or to Seller or any such other indemnified Person resulting from or arising
out of (a) any breach of any representation or warranty made by Buyer in this
Agreement, (b) the breach of any covenant, agreement or obligation of Buyer
contained in this Agreement or (c) the failure by Buyer to perform any of its
obligations in respect of the Assumed Liabilities; and
11.3.2. all claims, actions, suits, proceedings, demands, judgments,
assessments, fines, interest, penalties, costs and expenses (including
settlement costs and
40
reasonable legal, accounting, experts' and other fees, costs and expenses)
incident or relating to or resulting from any of the foregoing.
11.4. Limitations on Indemnity.
11.4.1. Notwithstanding anything to the contrary contained in this
Agreement, no indemnification for Losses may be recovered from Seller under
Section 11.2.1 of this Agreement unless and until the aggregate amount of such
indemnifiable Losses to the Buyer under Section 11.2.1 exceeds $100,000. The
aggregate amount of indemnification for Losses which may be recovered from
Seller shall not exceed the amount of $1,900,000; provided however, that such
maximum limit shall not apply to (a) claims made under Section 11.2.1(a) for the
representations and warranties set forth in Section 5.2 (solely as it applies to
authorization); Section 5.4 (solely as it applies to title of assets (other than
Real Property)); Section 5.8 (Environmental Matters); and Section 5.13 (Taxes);
(b) any claims made under Section 11.2.1(c), irrespective of whether such claims
also constitute claims under Section 11.2.1(a), or (c) the obligation to pay
post-Closing adjustments pursuant to Section 3.3.
11.4.2. Notwithstanding anything to the contrary contained in this
Agreement, no indemnification for Losses may be recovered from Buyer under
Section 11.3.1 of this Agreement unless and until the aggregate amount of such
indemnifiable Losses to the Seller under Section 11.3.1 exceeds $100,000. The
aggregate amount of indemnification for Losses which may be recovered from Buyer
shall not exceed the amount of $1,900,000; provided however, that such maximum
limit shall not apply to (a) claims made under Section 11.3.1(a) for the
representations and warranties set forth in Section 6.2 (solely as it applies to
authorization); (b) any claims made under Section 11.3.1(b), irrespective of
whether such claims also constitute claims under Section 11.3.1(a), or (c) the
obligation to pay post-Closing adjustments pursuant to Section 3.3.
11.5. Third Party Claims. Promptly after the receipt by any party of notice
of any claim, action, suit or proceeding by any Person who is not a party to
this Agreement (collectively, an "Action"), which Action is subject to
indemnification under this Agreement, such party (the "Indemnified Party") will
give reasonable written notice to the party from whom indemnification is claimed
(the "Indemnifying Party"). The Indemnified Party will be entitled, at the sole
expense and liability of the Indemnifying Party, to exercise full control of the
defense, compromise or settlement of any such Action unless the Indemnifying
Party, within a reasonable time after the giving of such notice by the
Indemnified Party, (a) admits in writing to the Indemnified Party the
Indemnifying Party's liability to the Indemnified Party for such Action under
the terms of this Section 11, (b) notifies the Indemnified Party in writing of
the Indemnifying Party's intention to assume such defense, (c) provides evidence
reasonably satisfactory to the Indemnified Party of the Indemnifying Party's
ability to pay the amount, if any, for which the Indemnified Party may be liable
as a result of such Action and (d) retains legal counsel reasonably satisfactory
to the Indemnified Party to conduct the
41
defense of such Action. The other party will cooperate with the party assuming
the defense, compromise or settlement of any such Action in accordance with this
Agreement in any manner that such party reasonably may request. If the
Indemnifying Party so assumes the defense of any such Action, the Indemnified
Party will have the right to employ separate counsel and to participate in (but
not control) the defense, compromise or settlement of the Action, but the fees
and expenses of such counsel will be at the expense of the Indemnified Party
unless (i) the Indemnifying Party has agreed to pay such fees and expenses, (ii)
any relief other than the payment of money damages is sought against the
Indemnified Party or (iii) the Indemnified Party will have been advised by its
counsel that there may be one or more defenses available to it which are
different from or additional to those available to the Indemnifying Party, and
in any such case that portion of the fees and expenses of such separate counsel
that are reasonably related to matters covered by the indemnity provided in this
Section 11 will be paid by the Indemnifying Party. No Indemnified Party will
settle or compromise any such Action for which it is entitled to indemnification
under this Agreement without the prior written consent of the Indemnifying
Party, unless the Indemnifying Party has failed, after reasonable notice, to
undertake control of such Action in the manner provided in this Section 11.5. No
Indemnifying Party will settle or compromise any such Action (A) in which any
relief other than the payment of money damages is sought against any Indemnified
Party or (B) in the case of any Action relating to the Indemnified Party's
liability for any tax, if the effect of such settlement would be an increase in
the liability of the Indemnified Party for the payment of any tax for any period
beginning after the Closing Date, unless the Indemnified Party consents in
writing to such compromise or settlement.
11.6. Payments for Indemnification Amounts. Amounts payable by either party
in respect of any amounts that are subject to the indemnification obligations of
such party under Section 11.2 or 11.3 will be payable by the Indemnifying Party
within five days of receiving written notice of such losses from the Indemnified
Party and will bear interest at the rate per annum publicly announced from time
to time by The Bank of New York as its prime rate (the "Prime Rate") plus 300
basis points from the date such losses are determined. At the election of either
party, Buyer may satisfy any amounts owed to it by Seller under Section 11.2 out
of the Holdback, without the accrual of interest, and the Holdback will be
reduced accordingly. Nothing in the preceding sentence will be deemed a
limitation on Seller's obligations under Section 11.2.
12. MISCELLANEOUS.
12.1. Parties Obligated and Benefited. Subject to the limitations set forth
below, this Agreement will be binding upon the parties and their respective
assigns and successors in interest and will inure solely to the benefit of the
parties and their respective assigns and successors in interest, and no other
Person will be entitled to any of the benefits conferred by this Agreement.
Without the prior written consent of Buyer, Seller will not assign any of its
rights under this Agreement or delegate any of its duties under this Agreement,
provided that
42
Buyer may assign any or all of its rights under this Agreement (a) to a
"qualified intermediary" engaged by Seller to effectuate a deferred like-kind
exchange under Section 1031 of the Code, and Buyer agrees in connection with
such an assignment to take such actions and execute such documents as may be
reasonably requested by Buyer in order to facilitate Buyer's intent to
effectuate a deferred like-kind exchange or (b) to an Affiliate.
12.2. Notices. Any notice, request, demand, waiver or other communication
required or permitted to be given under this Agreement will be in writing and
will be deemed to have been duly given only if delivered in person or by first
class, prepaid, registered or certified mail, or sent by courier or, if receipt
is confirmed, by telecopier:
To Buyer at:
c/o AT&T Broadband
188 Inverness Drive West
Englewood, Colorado 80112
Attention: Dan Buchanan
Telecopy: (303) 858-3469
with a copy (which shall not constitute notice) to: Karla Tartz, Associate
General Counsel
To Seller at:
Northland Cable Television, Inc.
1201 Third Avenue, Suite 3600
Seattle, Washington 98101
Attention: Gary S. Jones and Laura N. Williams
Telecopy: (206) 623-8034
Any party may change the address to which notices are required to be sent by
giving notice of such change in the manner provided in this Section 12.2. All
notices will be deemed to have been received on the date of delivery or on the
third Business Day after mailing in accordance with this Section 12.2, except
that any notice of a change of address will be effective only upon actual
receipt.
12.3. Attorneys' Fees. In the event of any action or suit based upon or
arising out of any alleged breach by any party of any representation, warranty,
covenant or agreement contained in this Agreement, the prevailing party will be
entitled to recover reasonable attorneys' fees and other costs of such action or
suit from the other party.
43
12.4. Right to Specific Performance. Seller acknowledges that the unique
nature of the Assets to be purchased by Buyer pursuant to this Agreement renders
money damages an inadequate remedy for the breach by Seller of its obligations
under this Agreement, and Seller agrees that in the event of such breach, Buyer
will upon proper action instituted by it, be entitled to a decree of specific
performance of this Agreement.
12.5. Waiver. This Agreement or any of its provisions may not be waived
except in writing. The failure of any party to enforce any right arising under
this Agreement on one or more occasions will not operate as a waiver of that or
any other right on that or any other occasion.
12.6. Captions. The article and section captions of this Agreement are for
convenience only and do not constitute a part of this Agreement.
12.7. CHOICE OF LAW. THIS AGREEMENT AND THE RIGHTS OF THE PARTIES UNDER IT
WILL BE GOVERNED BY AND CONSTRUED IN ALL RESPECTS IN ACCORDANCE WITH THE LAWS OF
THE STATE OF COLORADO, WITHOUT REGARD TO THE CONFLICTS OF LAWS RULES OF
COLORADO.
12.8. Rights Cumulative. All rights and remedies of each of the parties
under this Agreement will be cumulative, and the exercise of one or more rights
or remedies will not preclude the exercise of any other right or remedy
available under this Agreement or applicable law.
12.9. Further Actions. Seller and Buyer will execute and deliver to the
other, from time to time at or after the Closing, for no additional
consideration and at no additional cost to the requesting party, such further
assignments, certificates, instruments, records, or other documents, assurances
or things as may be reasonably necessary to give full effect to this Agreement
and to allow each party fully to enjoy and exercise the rights accorded and
acquired by it under this Agreement.
12.10. Time. Time is of the essence under this Agreement. If the giving of
any notice or the performance of any act required or permitted under this
Agreement falls on a day which is not a Business Day, the time for the giving of
such notice or the performance of such act will be extended to the next
succeeding Business Day.
12.11. Late Payments. If either party fails to pay the other any amounts
when due under this Agreement, the amounts due will bear interest from the due
date to the date of payment at the Prime Rate plus 300 basis points, adjusted as
and when changes in the Prime Rate are made.
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12.12. Counterparts. This Agreement may be executed in counterparts, each
of which will be deemed an original.
12.13. Entire Agreement. This Agreement (including the Schedules and
Exhibits referred to in this Agreement, which are incorporated in and constitute
a part of this Agreement) and the Transaction Documents contain the entire
agreement of the parties and supersedes all prior oral or written agreements and
understandings with respect to the subject matter. This Agreement may not be
amended or modified except by a writing signed by the parties.
12.14. Severability. Any term or provision of this Agreement which is
invalid or unenforceable will be ineffective to the extent of such invalidity or
unenforceability without rendering invalid or unenforceable the remaining rights
of the Person intended to be benefitted by such provision or any other
provisions of this Agreement.
12.15. Construction. This Agreement has been negotiated by Buyer and Seller
and their respective legal counsel, and legal or equitable principles that might
require the construction of this Agreement or any provision of this Agreement
against the party drafting this Agreement will not apply in any construction or
interpretation of this Agreement.
12.16. Expenses. Except as otherwise expressly provided in this Agreement,
each party will pay all of its expenses, including attorneys' and accountants'
fees, in connection with the negotiation of this Agreement, the performance of
its obligations and the consummation of the transactions contemplated by this
Agreement.
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The parties have executed this Asset Purchase Agreement as of the day and year
first above written.
NORTHLAND CABLE TELEVISION, INC.
By:
--------------------------------------------
Name: Gary S. Jones
Title: President
TCI CABLE PARTNERS OF ST. LOUIS, L.P.
By: Heritage Cablevision of Massachusetts, Inc.,
as general partner
By:
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Name: Alfredo Di Blasio
Title: Vice President
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