EXHIBIT 10.11
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ASSET PURCHASE AGREEMENT
BETWEEN
COXCOM, INC.
AND
MEDIACOM CALIFORNIA LLC
DATED
MAY 22, 1997
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TABLE OF CONTENTS
1. DEFINED TERMS .........................................................1
1.1. "Accounts Receivable" ..........................................1
1.2. "Agreement" ....................................................1
1.3. "Assets" .......................................................1
1.4. "Business Day" .................................................2
1.5. "Closing" ......................................................2
1.6. "Closing Date" .................................................2
1.7. "Code" .........................................................2
1.8. "Communications Act" ...........................................2
1.9. "Compensation Arrangement" .....................................2
1.10. "Consents" .....................................................2
1.11. "Contracts" ....................................................2
1.12. "Employee Plan" ................................................2
1.13. "Environmental Laws" ...........................................3
1.14. "Equivalent Subscriber" ........................................3
1.15. "ERISA" ........................................................4
1.16. "FAA" ..........................................................4
1.17. "FCC" ..........................................................4
1.18. "Franchises" ...................................................4
1.19. "Franchising Authorities" ......................................4
1.20. "Governmental Authority" .......................................4
1.21. "Governmental Permits" .........................................4
1.22. "Material Adverse Effect" ......................................4
1.23. "Multiemployer Plan" ...........................................4
1.24. "Permitted Encumbrances" .......................................5
1.25. "Personal Property" ............................................5
1.26. "Qualified Intermediary" .......................................5
1.27. "Real Property" ................................................5
1.28. List of Additional Definitions .................................5
2. SALE AND PURCHASE OF ASSETS ...........................................6
2.1. Agreement to Sell and Purchase .................................6
2.2. Excluded Assets ................................................7
2.3. Deposit ........................................................8
2.4. Purchase Price .................................................8
2.5. Adjustments and Prorations .....................................8
2.6. Assumption of Liabilities and Obligations .....................11
2.7. Financial and Tax Reporting ...................................11
3. REPRESENTATIONS AND WARRANTIES OF SELLER .............................12
3.1. Organization, Standing and Authority ..........................12
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3.2. Authorization and Binding Obligation ..........................12
3.3. Absence of Conflicting Agreements .............................12
3.4. Governmental Permits ..........................................12
3.5. Real Property .................................................13
3.6. Personal Property .............................................13
3.7. Contracts .....................................................13
3.8. Consents ......................................................14
3.9. Information on System .........................................14
3.10. Financial Statements ..........................................15
3.11. Employee Benefit Plans ........................................15
3.12. Labor Relations ...............................................15
3.13. Taxes, Returns and Reports ....................................16
3.14. Claims and Legal Actions ......................................16
3.15. Environmental Matters .........................................16
3.16. Compliance with Laws ..........................................16
3.17. Conduct of Business in Ordinary Course ........................17
3.18. FCC and Copyright Compliance ..................................17
3.19. Assets ........................................................19
3.20. Bonds .........................................................19
3.21. Accounts Receivable ...........................................19
3.22. Intangibles ...................................................19
3.23. No Other Authorizations .......................................19
3.24. No Undisclosed Liabilities ....................................19
3.25. Liabilities to Customers ......................................19
3.26. Restoration ...................................................20
3.27. Overbuilds ....................................................20
4. REPRESENTATIONS AND WARRANTIES OF BUYER ..............................20
4.1. Organization, Standing and Authority ..........................20
4.2. Authorization and Binding Obligation ..........................20
4.3. Absence of Conflicting Agreements .............................20
4.4. Buyer Qualification ...........................................21
5. COVENANTS OF THE PARTIES .............................................21
5.1. Conduct of the Business of the System .........................21
5.2. Access to Information .........................................22
5.3. Confidentiality ...............................................23
5.4. Publicity .....................................................23
5.5. Consents ......................................................23
5.6. Cooperation ...................................................24
5.7. Taxes, Fees and Expenses ......................................25
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5.8. Brokers .......................................................25
5.9. Risk of Loss ..................................................25
5.10. Employee Benefit Matters ......................................26
5.11. Bonds, Letters of Credit, Etc. ................................27
5.12. Noncompetition ................................................28
5.13. Transitional Services .........................................28
5.14. Title Insurance ...............................................28
5.15. Use of Seller's Name ..........................................28
5.16. Adverse Changes ...............................................29
5.17. Forms 394 .....................................................29
5.18. Monthly Financial Statements ..................................29
5.19. Reporting Requirements ........................................29
5.20. Certain Retransmission Contracts ..............................30
6. CONDITIONS PRECEDENT TO OBLIGATIONS OF BUYER
AND SELLER TO CLOSE ..................................................30
6.1. Conditions Precedent to Obligations of Buyer to Close .........30
6.2. Conditions Precedent to Obligations of Seller to Close ........31
7. CLOSING AND CLOSING DELIVERIES .......................................32
7.1. Closing .......................................................32
7.2. Like-Kind Exchange ............................................32
7.3. Deliveries by Seller ..........................................32
7.4. Deliveries by Buyer ...........................................33
8. TERMINATION ..........................................................34
8.1. Method of Termination .........................................34
8.2. Rights Upon Termination .......................................34
9. SURVIVAL OF REPRESENTATIONS AND WARRANTIES
AND INDEMNIFICATION ..................................................35
9.1. Representations and Warranties ................................35
9.2. Indemnification by Seller .....................................35
9.3. Indemnification by Buyer ......................................35
9.4. Procedure for Indemnification .................................36
9.5. Limitation on Indemnification; Exclusive Remedy ...............37
10. MISCELLANEOUS ........................................................38
10.1. Notices .......................................................38
10.2. Benefit and Binding Effect ....................................38
10.3. Bulk Transfer .................................................39
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10.4. Governing Law .................................................39
10.5. Headings ......................................................39
10.6 Gender and Number .............................................39
10.7. Entire Agreement ..............................................39
10.8. Cooperation and Further Assurances ............................39
10.9. Waiver of Compliance; Consents ................................40
10.10. Severability ..................................................40
10.11. Counterparts ..................................................40
10.12. No Third Party Beneficiaries ..................................40
10.13. Construction ..................................................40
10.14. Time of the Essence ...........................................40
10.15. Definition of Knowledge .......................................40
10.16. Cure ..........................................................40
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LIST OF EXHIBITS AND SCHEDULES
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Exhibit A List of Franchises
Exhibit B Form of Deposit Escrow Agreement
Exhibit C Form of Franchise Transfer Consent
Exhibit D-1 Form of Opinion of Seller's Counsel
Exhibit D-2 Form of Opinion of Seller's FCC Counsel
Exhibit E Form of Opinion of Buyer's Counsel
Schedule 2.2 Excluded Assets
Schedule 2.6 Assumed Liabilities
Schedule 3.4 Governmental Permits
Schedule 3.5 Real Property
Schedule 3.6 Personal Property
Schedule 3.7 Contracts
Schedule 3.8 Consents
Schedule 3.9.3 System Rate Information
Schedule 3.9.4 System Channel Lineup Information
Schedule 3.9.5 Additional System Information
Schedule 3.10 Financial Statements
Schedule 3.11 Employee Benefit Plans
Schedule 3.12 Labor Relations
Schedule 3.13 Taxes, Returns and Reports
Schedule 3.14 Claims and Legal Actions
Schedule 3.15 Environmental Matters
Schedule 3.17 Exceptions to Conduct of Business in Ordinary Course
Schedule 3.18 FCC and Copyright Compliance
Schedule 3.20 Bonds
Schedule 3.22 Intangibles
Schedule 3.24 Undisclosed Liabilities
Schedule 3.27 Overbuilds
Schedule 5.1 Conduct of the System
Schedule 6.1.7 Bank MAC
ASSET PURCHASE AGREEMENT
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THIS ASSET PURCHASE AGREEMENT is dated May 22, 1997, by and between
Mediacom California LLC ("Buyer"), a Delaware limited liability company, and
CoxCom, Inc. ("Seller"), a Delaware corporation.
RECITALS:
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A. Seller owns and operates the cable television system serving the areas
in and around Sun City in Riverside County, California and providing cable
television services to customers pursuant to the Franchises (as defined below)
listed on Exhibit A (the "System").
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B. Seller desires to sell, and Buyer wishes to buy, all of Seller's
assets used in the operation of the System and the cable television business
related thereto for the price and on the terms and conditions hereinafter set
forth.
C. Seller intends to transfer such assets in a transaction to which
Section 1031 of the Code (as defined below) applies, and Buyer is willing to
take such steps as are appropriate on its part to enable Seller's transfer to so
qualify, including, without limitation, the transfer of the assets and the
consideration through the use of a Qualified Intermediary (as defined below).
AGREEMENTS:
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In consideration of the above recitals and the covenants and agreements
contained herein, Buyer and Seller agree as follows:
1. DEFINED TERMS
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The following terms shall have the following meanings in this Agreement:
1.1. "Accounts Receivable" means, as of the Closing Date, the rights of
Seller to payment for services billed by Seller in connection with its operation
of the System in the ordinary course of business (including, without limitation,
those billed to subscribers of the System, but excluding any rights to payment
for advertising time provided by Seller) and unpaid prior to the Closing Date as
reflected on the billing records of Seller relating to the System.
1.2. "Agreement" means this Asset Purchase Agreement.
1.3. "Assets" means all the tangible and intangible assets presently or
hereafter owned, leased or used by Seller in connection with the conduct of the
business or operations of the System, including, without limitation, those
specified in detail in Section 2.1 but excluding those specified in Section 2.2.
1.4. "Business Day" means any day other than Saturday, Sunday or a day on
which banking institutions in New York City, New York or Atlanta, Georgia are
required or authorized to be closed.
1.5. "Closing" means the consummation of the transaction contemplated by
this Agreement in accordance with the provisions of Section 7.
1.6. "Closing Date" means the date of the Closing specified in Section 7.
1.7. "Code" shall mean the Internal Revenue Code of 1986, as amended, and
the regulations thereunder, or any subsequent legislative enactment thereof, as
in effect from time to time.
1.8. "Communications Act" means the Communications Act of 1934, as
amended, and the rules and regulations thereunder, as in effect from time to
time.
1.9. "Compensation Arrangement" shall mean any written plan or
compensation arrangement other than an Employee Plan or a Multiemployer Plan
that provides to employees of Seller employed at the System any compensation or
other benefits, whether deferred or not, in excess of base salary or wages and
excluding overtime pay, including, but not limited to, any bonus or incentive
plan, stock rights plan, deferred compensation arrangement, stock purchase plan,
severance pay plan and any other perquisites and employee fringe benefit plan.
1.10. "Consents" means all of the consents, permits, approvals or other
action of Governmental Authorities and other third parties necessary to permit
the transfer of the Assets to Buyer or otherwise to consummate lawfully the
transaction contemplated hereby.
1.11. "Contracts" means all pole attachment and conduit agreements,
personal property leases, real property leases, subscription agreements with
customers for cable services provided by the System, maintenance agreements,
retransmission consent agreements and other agreements, written or oral
(including any amendments and other modifications thereto) to which Seller is a
party and that relate to the Assets or the business or operations of the System
(other than the Franchises, and other than programming agreements and any other
contracts that are Excluded Assets) that are either (i) in effect on the date
hereof (other than those that expire by their terms and are not renewed prior to
Closing); or (ii) entered into by Seller in the ordinary course of business of
the System as permitted by this Agreement between the date hereof and the
Closing Date.
1.12. "Employee Plan" shall mean any written pension, retirement, profit-
sharing, deferred compensation, vacation, severance, bonus, incentive, medical,
vision, dental, disability, life insurance or any other employee benefit plan as
defined in Section 3(3) of ERISA (other than a Multiemployer Plan) to which
Seller contributes or which Seller sponsors or maintains or by which Seller
otherwise is bound, that provides benefits to employees of Seller employed at
the System.
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1.13. "Environmental Laws" shall mean the following: (i) Clean Air Act (42
U.S.C. (S) 7401, et seq.); (ii) Clean Water Act (33 U.S.C. (S) 1251 et seq.);
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(iii) Resource Conservation and Recovery Act (42 U.S.C. (S) 6901 et seq.); (iv)
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Comprehensive Environmental Response, Compensation and Liability Act of 1980 (42
U.S.C. (S) 9601, et seq.; (v) Safe Drinking Water Act (42 U.S.C. (S) 300f et
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seq.); (vi) Toxic Substances Control Act (15 U.S.C. (S) 2601, et seq.); (vii)
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Rivers and Harbors Act of 1899 (33 U.S.C. (S) 401, et seq.); (viii) Endangered
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Species Act of 1973 (16 U.S.C. (S) 1531, et seq.); and (ix) Occupational Safety
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and Health Act of 1970 (29 U.S.C. (S) 651 et seq.); all as amended.
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1.14. "Equivalent Subscriber" shall mean an active customer for basic
cable service either in a single household, a commercial establishment or in a
multi-unit dwelling (including a hotel unit); provided, however, that the number
of customers in a multi-unit dwelling or commercial establishment that obtain
service on a "bulk-rate" basis shall be determined by dividing the gross bulk-
rate billings for both basic cable service and CPST (but not billings from a la
carte tiers or premium services, installation or other non-recurring charges,
converter rental, new product tier or from any outlet or connection other than
such customer's first (except in the case of a hotel unit), or from any pass-
through charge for sales taxes, line-itemized franchise fees, fees charged by
the FCC and the like) attributable to such multi-unit dwelling or commercial
establishment during the most recent billing period ended prior to the date of
calculation (but excluding billings in excess of a single month's charge) by the
retail rate charged during that billing period to individual households for
combined basic cable service and CPST offered by the System, such rate as of the
date of this Agreement being $23.04 (excluding a la carte tiers or premium
services, installation or other nonrecurring charges, converter rental, new
product tier or from any outlet or connection other than the first or from any
pass-through charges for sales taxes, line-itemized franchise fees, fees charged
by the FCC and the like). For purposes of this definition (i) "basic cable
service" shall mean the tier of cable television service that includes the
retransmission of local broadcast signals as defined by the Communications Act;
(ii) "CPST" shall mean the tier of cable television service immediately above
basic cable service offered by the System providing for a package of programming
that includes satellite-delivered services; (iii) an "active customer" shall
mean any person, commercial establishment or multi-unit dwelling at any given
time that is paying for and receiving basic cable service from the System who
has an account that is not more than 60 days past due (except for past due
amounts of $10 or less, provided such account is otherwise current), provided
that for purposes of this definition, an "active customer" does not include (a)
any person, commercial establishment or multi-unit dwelling that as of the date
of calculation has not paid in full, without discount (unless discounted
pursuant to Marketing Programs (as defined in Section 3.9.5 below) conducted in
the ordinary course of business), the charges for at least one month of the
services ordered, including deposit and installation charges, if any, due in
connection with such customer's initially obtaining cable television service
from the System, (b) any courtesy account, (c) any customer that comes within
the definition of "active customer" because such customer's account (or any part
thereof) has been compromised or written off, other than in the ordinary course
of business consistent with past practices for reasons such as service
interruptions, but not for the purpose of making such customer qualify as an
Equivalent Subscriber or (d) any account that has a disconnect request pending
or that is scheduled to be disconnected for any reason, except for any customer
who has a disconnect request pending in connection with a transfer of service
within the System's service area; and (iv)
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the number of days past due of a customer account shall be determined from the
first day of the period for which the applicable billing relates.
1.15. "ERISA" shall mean the Employee Retirement Income Security Act
of 1974, as amended, and the regulations thereunder, as in effect from time to
time.
1.16. "FAA" means the Federal Aviation Administration.
1.17. "FCC" means the Federal Communications Commission.
1.18. "Franchises" means all franchise agreements, franchise
applications, operating permits and similar governing agreements, instruments,
statutes, ordinances, approvals, authorizations, and similar rights obtained
from any Franchising Authority which are necessary or required in order to
operate the System and provide cable television services thereto, including all
amendments thereto and renewals or modifications thereof.
1.19. "Franchising Authorities" means all Governmental Authorities
which have issued municipal or county cable franchises relating to the operation
of the System or before which are pending any franchise applications filed by
Seller relating to the operation of the System.
1.20. "Governmental Authority" means (i) the United States of
America, (ii) any state, commonwealth, territory or possession of the United
States of America and any political subdivision thereof (including counties,
municipalities and the like) or (iii) any agency, authority or instrumentality
of any of the foregoing, including any court, tribunal, department, bureau,
commission or board.
1.21. "Governmental Permits" means all Franchises, domestic
satellite, business radio and other licenses, earth station registrations, and
all authorizations and permits relating to the System granted to Seller by any
Governmental Authority, including all amendments thereto and modifications
thereof.
1.22. "Material Adverse Effect" means any of (a) a material adverse
effect on the operations of the System, taken as a whole, or (b) a material
adverse effect on the assets of the System, taken as a whole, or (c) a material
adverse effect on the financial condition of the System, taken as a whole, in
each case other than matters affecting the cable television industry generally
(including, without limitation, legislative, regulatory or litigation matters)
and matters relating to or arising from national economic conditions (including,
without limitation, financial and capital markets).
1.23. "Multiemployer Plan" means a plan, as defined in ERISA Section
3(37) or 4001 (a)(3), to which Seller or any trade or business which would be
considered a single employer with Seller under Section 400 l(b)(l) of ERISA
contributed, contributes or is required to contribute that provides benefits to
employees of Seller employed at the System.
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1.24. "Permitted Encumbrances" shall mean any of the following liens
or encumbrances: (i) landlord's liens and liens for current taxes, assessments
and governmental charges not yet due or being contested in good faith by
appropriate proceedings; (ii) statutory liens or other encumbrances that are
minor or technical defects in title that do not, individually or in the
aggregate, materially affect the value, marketability or utility of the Assets
as presently utilized or that do not, individually or in the aggregate, exceed
$25,000; (iii) such liens, liabilities or encumbrances as are Assumed
Liabilities; (iv) leased interests in property leased to others; (v)
restrictions set forth in, or rights granted to Franchising Authorities as set
forth in, the Franchises or applicable laws relating thereto; and (vi) zoning,
building or similar restrictions, easements, rights-of-way, reservations of
rights, conditions or other restrictions or encumbrances relating to or
affecting the Real Property, that do not materially interfere with the use of
such Real Property in the operation of the System as presently conducted.
1.25. "Personal Property" means all of the machinery, equipment,
tools, vehicles, furniture, leasehold improvements, office equipment, plant,
inventory, spare parts, supplies and other tangible and intangible personal
property, including, without limitation, the Governmental Permits, the Contracts
and the Accounts Receivable, that are owned, leased or held by Seller and used,
useful or held for use as of the date hereof in the conduct of the business or
operations of the System, plus such additions thereto and deletions therefrom
arising in the ordinary course of business and as permitted by this Agreement
between the date hereof and the Closing Date.
1.26. "Qualified Intermediary" means an entity constituting a
"qualified intermediary" within the definition set forth in Treas. Reg. (S)
1.1031(k)-1(g)(4).
1.27. "Real Property" means all of the real property interests of
Seller, including without limitation fee interests in real estate (together with
the buildings and other improvements located thereon), leasehold interests in
real estate, easements, licenses, rights to access, rights-of-way and other real
property interests that are (i) leased by Seller and used as of the date hereof
in the business or operations of the System; or (ii) owned by Seller and used as
of the date hereof in the business or operations of the System, plus such
additions thereto and deletions therefrom arising in the ordinary course of
business and permitted by this Agreement between the date hereof and the Closing
Date.
1.28. List of Additional Definitions. The following is a list of some
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additional terms used in this Agreement and a reference to the Section hereof in
which such term is defined:
Term Section
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Ad Sales Certificate 2.5.9
Advertising Agreement 2.5.3
Assumed Liabilities 2.6
Authorizations 3.23
Bank MAC 6.1.7
Billing Services 5.13
Buyer Preamble
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Buyer's 401(k) Plan 5.10.5
Confidential Information 5.3
Claimant 9.4.1
Copyright Act 3.18.2
Deposit 2.3
Escrow Agent 2.3
Escrow Agreement 2.3
Excluded Assets 2.2
Final Report 2.5.7
Financial Statements 3.10
Indemnifying Party 9.4.1
Marketing Programs 3.9.5
Preliminary Report 2.5.6
Purchase Price 2.4
Seller Preamble
Seller's 401(k) Plan 5.10.5
Subscriber Count 2.5.5(i)
Subscriber Estimate 2.5.5(i)
System Recitals
Taxes 3.13
Threshold Amount 9.5.1
Transferred Employees 5.10.1
2. SALE AND PURCHASE OF ASSETS
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2.1. Agreement to Sell and Purchase. Subject to the terms and
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conditions set forth in this Agreement, Seller hereby agrees to sell, transfer
and deliver to Buyer on the Closing Date, and Buyer agrees to purchase from
Seller on the Closing Date, all of the Assets, free and clear of any claims,
liabilities, mortgages, liens, pledges, conditions, charges or encumbrances of
any nature whatsoever except for Permitted Encumbrances, more specifically
described as follows:
2.1.1. The Personal Property;
2.1.2. The Real Property;
2.1.3. The Governmental Permits;
2.1.4. The Contracts;
2.1.5. The Accounts Receivable and all advertising commissions
receivable under the Advertising Agreement (as defined in Section 2.5.3 below);
2.1.6. All of Seller's proprietary information, technical
information and data, machinery and equipment warranties, maps, computer discs
and tapes, plans, diagrams, blueprints
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and schematics, including filings with the Franchising Authorities and the FCC
relating to the System (other than the materials described in Section 2.2.2
hereof);
2.1.7. All choses in action of Seller relating to the System;
2.1.8. Subject to Section 2.2.2, all books and records
relating to the business or operations of the System, including executed copies
of the Contracts and all correspondence and memoranda relating thereto, customer
records and all records required by the Franchising Authorities and the FCC to
be kept, subject to the right of Seller to have such books and records made
available to Seller for a reasonable period, not to exceed three years from the
Closing Date; and
2.1.9. The goodwill and going concern value generated by
Seller with respect to the System, if any.
2.2. Excluded Assets. The Assets shall exclude the following
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assets (the "Excluded Assets"):
2.2.1. Seller's cash on hand as of the Closing Date and all
other cash in any of Seller's bank or savings accounts, including, without
limitation, customer advance payments and deposits; any and all bonds, surety
instruments, insurance policies and all rights and claims thereunder, letters of
credit or other similar items and any cash surrender value in regard thereto,
and any stocks, bonds, certificates of deposit and similar investments;
2.2.2. Any books and records that Seller is required by law
to retain and any correspondence, memoranda, books of account, tax reports and
returns and the like related to the System other than those described in Section
2.1.8, subject to the right of Buyer to have access to and to copy for a
reasonable period, not to exceed three years from the Closing Date, and Seller's
corporate minute books and other books and records related to internal corporate
matters and financial relationships with Seller's lenders and affiliates;
2.2.3. Any claims, rights and interest in and to any refunds
of federal, state or local franchise, income or other taxes or fees of any
nature whatsoever for periods prior to the Closing Date including, without
limitation, fees paid to the U.S. Copyright Office or any choses in action owned
by Seller relating to such refunds;
2.2.4. All programming agreements and retransmission consent
agreements of Seller, including those relating to or benefitting the System
(other than the local programming agreements, retransmission consents and
must-carry notices listed on Schedule 3.7);
2.2.5. Except as provided in Section 5.15, all trademarks,
trade names, service marks, service names, logos and similar proprietary rights
of Seller whether or not used in the business of the System;
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2.2.6. Any Employee Plan, Compensation Arrangement or
Multiemployer Plan;
2.2.7. Any and all assets and rights of Seller unrelated to the
System;
2.2.8. Except as provided in Section 5.13, all equipment,
software and agreements related to Seller's accounting and customer billing
systems, the material items of which are listed on Schedule 2.2;
2.2.9. Any contracts, agreements or other arrangements between
Seller and its affiliates relating to corporate overhead, MIS, accounting
services, payroll system services, programming costs, employee benefits,
insurance coverage, marketing, advertising and converter repair services; and
2.2.10. The assets listed on Schedule 2.2.
2.3. Deposit. Upon execution and delivery of this Agreement by Seller
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and Buyer, Buyer shall deliver to Wachovia Bank of Georgia, N.A., Atlanta,
Georgia ("Escrow Agent") the sum of Three Hundred Thousand Dollars ($300,000)
(the "Deposit"), to secure the obligations of Buyer to close under this
Agreement. The Deposit shall be held in an escrow account and applied pursuant
to the terms of that certain Deposit Escrow Agreement, in the form attached
hereto as Exhibit B executed concurrently herewith by Buyer, Seller and Escrow
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Agent (the "Escrow Agreement"). Upon the Closing, the amount of the Deposit,
together with interest thereon, shall be delivered to Seller or, at Seller's
direction, to a Qualified Intermediary for purposes of effecting a like-kind
exchange of property under Section 1031 of the Code, and credited against the
Purchase Price. In the event of a termination of this Agreement, the Deposit
shall be paid in accordance with Section 8.2 hereof.
2.4. Purchase Price. The purchase price for the Assets shall be Eleven
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Million Five Hundred Thousand Dollars ($11,500,000) (the "Purchase Price"),
which amount shall be adjusted as provided in Section 2.5 below and be paid by
Buyer to Seller at Closing by wire transfer of immediately available funds to
Seller or, at Seller's direction, to a Qualified Intermediary for purposes of
effecting a like-kind exchange of property under Section 1031 of the Code.
2.5. Adjustments and Prorations.
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2.5.1. All expenses and other liabilities arising from the System
up until midnight on the day prior to the Closing Date, including franchise
fees, pole and other rental charges payable with respect to cable television
service, utility charges, real and personal property taxes and assessments
levied against the Assets, salesperson advances, property and equipment rentals,
applicable copyright or other fees, sales and service charges, taxes (except for
taxes arising from the transfer of the Assets hereunder), accrued vacation (only
to the extent Buyer honors such accrual as set forth in Section 5.10.4) and
similar prepaid and deferred items, shall be prorated between Buyer and Seller
in accordance with the principle that Seller shall be responsible for all
expenses, costs and liabilities allocable to the conduct of the business or
operations of the System for the
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period prior to the Closing Date, and Buyer shall be responsible for all
expenses, costs and liabilities allocable to the conduct of the business or
operations of the System on the Closing Date and for the period thereafter.
2.5.2. The Purchase Price shall be increased by an amount
equal to (i) 100% of the face amount of all cable service customer Accounts
Receivable that are outstanding 30 days or less from the first day of the period
to which any outstanding bill relates, (ii) 90% of the face amount of all cable
service customer Accounts Receivable that are outstanding more than 30 but fewer
than 61 days from the first day of the period to which any outstanding bill
relates and (iii) 0% of the face amount of all cable service customer Accounts
Receivable that are outstanding more than 60 days from the first day of the
period to which any outstanding bill relates.
2.5.3. The Purchase Price shall be increased by an amount
equal to any advertising commissions payable to Seller under that certain
Agreement, dated July 22, 1992, between King VideoCable Company and Dimension
Media Services, Inc. (the "Advertising Agreement") for advertising services
provided prior to the Closing Date.
2.5.4. The Purchase Price shall be reduced by an amount equal
to (i) any customer advance payments (i.e., customer payments received by Seller
prior to Closing but relating to service to be provided by Buyer after Closing)
and deposits (including any interest owing thereon), (ii) any other advance
payments (i.e., advertising payments received by Seller prior to Closing but
relating to service to be provided by Buyer after Closing) and (iii) Accounts
Receivable relating to services to be performed after the Closing and the
responsibility for which is assumed by Buyer under this Agreement.
2.5.5. The Purchase Price shall be reduced as follows:
(i) In the event the Closing occurs on or before
August 15, 1997, the Purchase Price shall be reduced by $1,200 for each
Equivalent Subscriber less than 9,500 as of the Closing Date, but, except as
provided below, the Purchase Price shall not be reduced pursuant to this Section
2.5.5(i) by an amount greater than $600,000. The number of such Equivalent
Subscribers shall be estimated as of Closing in Seller's Preliminary Report (as
defined in Section 2.5.6 below) delivered to Buyer in accordance with Section
2.5.6, and thereafter being subject to post-Closing verification and adjustment
under Section 2.5.7. In the event the number of Equivalent Subscribers estimated
as of Closing (the "Subscriber Estimate") is at least 9,000 but is determined
upon post-Closing verification and adjustment under Section 2.5.7 (the
"Subscriber Count") to be fewer than 9,000, the Purchase Price reduction
pursuant to this Section 2.5.5(i) shall not be subject to the $600,000
limitation set forth herein. In addition, in the event the Subscriber Estimate
is less than 9,000, Buyer elects to proceed with the Closing, and the Subscriber
Count is less than such Subscriber Estimate, Buyer shall be entitled to a
further Purchase Price reduction equal to $1,200 multiplied by the difference
between such Subscriber Estimate and the Subscriber Count, which shall not be
subject to the $600,000 limitation set forth herein.
9
(ii) In the event the Closing occurs after August 15,
1997, the Purchase Price shall be reduced by $1,200 for each Equivalent
Subscriber less than 9,600 as of the Closing Date, but, except as provided
below, the Purchase Price shall not be reduced pursuant to this Section
2.5.5(ii) by an amount greater than $600,000. The number of such Equivalent
Subscribers shall be estimated as of Closing in Seller's Preliminary Report (as
defined in Section 2.5.6 below) delivered to Buyer in accordance with Section
2.5.6, and thereafter being subject to post-closing verification and adjustment
under Section 2.5.7. In the event the Subscriber Estimate (as defined in Section
2.5.5(i) above) is at least 9,100 but the Subscriber Count (as defined in
Section 2.5.5(i) above) is less than 9,100, the Purchase Price reduction
pursuant to this Section 2.5.5(ii) shall not be subject to the $600,000
limitation set forth herein. In addition, in the event the Subscriber Estimate
is less than 9,100, Buyer elects to proceed with the Closing, and the Subscriber
Count is less than such Subscriber Estimate, Buyer shall be entitled to a
further Purchase Price reduction equal to $1,200 multiplied by the difference
between such Subscriber Estimate and the Subscriber Count, which shall not be
subject to the $600,000 limitation set forth herein.
2.5.6. At least ten Business Days prior to the Closing,
Seller will deliver to Buyer a report with respect to the System (the
"Preliminary Report"), showing in detail the preliminary determination of the
adjustments referred to in this Section 2.5, calculated in accordance with such
Section as of the Closing Date (or as of any other date(s) agreed to by the
parties) together with any documents substantiating the determination of the
adjustments to the Purchase Price proposed in the Preliminary Report. The
Preliminary Report will include a schedule setting forth advance payments and
deposits made to or by Seller, as well as Accounts Receivable information
relating to the System (showing sums due and their respective aging as of the
Closing Date) and the Subscriber Estimate. The parties shall negotiate in good
faith to resolve any dispute and to reach an agreement prior to the Closing Date
on such estimated adjustments as of the Closing Date or thereafter in accordance
with Section 2.5.7 below. The adjustment shown in the Preliminary Report, as
adjusted by agreement of the parties, will be reflected as an adjustment to the
Purchase Price payable at the Closing, provided Buyer has not given notice to
Seller that, in Buyer's reasonable opinion, the proposed adjustments are
materially incorrect. If Buyer gives Seller notice that in its reasonable
opinion, the proposed adjustments are materially incorrect, and if the parties
have not been able to resolve the matter prior to the Closing Date, any disputed
amounts shall be paid by the party to be charged with a disputed adjustment into
escrow, and shall be held by the Escrow Agent in accordance with the Escrow
Agreement until the adjustments are finally determined pursuant to Section
2.5.7, at which time Seller and Buyer shall deliver a joint written notice to
the Escrow Agent setting forth appropriate instructions as to the disposition
from escrow of such disputed amounts deposited thereunder, in accordance with
the Escrow Agreement.
2.5.7. Within 120 days after the Closing Date, Buyer shall
deliver to Seller a report with respect to the System (the "Final Report"),
showing in detail the final determination of any adjustments which were not
calculated as of the Closing Date and containing any corrections to the
Preliminary Report, together with any documents substantiating the final
calculation of the adjustments proposed in the Final Report. If Seller shall
conclude that the Final Report does not accurately reflect the adjustments and
prorations to be made to the Purchase Price in accordance with this Section 2.5,
Seller shall, within 30 days after its receipt of the Final Report, provide to
10
Buyer its written statement of any discrepancies believed to exist. Buyer and
Seller shall use good faith efforts to jointly resolve the discrepancies within
30 days of Buyer's receipt of Seller's written statement of discrepancies, which
resolution, if achieved, shall be binding upon all parties to this Agreement and
not subject to dispute or judicial review. If Buyer and Seller cannot resolve
the discrepancies to their mutual satisfaction within such 30-day period, Buyer
and Seller shall, within the following 10 days, jointly designate a national
independent public accounting firm to be retained to review the Final Report
together with Seller's discrepancy statement and any other relevant documents.
The parties agree that the foregoing independent public accounting firm shall
not be one that is, or within two years prior to the Closing Date has been,
regularly engaged by Buyer or Seller. Such firm shall report its conclusions as
to adjustments pursuant to this Section 2.5 which shall be conclusive on all
parties to this Agreement and not subject to dispute or judicial review. If,
after adjustment as appropriate with respect to the amount of the aforesaid
adjustments paid or credited at the Closing, Buyer or Seller is determined to
owe an amount to the other, the appropriate party shall pay such amount thereof
to the other, within three Business Days after receipt of such determination.
The cost of retaining such independent public accounting firm shall be borne
one-half by Seller and one-half by Buyer.
2.5.8. Within 30 days after the first anniversary of the Closing
Date, Buyer shall deliver to Seller a certificate (the "Ad Sales Certificate"),
signed by an officer of Buyer, certifying to his or her knowledge, without
personal liability, to the amount of advertising commissions earned and received
by Buyer pursuant to the Advertising Agreement in the 12-month period
immediately following Closing; provided that the Ad Sales Certificate shall be
accompanied by financial and other records sufficient to support the
certification set forth therein. If the amount of advertising commissions
calculated pursuant to this Section 2.5.8 is less than $75,000, Seller will pay
to Buyer the difference between $75,000 and the advertising commissions so
calculated within five Business Days after receipt of the Ad Sales Certificate.
2.6. Assumption of Liabilities and Obligations. As of the Closing
-----------------------------------------
Date, Buyer shall assume and pay, discharge and perform the following:
(collectively, the "Assumed Liabilities"): (i) all the obligations and
liabilities of Seller arising on or after the Closing Date under the
Governmental Permits and the Contracts; (ii) all obligations and liabilities of
Seller arising on or after the Closing Date to all customers and advertisers of
the System for any advance payments or deposits to the extent Buyer received a
credit therefor pursuant to Section 2.5.4; (iii) all obligations and liabilities
arising out of events occurring on or after the Closing Date related to Buyer's
ownership of the Assets or its conduct of the business or operations of the
System; and (iv) the obligations and liabilities listed on Schedule 2.6. All
other obligations and liabilities of Seller shall remain and be the obligations
and liabilities solely of Seller.
2.7. Financial and Tax Reporting. Buyer and Seller agree to use
---------------------------
reasonable business efforts to engage in the mutually agreeable sharing of
financial and valuation information in order to obtain mutually consistent
financial and tax reporting, to the greatest extent practicable.
11
3. REPRESENTATIONS AND WARRANTIES OF SELLER
----------------------------------------
Seller represents and warrants to Buyer as of the date of this
Agreement and as of the Closing Date, as follows:
3.1. Organization, Standing and Authority. Seller is a corporation
------------------------------------
duly organized, validly existing and in good standing under the laws of the
State of Delaware, and is qualified to conduct business as a foreign corporation
in each jurisdiction in which the property owned, leased or operated by it
requires it to be so qualified, except where the failure to so qualify would not
have a Material Adverse Effect, or a material adverse effect on the validity,
binding effect or enforceability of this Agreement or the ability of Seller to
perform its obligations hereunder. Seller has the requisite corporate power and
authority (i) to own, lease and use the Assets as presently owned, leased and
used by it; and (ii) to conduct the business and operations of the System as
presently conducted by it. Seller is not a participant in any joint venture or
partnership with any other person or entity with respect to any part of the
System's operations or the Assets.
3.2. Authorization and Binding Obligation. Seller has the corporate
------------------------------------
power and authority to execute and deliver this Agreement and to carry out and
perform all of its other obligations under the terms of this Agreement. All
corporate action by Seller necessary for the authorization, execution, delivery
and performance by it of this Agreement has been taken. This Agreement has been
duly executed and delivered by Seller and this Agreement constitutes the valid
and legally binding obligation of Seller, enforceable against it in accordance
with its terms, except (i) as rights to indemnity, if any, thereunder may be
limited by federal or state securities laws or the public policies embodied
therein; (ii) as enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium or similar laws from time to time in effect affecting
the enforcement of creditors' rights generally; and (iii) as the remedy of
specific performance and injunctive and other forms of equitable relief may be
subject to equitable defenses and to the discretion of the court before which
any proceeding therefor may be brought.
3.3. Absence of Conflicting Agreements. Subject to obtaining the
---------------------------------
Consents listed on Schedule 3.8, the execution, delivery and performance of this
Agreement by Seller will not (i) violate the articles of incorporation or bylaws
of Seller; (ii) violate any law, judgment, order, ordinance, injunction, decree,
rule or regulation of any Governmental Authority applicable to Seller with
respect to the Assets; or (iii) conflict with, constitute grounds for
termination of, result in a breach of, constitute a default under, accelerate or
permit the acceleration of any performance required by the terms of, any
agreement, instrument, license or permit to which Seller is a party or may be
bound and by which the Assets or the System are affected, excluding from the
foregoing clauses (ii) and (iii) such violations, conflicts, terminations,
breaches and defaults, which in the aggregate would not have a Material Adverse
Effect.
3.4. Governmental Permits. Schedule 3.4 includes a true and complete
--------------------
list of all Governmental Permits that are held for use in connection with the
operations of the System. True and complete copies of such Governmental Permits
(together with any and all amendments thereto) have been made available to
Buyer. Each of the Governmental Permits listed on Schedule 3.4 is
12
valid and binding on Seller and, to the knowledge of Seller, in full force and
effect in accordance with its terms. No proceedings are pending or, to Seller's
knowledge, threatened, to revoke, terminate, cancel or modify any of the
Governmental Permits. Except as listed on Schedule 3.4 and except for any
noncompliance or default that would not have a Material Adverse Effect, the
Seller and the operations of the System by Seller are in compliance with the
terms and conditions of the Governmental Permits and are not in default
thereunder.
3.5. Real Property. Schedule 3.5 contains a list of all leases of Real
-------------
Property to which Seller is a party as of the date hereof, and all
rights-of-way, easements, or other interests in Real Property to which Seller is
a party as of the date hereof, except for those rights-of-way, easements and
other interests which if not held by Seller would not have a Material Adverse
Effect. Seller does not own fee title to any real property used in the operation
of the System. To Seller's knowledge, there are not pending or threatened any
condemnation actions or special assessments or any pending proceedings for
changes in the zoning with respect to such Real Property or any part thereof and
Seller has not received any notice of the desire of any Governmental Authority
or other entity to take or use any Real Property or any part thereof. All
structures owned by Seller on the Real Property are structurally sound and in
good operating condition and repair (reasonable wear and tear excepted). Each
parcel of Real Property has access to all public roads and utilities necessary
for operation of the System with respect to such parcel.
3.6. Personal Property. Schedule 3.6 contains a list of all material
-----------------
items of machinery, equipment, vehicles, plant and other tangible Personal
Property used or held for use by Seller in the operation of the System. Seller
has, or will have on the Closing Date, good title to all Personal Property owned
by Seller, and as of the Closing Date none of the Personal Property will be
subject to any claims, liabilities, mortgages, liens, pledges, conditions,
charges or encumbrances of any nature whatsoever, except for Permitted
Encumbrances. Except as set forth in Schedule 3.6. the Personal Property is in
reasonable operating condition and repair (subject to normal wear and tear).
3.7. Contracts. Schedule 3.7 lists all Contracts in existence as of
---------
the date hereof except for: (i) subscription agreements with customers for the
cable services provided by the System; (ii) oral employment contracts and
miscellaneous service contracts terminable at will without penalty; and (iii)
other contracts not involving either liabilities under such contract exceeding
$5,000 per year or any material nonmonetary obligation. Notwithstanding the
foregoing, Schedule 3.7 contains a description of all oral employment contracts.
Seller has made available to Buyer true and complete copies of all written
Contracts disclosed in Schedule 3.7. Except as set forth thereon, all of the
Contracts listed on Schedule 3.7 are valid and binding and in full force and
effect and, to the knowledge of Seller, legally enforceable in accordance with
their terms upon the other parties thereto. There is not under any Contract any
breach or default by Seller or, to the knowledge of Seller, any other party
thereto, except for such breaches and defaults which, individually or in the
aggregate, would not have a Material Adverse Effect. Seller has not nor, to
Seller's knowledge, has any other party to any Contract given or received notice
of termination and, to Seller's knowledge, subject to the receipt of the
Consents set forth on Schedule 3.8, the consummation of the transactions
contemplated by this Agreement will not result in any such termination.
13
3.8. Consents. Except for the Consents described in Schedule 3.8 and
--------
Consents which if not obtained would not have a Material Adverse Effect or a
material adverse effect on Seller's ability to perform its obligations under
this Agreement, no consent, approval, permit or authorization of, or declaration
to or filing with any Governmental Authority or any other third party is
required to consummate this Agreement and the transaction contemplated hereby.
3.9. Information on System.
---------------------
3.9.1. As of the date of this Agreement (i) there are
approximately 145 miles of energized cable plant in the System of which
approximately 70% is underground and approximately 30% is aerial and (ii) not
less than 75% of the energized cable plant has a bandwidth capacity of at least
550 MHz.
3.9.2. As of the date of this Agreement, the energized cable
plant passes 13,100 "dwellings" (where "dwellings" means a home or other
residential unit that can legally be serviced by the System by using no more
than 300 feet of drop cable). Of these 13,100 "dwellings," 12,700 can legally be
serviced by the System by using no more than 150 feet of drop cable, with the
remaining 400 "dwellings" requiring more than 150 feet (but no more than 300
feet) of drop cable.
3.9.3. As of the date of this Agreement, the rates (including
installation charges) charged to customers for each class of service and
categories of customers for the System are set forth in Schedule 3.9.3.
3.9.4. The System duly and properly carries and delivers the
channels indicated in Schedule 3.9.4. Seller has obtained all required FCC
clearances for the operation of the System in all necessary aeronautical
frequency bands.
3.9.5. Schedule 3.9.5 sets forth the following System
information, true and correct in all material respects as of March 31, 1997
(unless otherwise noted):
(i) an inventory of converters;
(ii) the approximate number of Equivalent Subscribers;
(iii) a listing of all communities registered with the
FCC included within the Franchise areas;
(iv) the channel capacity of the System, all
broadcast and nonbroadcast stations or signals carried by the System, with a
breakdown as to each signal as between satellite and off-air reception, current
channel and frequencies utilized (including system radius and designated
coordinates reported to the FCC);
(v) all marketing programs pursuant to which any
customers of the System currently are receiving discounts, whether or not such
programs currently are being offered to
14
customers or potential customers of the System, and all marketing programs
active as of the date of this Agreement as described in written materials
distributed to customers or potential customers of the System (collectively,
"Marketing Programs");
(vi) all FCC call signals and licenses, including,
but not limited to, business radios, earth stations and microwave; and
(vii) all retransmission agreements and must carry
requests utilized by Seller in the operation of the System.
3.10. Financial Statements. Schedule 3.10 contains true and complete
--------------------
copies of unaudited financial statements of the System containing (i) balance
sheets and statements of income as of December 31, 1995 and 1996 and for each of
the years then ended and (ii) balance sheets and statements of income as of
March 31, 1997 and for the three-month period then ended (collectively, the
"Financial Statements"). The Financial Statements are prepared in accordance
with generally accepted accounting principles consistently applied, except for
the absence of footnotes and statements of cash flows and, with respect to the
interim Financial Statements, subject to normal recurring year-end adjustments.
The Financial Statements are in accordance with the books and records of Seller
and present fairly in all material respects the financial condition of the
System as of their respective dates and the results of operations for the
periods then ended.
3.11. Employee Benefit Plans.
----------------------
3.11.1. All of Seller's Employee Plans and Compensation
Arrangements providing benefits to employees of the System as of the date of
this Agreement are listed in Schedule 3.11, and copies of any such Employee
Plans and Compensation Arrangements (or related insurance policies) and any
amendments thereto have been made available to Buyer, along with copies of any
currently available employee handbooks or similar documents describing such
Employee Plans and Compensation Arrangements. Except as disclosed in Schedule
3.11, there is not now in effect or to become effective after the date of this
Agreement and until the Closing Date, any new Employee Plan or Compensation
Arrangement or any amendment to an existing Employee Plan or Compensation
Arrangement which will affect the benefits of employees or former employees of
the System.
3.11.2. Each of Seller's Employee Plans and Compensation
Arrangements has been administered without material exception in compliance with
its own terms and, where applicable, with ERISA, the Code, the Age
Discrimination in Employment Act and any other applicable federal or state laws.
3.11.3. Except as disclosed in Schedule 3.11, Seller does not
contribute to and is not required to contribute to any Multiemployer Plan with
respect to its employees at the System.
3.12. Labor Relations. Schedule 3.12 lists the names, dates of hire
---------------
and job titles (indicating whether such employee is full-time or part-time) of
all personnel whose work is
15
performed wholly or substantially for the System, and Seller has previously
delivered to Buyer the current rates of compensation and bonus arrangements for
all such employees. To the knowledge of Seller, Seller is not liable for any
arrearages of wages or any taxes or penalties relating thereto. Except as
disclosed in Schedule 3.12, Seller is not a party to or subject to any
collective bargaining agreements with respect to the System and the employees of
the System are not represented by a union. Seller has no written or oral
contracts of employment with any employee of the System, other than (i) oral
employment agreements terminable at will without penalty; or (ii) those listed
in Schedule 3.7.
3.13. Taxes, Returns and Reports. All federal, state and local tax
--------------------------
returns required to be filed by Seller through the date hereof in connection
with the operation of the System with respect to any federal, state or local
taxes (the "Taxes") have been filed. Except as set forth in Schedule 3.13, all
Taxes which are due and payable or disputed in good faith have been properly
accrued or paid or are being contested in good faith by appropriate proceedings.
3.14. Claims and Legal Actions. Except as set forth in Schedule 3.14,
------------------------
and except for any investigations and rule-making proceedings affecting the
cable industry generally, there is no (i) judgment or order outstanding, (ii)
legal action, counterclaim, suit, arbitration, proceeding or claim in progress
or, to the knowledge of Seller, pending, threatened against or relating to
Seller, the Assets or the business or operations of the System, or (iii) to the
knowledge of Seller, governmental investigation in progress, pending, threatened
against or relating to Seller, the Assets or the business or operations of the
System; other than those which would not have a Material Adverse Effect or would
not impair the ability of Seller to perform its obligations under this
Agreement.
3.15. Environmental Matters.
---------------------
3.15.1. Except as disclosed in Schedule 3.15 hereto, Seller's
operations with respect to the System, including with respect to the Real
Property, comply with all applicable Environmental Laws except for any
noncompliance that would not have a Material Adverse Effect. Except as described
in Schedule 3.15 hereto, to the knowledge of Seller no underground storage tanks
are located on the Real Property.
3.15.2. No hazardous substances, pollutants, contaminants or
petroleum products, as such terms are defined in Environmental Laws, are present
on the Real Property, whether inside or outside of any building, in such a
manner as may require remediation by Seller under any Contract or applicable
Environmental Laws.
3.15.3. Seller has not received written notice from any
Governmental Authority of any violation by Seller with respect to the System of
any Environmental Laws which violation has not been remedied or cured on or
prior to the date hereof.
3.16. Compliance with Laws. Seller has complied and is in compliance
--------------------
with all federal, state and local laws, rules, regulations and ordinances
applicable to the System, except for such noncompliance which would not have a
Material Adverse Effect.
16
3.17. Conduct of Business in Ordinary Course. Except as set forth on
--------------------------------------
Schedule 3.17, since December 31, 1996, (i) Seller has conducted the business
and operations of the System only in the ordinary course; (ii) Seller has not
suffered any changes, events or conditions that, individually or in the
aggregate, have had a Material Adverse Effect; (iii) except for assets or
properties retired due to obsolescence, there has been no sale, assignment or
transfer of any material assets or properties related to the System, or any
theft, damage, removal of property, destruction or casualty loss that has not
been repaired, replaced or restored by Seller and that, individually or in the
aggregate, has had a Material Adverse Effect; and (iv) there has been no waiver
or release of any material right or claim of Seller against any third party.
3.18. FCC and Copyright Compliance.
----------------------------
3.18.1. Seller is permitted under all applicable FCC rules,
regulations and orders to distribute the transmissions (whether television,
satellite, radio or otherwise) of video programming or other information that
the Seller makes available to customers of the System presently being carried to
the customers of and by the System and to utilize all carrier frequencies
generated by the operations of the System, and is licensed to operate all the
facilities required by law to be licensed, including, without limitation, any
business radio and any cable television relay service system, being operated as
part of the System. Except as provided in Schedule 3.18, Seller's operation of
the System and of any FCC-licensed or registered facility used in conjunction
with Seller's operation of the System, is in compliance with the FCC's rules and
regulations and the provisions of the Communications Act, except for such
noncompliance that would not have a Material Adverse Effect, and all required
reports of Seller to the FCC are materially true and correct and have been
timely filed. Seller makes no representation or warranty with respect to the
effect of the cable television industry-wide dispute concerning music licensing
fees.
3.18.2. Seller has deposited with the U.S. Copyright Office all
statements of account and other documents and instruments, and paid all
royalties, supplemental royalties, fees and other sums to the U.S. Copyright
Office under the Copyright Act of 1976, as amended (the "Copyright Act"), with
respect to the business and operations of the System as are required to obtain,
hold and maintain the compulsory license for cable television systems prescribed
in Section 111 of the Copyright Act. The System is in compliance with the
Copyright Act and the rules and regulations of the U.S. Copyright Office, except
for such noncompliance that would not have a Material Adverse Effect and except
as to potential copyright liability arising from the performance, exhibition or
carriage of any music on the System. To the knowledge of Seller, there is no
inquiry, claim, action or demand pending before the U.S. Copyright Office or
from any other party which questions the copyright filings or payments made by
Seller with respect to the System.
3.18.3. All necessary FAA approvals have been obtained with
respect to the height and location of towers used in connection with the
operation of the System and are listed in Schedule 3.4. The towers are being
operated in compliance with applicable FCC and FAA rules, except for such
noncompliance that would not have a Material Adverse Effect.
17
3.18.4. Without limiting the generality of the foregoing,
except to the extent that the failure to comply with any of the following could
not (either individually or in the aggregate) have a Material Adverse Effect and
except as set forth in Schedule 3.18 hereto:
(i) the Franchise areas have been registered with
the FCC;
(ii) all of the annual performance tests on the
System required under the rules and regulations of the FCC have been performed
and the results of such tests demonstrate satisfactory compliance in all
material respects;
(iii) the System currently meets or exceeds the
technical standards set forth in the rules and regulations of the FCC,
including, without limitation, the leakage limits contained in 47 C.F.R. Section
76.605(a)(11);
(iv) the System is being operated in compliance
with the provisions of 47 C.F.R. Sections 76.6 10 through 76.619 (mid-band and
super-band signal carriage), including 47 C.F.R. Section 76.611 (compliance with
the cumulative signal leakage index); and
(v) all notices to subscribers of the System
required by the rules and regulations of the FCC have been provided.
3.18.5. Except as set forth on Schedule 3.18, the carriage
of all television and radio station signals (other than satellite super
stations) by the System are permitted by valid transmission consent agreements
or by must-carry elections by broadcasters.
3.18.6. Seller is in compliance with its obligations with
regard to the protection of subscriber privacy pursuant to Section 631 of the
Communications Act except to the extent that failure to so comply could not
(either individually or in the aggregate) reasonably be expected to have a
Material Adverse Effect.
3.18.7. No Governmental Authority has notified Seller of its
application to be certified to regulate rates with respect to the System as
provided in 47 C.F.R. Section 76.910.
3.18.8. No Governmental Authority has notified Seller that it
has been certified and has adopted regulations required to commence regulation
with respect to the System as provided in 47 C.F.R. Section 76.910(c)(2).
3.18.9. Seller has established rates charged to customers
that are permitted rates under rules and regulations promulgated by the FCC
under the Communications Act, and any authoritative interpretation thereof,
except as set forth in Schedule 3.18.
3.18.10. No Governmental Authority has an order outstanding
requiring the Seller to reduce rates or issue refunds to subscribers.
18
3.19. Assets. Seller has no properties or assets used or held for use
------
in the System that are not included in the Assets, other than the Excluded
Assets, and except for the Excluded Assets, the Assets to be transferred to
Buyer at Closing include all material properties and assets necessary for the
conduct of the business of the System in the ordinary course of business in
substantially the same manner as conducted prior to the Closing Date.
3.20. Bonds. Seller has in force all bonds required to be obtained by
-----
Seller with respect to the System, including without limitation all bonds
required by Governmental Permits and Contracts, as set forth on Schedule 3.20.
Schedule 3.20 is true, complete and accurate in all material respects and the
bonds referred to therein are in full force and effect, and Seller has received
no notice of non-renewal or cancellation of such bonds.
3.21. Accounts Receivable. The Accounts Receivable have not been
-------------------
assigned to or for the benefit of any other person. The Accounts Receivable
reflected in the Financial Statements and all Accounts Receivable arising after
the dates thereof up to and including the Closing Date (to the extent not
heretofore or theretofore collected) arose and will arise from bona fide
transactions in the ordinary course of business.
3.22. Intangibles. Except as set forth on Schedule 3.22, Seller owns
-----------
or possesses royalty free licenses or other rights to use all trademarks,
service marks and trade names necessary to the operation of the System as
presently conducted without any conflict with, or infringement of, the rights of
others. Schedule 3.22 contains a true, correct and complete list of all
trademarks, service marks and trade names which are material to the operation of
the System. There is no claim pending, or, to Seller's knowledge, threatened
with respect to any such trademarks, service marks and trade names.
3.23. No Other Authorizations. Seller has obtained and is in
-----------------------
compliance with all consents, approvals, authorizations, waivers, orders,
licenses, certificates, permits and franchises (collectively, "Authorizations")
from all Governmental Authorities and other persons required for the operation
of the System as presently operated, all of which are in full force and effect
and enforceable in accordance with their respective terms and comply with all
applicable legal requirements, except for such Authorizations that if not
obtained would not have a Material Adverse Effect, and except for such
noncompliance that would not have a Material Adverse Effect.
3.24. No Undisclosed Liabilities. Except as and to the extent set
--------------------------
forth on Schedule 3.24, Seller does not have any liability or obligation (direct
or indirect, absolute, fixed, contingent or otherwise) arising out of the Assets
or operation of the System which would be required by generally accepted
accounting principles to be reflected or reserved on the Financial Statements
but which are not so reflected or reserved, and Seller has not incurred any such
liability or obligation since December 31, 1996 other than in the ordinary
course of business.
3.25. Liabilities to Customers. There are no obligations or
------------------------
liabilities to customers of the System except with respect to (i) prepayments or
deposits made by such customers as set forth in the Financial Statements or,
since December 31, 1996, incurred in the ordinary course of business
19
consistent with past practices, and (ii) the obligation to supply services to
customers in the ordinary course of business in accordance with and pursuant to
the terms of the Governmental Permits and Contracts.
3.26. Restoration. No property of any third party has been damaged,
-----------
destroyed, disturbed or removed in the process of construction or maintenance of
the System that has not been, or will not be, prior to the Closing, repaired,
restored or replaced, other than in connection with installation and work
projects undertaken in the ordinary course of business and on-going as of
Closing.
3.27. Overbuilds. To the knowledge of Seller and except as set forth
----------
in Schedule 3.27, (i) no construction programs have been undertaken or are
proposed or threatened to be undertaken by any municipality or other cable
television, multichannel multipoint distribution system or multipoint
distribution system provider or operator in any Franchise area served by the
System; and (ii) no franchise or other application or request of any person is
pending, threatened or proposed. Except as set forth on Schedule 3.27, Seller is
not, nor is an affiliate of Seller, a party to any agreement restricting the
ability of a third party to operate cable television systems in the Franchise
areas.
4. REPRESENTATIONS AND WARRANTIES OF BUYER
---------------------------------------
Buyer represents and warrants to Seller as of the date of this
Agreement and as of the Closing Date, as follows:
4.1. Organization, Standing and Authority. Buyer is a limited
------------------------------------
liability company duly organized, validly existing and in good standing under
the laws of the State of Delaware. Buyer has the requisite company power and
authority to execute and deliver this Agreement and to perform and comply with
all of the terms, covenants and conditions to be performed and complied with by
Buyer hereunder and thereunder.
4.2. Authorization and Binding Obligation. Buyer has the company power
------------------------------------
and authority to execute and deliver this Agreement and to carry out and perform
all of its other obligations under the terms of this Agreement. All company
action by Buyer necessary for the authorization, execution, delivery and
performance by Buyer of this Agreement has been taken. This Agreement has been
duly executed and delivered by Buyer and this Agreement constitutes the valid
and legally binding obligation of Buyer, enforceable against it in accordance
with its terms, except (i) as rights to indemnity, if any, thereunder may be
limited by federal or state securities laws or the public policies embodied
therein; (ii) as enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium or similar laws from time to time in effect affecting
the enforcement of creditors' rights generally; and (iii) as the remedy of
specific performance and injunctive and other forms of equitable relief may be
subject to equitable defenses and to the discretion of the court before which
any proceeding therefor may be brought.
4.3. Absence of Conflicting Agreements. Subject to obtaining the
---------------------------------
Consents listed on Schedule 3.8, the execution, delivery and performance of this
Agreement by Buyer will not: (i) require the consent, approval, permit or
authorization of, or declaration to or filing with any
20
Governmental Authority or any other third party; (ii) violate the articles of
organization or operating agreement of Buyer; (iii) violate any material law,
judgment, order, ordinance, injunction, decree, rule or regulation of any
Governmental Authority; or (iv) conflict with, constitute grounds for
termination of, result in a breach of, constitute a default under, or accelerate
or permit the acceleration of any performance required by the terms of, any
material agreement, instrument, license or permit to which Buyer is a party or
by which Buyer may be bound, such that Buyer could not perform hereunder and
acquire or operate the Assets.
4.4. Buyer Qualification. Buyer knows of no reason why it cannot
-------------------
become the franchisee pursuant to the Franchises, and to its knowledge has the
requisite qualifications to own and operate the System.
5. COVENANTS OF THE PARTIES
------------------------
5.1. Conduct of the Business of the System. Except as contemplated by
-------------------------------------
this Agreement, disclosed on Schedule 5.1 or with the prior written consent of
Buyer (which consent shall not be unreasonably withheld or delayed), between the
date hereof and the Closing Date, Seller shall operate the System in the
ordinary course of business in accordance with past practices and shall:
5.1.1. Not enter into any contract or commitment, except for any
contract or commitment entered into in the ordinary course of business and that
involves liabilities under such contract or commitment not exceeding $5,000 per
year;
5.1.2. Not sell, assign, lease or otherwise dispose of any of the
Assets, except for assets consumed or disposed of in the ordinary course of
business, where no longer used or useful in the business or operations of the
System or in conjunction with the acquisition of replacement property of
equivalent kind and value;
5.1.3. Not create, assume or permit to exist any claim,
liability, mortgage, lien, pledge, condition, charge or encumbrance upon the
Assets, except for Permitted Encumbrances;
5.1.4. Not implement any retiering or repackaging of channels,
change customer rates, or change billing, disconnect or marketing practices
(other than customary marketing practices conducted in the ordinary course of
business);
5.1.5. Maintain the Assets, including the plant and equipment
related thereto, in good operating condition consistent with past practices
(normal wear and tear excepted), and implement any capital expenditures required
in connection with such maintenance consistent with past practices;
5.1.6. Maintain all bonds and casualty and liability insurance
relating to the System as in effect on the date of this Agreement;
21
5.1.7. Keep all of its business books, records and files
relating to the System in the ordinary course of business in accordance with
past practices, and pay, consistent with past practices, all accounts payable
and other debts, liabilities and obligations relating to the System;
5.1.8. Continue to implement its customary procedures for
disconnection and discontinuance of service to System customers whose accounts
are delinquent in accordance with those procedures in effect on the date of this
Agreement;
5.1.9. Not permit the amendment or cancellation of any of
the Governmental Permits or Contracts (other than those constituting Excluded
Assets) which would have a Material Adverse Effect;
5.1.10. Maintain inventories of equipment, cable and supplies
at normal levels consistent with past practices, as described on Schedule 3.6;
5.1.11. Not increase the compensation or change any benefits
available to employees of Seller who work in the System except as required
pursuant to existing written agreements or except in the ordinary course of
business consistent with past practice;
5.1.12. Report and write off Accounts Receivable in
accordance with past practices;
5.1.13. Withhold and pay when due all Taxes relating to
employees of the System, the Assets, and/or the System;
5.1.14. Maintain service quality of the System consistent
with past practices; and
5.1.15. File with the FCC all material reports required to be
filed under applicable FCC rules and regulations, and otherwise comply with all
material legal requirements with respect to the System.
5.2. Access to Information. Seller shall allow Buyer and its
---------------------
authorized representatives reasonable access upon reasonable advance notice at
Buyer's expense during normal business hours to the Assets and to all other
properties, equipment, books, records, Contracts and documents relating to the
System for the purpose of inspection, and furnish or cause to be furnished to
Buyer or its authorized representatives all information with respect to the
affairs and business of the System as Buyer may reasonably request, it being
understood that the rights of Buyer hereunder shall not be exercised in such a
manner as to interfere with the operations of Seller's business. Without
limiting the generality of the foregoing, Buyer shall have access to all
documents and information and reasonable access to books, records and employees
necessary to permit Buyer to verify, to its reasonable satisfaction, the
representations and warranties of the Seller contained herein, including without
limitation that (i) all offset frequencies relating to the System are in place
and (ii) the System is otherwise in compliance with all applicable legal
requirements, and Buyer shall be permitted to conduct (if it so desires) a
signal leakage rideout and follow up and such other tests as Buyer shall deem
necessary to verify the foregoing.
22
5.3. Confidentiality. Each party shall keep secret and hold in
---------------
confidence for a period of one and one-half years following the date hereof, any
and all information relating to the other party that is proprietary to such
other party, including without limitation proprietary information, contacts,
marketing information, technical information, product or service concepts,
subscriber information, rates, financial information, ideas, concepts and
research and development (collectively, "Confidential Information").
Confidential Information does not include any item of information that (i) is
publicly known at the time of its disclosure, (ii) is lawfully received from a
third party not known by a party hereto to be bound in a confidential
relationship with the other party hereto, (iii) is published or otherwise made
known to the public by any source other than a party bound by the provisions
hereof, or (iv) was generated independently. Buyer and Seller agree that
Confidential Information received from the other shall be used solely in
connection with the transactions contemplated by this Agreement. Buyer and
Seller each agrees that it shall treat confidentially and not directly or
indirectly divulge, reveal, report, publish, transfer or disclose, for any
purposes whatsoever, all or any portion of the Confidential Information
disclosed to it by the other, other than (x) information that is required to be
disclosed by applicable law or judicial order, (y) disclosures made by any party
to its directors, officers, employees, attorneys, accountants, members, lenders
and accredited potential investors (excluding any potential investors that are
competitors of the System) and other agents that need the information in
connection with the evaluation and consummation of the transactions contemplated
herein, or (z) disclosures made by any party as shall be reasonably necessary in
connection with obtaining the Consents; provided, however, in connection with
disclosure of Confidential Information under (x) and (z) hereof, the disclosing
party shall give the other party hereto timely prior notice of the anticipated
disclosure and the parties shall cooperate in designing reasonable procedural
and other safeguards to preserve, to the maximum extent possible, the
confidentiality of such material; and provided, further, in connection with
disclosure of Confidential Information under (y) hereof, that Seller and Buyer,
as the case may be, shall be fully liable for any breach of this provision by
any such persons.
5.4. Publicity. Neither party hereto will issue any press release or
---------
otherwise make any public statement with respect to this Agreement and the
transactions contemplated hereby without the prior consent of the other, except
as may be required by applicable laws, in which event the party required to make
the release or announcement shall, if possible, allow the other party reasonable
time to comment on such release or announcement in advance of such issuance.
5.5. Consents. Following the execution hereof, Seller shall make such
--------
applications to the Franchising Authorities and other third parties whose
Consents are listed on Schedule 3.8 required for the consummation hereof, and
shall otherwise use its commercially reasonable efforts to obtain the Consents
as expeditiously as possible, but in no event shall Seller be required, as a
condition of obtaining such Consents, to expend any monies on, before or after
the Closing Date (other than customary application and filing fees, professional
fees and expenses incurred in connection with the efforts to obtain such
Consents), or to offer or grant any accommodations or concessions adverse to
Seller. Buyer shall use its commercially reasonable efforts to promptly assist
Seller and shall take such prompt and affirmative actions as may reasonably be
necessary in obtaining such Consents and shall cooperate with Seller in the
preparation, filing and prosecution of such applications as may reasonably be
necessary, including, without limitation, making management and other personnel
of
23
Buyer available to assist in obtaining such Consents. The parties agree to use
commercially reasonable efforts to obtain consents to the transfer of the cable
television Franchises in substantially the form attached hereto as Exhibit C.
---------
Seller shall not agree to any change in any Franchise more burdensome than
currently exists as a condition to obtaining any authorization, consent, order
or approval necessary for the transfer of such Franchise unless Buyer shall
otherwise consent; provided, however, that Buyer, and not Seller shall bear the
cost and expense of any conditions imposed by Franchising Authorities on
Franchise transfers to which Buyer has consented. Buyer acknowledges that
Franchising Authorities and third parties to Contracts may impose bond, letter
of credit, indemnity and insurance requirements pursuant to the current terms of
the Franchises and Contracts as a condition to giving their consent to
assignment or transfer thereof. Notwithstanding anything to the contrary
contained in this Section 5.5, and regardless of whether any of such bond,
letter of credit, indemnity or insurance requirements have been waived with
respect to Seller, Buyer shall be obligated to accept any such conditions. In
addition, Buyer acknowledges that Franchising Authorities may also modify the
bond, indemnity and insurance provisions of the Franchises or may impose penalty
provisions and other similar provisions to the appropriate Franchise as a
condition to giving their consent to assignment or transfer thereof.
Notwithstanding anything to the contrary contained in this Section 5.5, Buyer
shall be obligated to accept any such conditions as long as the requirements are
reasonable and customary in the industry for similarly situated cable system
operators in terms of size and financial and operating qualifications.
Notwithstanding anything to the contrary contained in this Section 5.5, Buyer
acknowledges that it shall be obligated to deliver to Franchising Authorities
and third parties to Contracts bonds and letters of credit in amounts no less
than the amounts of such bonds and letters of credit delivered by Seller and set
forth on Schedule 3.20, even if such amounts are not specified in the Franchises
or Contracts or are in amounts in excess of those required by the terms of the
Franchises and Contracts. Buyer agrees that it shall not, without the prior
written consent of Seller (which may be withheld at Seller's sole discretion),
seek amendments or modifications to Franchises or Contracts. Buyer shall, at
Seller's request, promptly furnish Seller with copies of such documents and
information with respect to Buyer, including financial information and
information relating to the cable and other operations of Buyer and any of its
affiliated or related companies, as Seller may reasonably request in connection
with the obtaining of any of the Consents or as may be reasonably requested by
any person in connection with any Consent. Notwithstanding anything to the
contrary contained in this Section 5.5, Seller's obligations hereunder with
respect to pursuing any Consent to the transfer of pole attachment or conduit
contracts shall be fully satisfied if Buyer has executed a new contract with the
respective pole company or if such pole company has indicated in writing that it
is willing to execute a new contract with Buyer.
5.6. Cooperation. Buyer agrees that Seller's transfer of the Assets to
-----------
Buyer shall be accomplished in a manner that will enable Seller to qualify the
transfer as part of a like-kind exchange of property within the meaning of
Section 1031 of the Code. Buyer shall, at no expense to Buyer, cooperate with
Seller on and prior to the Closing Date, which cooperation shall include,
without limitation, the manner in which the Purchase Price and Deposit is paid
and the Assets are transferred through the qualified Escrow Agent and a
Qualified Intermediary, to enable Seller to qualify the transfer of Assets as
part of a like-kind exchange of property within the meaning of Section 1031 of
the Code.
24
5.7. Taxes, Fees and Expenses. Buyer and Seller shall each pay
------------------------
one-half of all sales, use, transfer, purchase taxes and fees, filing fees,
recordation fees and application fees, if any, arising out of the transactions
contemplated herein. Each party shall pay its own expenses incurred in
connection with the authorization, preparation, execution and performance of
this Agreement, including all fees and expenses of counsel, accountants, agents
and other representatives.
5.8. Brokers. Each of Buyer and Seller represents and warrants that
-------
neither it nor any person or entity acting on its behalf has incurred any
liability for any finders' or brokers' fees or commissions in connection with
the transaction contemplated by this Agreement, except that Seller has retained
Daniels & Associates whose fees shall be paid by Seller. Buyer agrees to
indemnify and hold harmless Seller against any fee, commission, loss or expense
arising out of any claim by any broker or finder employed or alleged to have
been employed by it, and Seller agrees to indemnify and hold harmless Buyer
against any fee, commission, loss or expense arising out of any claim by Daniels
& Associates and any other broker or finder employed or alleged to have been
employed by it.
5.9. Risk of Loss.
------------
5.9.1. The risk of loss, damage or destruction to the System from
fire, theft or other casualty or cause shall be borne by Seller at all times up
to completion of the Closing. It is expressly understood and agreed that in the
event of any material loss or damage to any material portion of the Assets from
fire, casualty or other cause prior to the Closing, Seller shall promptly notify
Buyer of same in writing. Such notice shall report the loss or damage incurred,
the cause thereof, if known, and the insurance coverage related thereto.
5.9.2. Notwithstanding anything to the contrary contained in this
Agreement, including without limitation the provisions of Sections 8.1.2 and
8.1.3, in the event of any loss or damage to the System prior to the Closing,
Seller shall promptly restore, replace or repair the damaged Assets to their
previous condition at Seller's sole cost and expense. In the event such loss or
damage shall not be restored, replaced or repaired by the Closing Date, the
Closing Date shall be postponed (but not to a date later than February 28,
1998), to permit the restoration, repair or replacement of the damaged or lost
Assets.
5.9.3. In the event such loss or damage to the System shall not
have been restored, replaced or repaired by February 28, 1998, Buyer shall, at
its option:
(i) Proceed with the Closing and accept the Assets in
their then condition, in which event Seller shall pay or assign to Buyer all
proceeds of insurance theretofore received or to be received as a result of such
loss or damage, and the Purchase Price shall be reduced by an amount equal to
the difference between the amount of such insurance proceeds and the fair market
value of such loss or damage as reasonably agreed by the parties; or
(ii) Terminate this Agreement by notice to Seller, in
which event there shall be no Closing and this Agreement and all the terms and
provisions hereof shall thereupon be
25
deemed null and void and Buyer shall be entitled to a return of the Deposit plus
accrued interest, whereupon the parties shall have no further liability to each
other.
5.10. Employee Benefit Matters.
------------------------
5.10.1. It is clearly understood that Buyer has no obligation
to employ any of Seller's employees employed at the System and that Seller shall
be responsible for and shall cause to be discharged and satisfied in full all
amounts owed to any employee, including without limitation, wages, salaries, any
employment, incentive, compensation or bonus agreements or other benefits or
payments on account of termination. Buyer, which as noted above has no
obligations to hire any of Seller's employees at the System, agrees that it will
provide Seller with notice of which employees of the System Buyer intends to
hire (the "Transferred Employees") at least 45 days before the Closing Date.
From the date of this Agreement until 180 days after Closing, Seller agrees that
it shall not, and that it shall use its best efforts to cause Cox
Communications, Inc. and its affiliates to not, solicit any employees of the
System for the purpose of retaining and reassigning such employees.
5.10.2. As of the Closing Date, Seller shall terminate
employment of all Transferred Employees.
5.10.3. Buyer shall offer health plan coverage to all of the
full-time Transferred Employees, on terms and conditions generally applicable to
all of Buyer's employees. For purposes of providing such coverage, Buyer shall
waive all preexisting condition limitations for all such employees of the System
covered by the Seller's health care plan as of the Closing Date who have been
employed by Seller for at least six months as of the Closing Date (other than
preexisting conditions which were excluded by Seller's health care plan) and
shall provide such health care coverage effective as of the Closing Date without
the application of any eligibility period for coverage. In addition, Buyer shall
credit all employee payments toward deductible and co-payment obligation limits
under Seller's health care plans for the plan year which includes the Closing
Date as if such payments had been made for similar purposes under Buyer's health
care plans during the plan year which includes the Closing Date, with respect to
Transferred Employees, provided Buyer receives proof of such payments if
required by Buyer's health care plans.
5.10.4. For each Transferred Employee, Buyer shall give past
service credit for all crediting purposes under such of its employee benefit
plans that, on or after the Closing Date, provides coverage to Transferred
Employees, in accordance with Buyer's benefit plans. For each Transferred
Employee, to the extent Buyer shall have received an adjustment pursuant to
Section 2.5.1, Buyer shall honor all accrued vacation not taken by such employee
for the calendar year in which the Closing occurs.
5.10.5. Within a reasonable period of time after the Closing,
Seller shall transfer from the Cox Communications, Inc. Savings and Investment
Plan ("Seller's 401(k) Plan") to the Mediacom California LLC 401(k) Plan
("Buyer's 401(k) Plan") an amount equal to the aggregate account balances held
in the Seller's 401(k) Plan as of the date of transfer with respect to all
26
Transferred Employees. The transfer of assets contemplated by this Section
5.10.5 shall be in cash or a combination of cash and in kind, as may be mutually
agreeable to Seller and Buyer; provided, that Buyer shall be obligated to accept
as a part of such transfer any promissory notes with respect to Transferred
Employees that have taken participant loans from the Seller's 401(k) Plan that
are outstanding as of the Closing Date. Prior to the date of such transfer, and
as preconditions thereto: (i) Seller shall deliver to Buyer a copy of the most
recently issued IRS determination letter (or other proof reasonably satisfactory
to counsel for Buyer) that the Seller's 401(k) Plan is qualified under the Code,
and (ii) Buyer shall deliver to Seller a copy of the most recently issued IRS
determination letter (or other proof reasonably satisfactory to counsel for the
Seller) that the Buyer's 401(k) Plan is qualified under the Code. Seller shall
not take any action with respect to the Seller's 401(k) Plan to create a right
on behalf of the Transferred Employees to distribution of plan assets from the
Seller's 401(k) Plan prior to such transfer. Subsequent to the transfer of
assets to the Buyer's 401(k) Plan, neither Seller nor the Seller's 401(k) Plan
shall retain any liability with respect to such Transferred Employees to provide
them with benefits in accordance with the terms of the Seller's 401(k) Plan.
Notwithstanding the foregoing, in the event Buyer determines that a transfer of
assets would require one or more amendments to the Buyer's 401(k) Plan to comply
with the requirements of Section 411(d)(6) of the Code, no transfer of assets
to the Buyer's 401(k) Plan will be required unless Buyer, in its sole
discretion, consents to making such amendment(s). On or prior to the Closing
Date, Seller shall deliver to Buyer a list of all Transferred Employees,
indicating thereon the total amount deferred in pre-tax dollars to the Seller's
401(k) Plan by each Transferred Employee under the terms of Section 402(g) of
the Code with respect to the plan year of the Seller's 401(k) Plan in which the
Closing occurs. Seller and Buyer agree to cooperate with respect to any
government filing, including, but not limited to, the filing of IRS Forms
5310-A, if necessary, to effect the transfer of assets contemplated by this
Section 5.10.5.
5.10.6. Promptly upon Seller's written request, Buyer shall
reimburse Seller for one-half of the total amount of severance payments that
Seller is obligated to pay, pursuant to the severance benefits plan disclosed as
Item 5 on Schedule 3.11, to any of the Seller's employees as to which Buyer
notifies Seller, pursuant to Section 5.10.1 above, that it intends to hire at
Closing, if Buyer fails to hire any such employees on the Closing Date. In
addition, if Buyer discharges without cause any Transferred Employees within 90
days of Closing, if Seller or an affiliate of Seller does not hire such
employees within 60 days of discharge by Buyer, and if such employees would have
been entitled to severance payments pursuant to Seller's severance benefits plan
if such employees had been discharged without cause by Seller in accordance with
Section 5.10.2 and not been hired by Buyer as of Closing, then Buyer and Seller
shall pay severance payments to such employees in accordance with Seller's
severance benefits plan listed as Item 5 on Schedule 3.11 to the extent such
plan would have paid severance to any such employees if they had not been hired
by Buyer at Closing, with Buyer and Seller each paying one-half of the amount of
such severance payments. Except for severance payments, Buyer shall not be
responsible for any other severance benefits pursuant to Seller's severance
benefits plan.
5.11. Bonds, Letters of Credit. Etc. Buyer shall take all reasonably
------------------------------
necessary steps, and execute and deliver all reasonably necessary documents, to
insure that on the Closing Date Buyer has delivered such bonds, letters of
credit, indemnity agreements and similar instruments in such
27
amounts and in favor of such Franchising Authorities and other persons requiring
the same in connection with the Governmental Permits and the Contracts.
5.12. Noncompetition. Seller covenants and agrees that, unless Buyer
--------------
shall otherwise give its prior written consent, for a period of three years from
the Closing Date neither it nor any of its affiliates will own, manage, operate,
control or engage, directly or indirectly, in the business of operating a
wireline video cable television system within the area currently serviced by the
System. Notwithstanding the foregoing, nothing herein shall be construed to
prohibit or restrict (i) Seller or its affiliates from directly or indirectly
holding an ownership interest in or participating in the management or
operations of, or acting as distributor for, PrimeStar Partners, L.P., its
successors and assigns, presently offering direct broadcast satellite service
nationwide, including within the area currently served by the System, or (ii)
the ownership of a company's securities listed on a national securities exchange
or the National Association of Securities Dealers Automated Quotations System,
which (A) constitutes less than 10% of the outstanding voting stock of such
company, (B) does not constitute control over such company and (C) is held
solely for investment purposes.
5.13. Transitional Services.
---------------------
5.13.1. Seller shall provide to Buyer subscriber billing
services, excluding lockbox services ("Billing Services") in connection with the
System for a period of up to 12 months after the Closing Date, free of charge,
to allow for conversion of existing billing arrangements. Seller shall provide
reasonable cooperation and support to Buyer in connection with such conversion,
including, without limitation, reasonable access to all data and information
necessary for conversion planning purposes.
5.13.2. To facilitate Buyer's access to Seller's customer
billing system, for a period of up to 12 months after the Closing Date, Seller
shall permit Buyer to use certain computer and communications equipment located
at the System and used to access Seller's customer billing system, including the
material items listed on Schedule 2.2. At the end of such 12 month period or
such earlier time as Buyer has completed the transition to Buyer's customer
billing system, Buyer shall return to Seller such equipment.
5.14. Title Insurance. Seller shall cooperate with Buyer if Buyer
---------------
elects to obtain title insurance policies or surveys on any Real Property owned
in fee or leased. Buyer shall have the sole responsibility for obtaining and
paying for such policies and surveys. The parties agree that the obtaining of
title insurance and surveys on any Real Property shall not be a condition to the
obligation of Buyer to consummate the transactions contemplated hereby.
5.15. Use of Seller's Name. For a period of up to 120 days after the
--------------------
Closing Date, Buyer may continue (but only to the extent reasonably necessary)
to operate the System using Seller's name and all derivations and abbreviations
of such name and related trade names and marks in use in the System on the
Closing Date, such use to be in a manner consistent with the way in which Seller
has used the names and marks. Within 120 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
28
marks. Seller will be entitled to indemnification (as provided in Section 9.3)
with respect to Buyer's misuse of such names and marks.
5.16. Adverse Changes. Between the date of execution and delivery of
---------------
this Agreement and the Closing Date, Seller shall give Buyer prompt written
notice of any material adverse change in the condition of any of the Assets or
the condition, operations or financial condition of the System or any material
change in any of the information contained in the representations and warranties
of Seller or information otherwise furnished to Buyer which, to the best of
Seller's knowledge, occurs after the date hereof, including, without limitation,
(i) any damage, destruction or loss (whether or not covered by insurance); (ii)
any notice of violation, forfeiture or complaint under any Governmental Permit
or Contract; (iii) any claim, action, investigation or proceeding threatened in
writing or initiated relating to any rate then being charged by Seller for any
service provided by the System or the carriage of or failure to carry any
television broadcast signal; or (iv) anything which, if not corrected prior to
the Closing Date, will prevent Seller from fulfilling any condition to Closing
described herein. During such period, Seller shall consult with Buyer and keep
Buyer fully informed at all times regarding any hearings or developments
relating to any such claim, action, investigation or proceeding. No such
furnishings of information to Buyer and no investigation by Buyer shall affect
Buyer's right to rely on, or Seller's liability with respect to, any
representation or warranty made in this Agreement.
5.17. Forms 394. If required, within 20 Business Days after the date
---------
of this Agreement, Seller and Buyer shall, each at its own expense, prepare and
file properly prepared Applications for Franchise Authority Consent to
Assignment or Transfer of Control of Cable Television Franchise FCC 394 with the
Franchising Authorities and shall file all additional information required by
such Franchises or applicable local legal requirements or that the Franchising
Authorities deem necessary or appropriate in connection with their consideration
of the request of Seller or Buyer that such authority approve of the transfer of
the Franchises to Buyer.
5.18. Monthly Financial Statements. Between the date of execution and
----------------------------
delivery of this Agreement and the Closing Date, Seller shall deliver to Buyer
within 30 days after the end of each calendar month, unaudited financial reports
in the form customarily prepared by Seller with respect to the System, and other
reports with respect to the System, in the form customarily prepared by Seller
or as Buyer may reasonably request (including, without limitation, capital
expenditures to the System, reports setting forth the revenue and cash flow of
the System for each month and year-to-date, customer activity information,
including information on connect and disconnect requests, pay television units
and homes passed), beginning as soon as practicable after the date of this
Agreement. Such financial statements and other reports, if any, shall present
fairly and accurately the financial condition and results of operations of
Seller and the System for the period then ended and as of such dates and be
prepared in accordance with generally accepted accounting principles
consistently applied through the periods specified, subject to normal year end
adjustments.
5.19. Reporting Requirements. Seller covenants and agrees that from
----------------------
time to time, upon the request of Buyer, and at the expense of Buyer (which
expense shall include, without limitation, all fees of Seller's independent
auditors as well as the costs of Seller's accountants), Seller shall (i)
29
as soon as practicable make available to Buyer such financial information with
respect to the System relating to periods prior to the Closing Date as Buyer may
request in order to prepare any financial statements and financial statement
schedules relating to the System that Buyer is required to include in any
registration statement, report or other document that it files with the
Securities and Exchange Commission or any state securities commission, in
appropriate form as provided by applicable federal or state securities laws and
the rules and regulations promulgated thereunder, and Seller shall direct its
present certified public accountants, Deloitte & Touche, L.L.P., to cooperate
with Buyer in connection therewith, and (ii) use its commercially reasonable
efforts to obtain for Buyer as soon as practicable any consent, report, opinion
or letter of accountants required to be filed in connection therewith.
Notwithstanding anything to the contrary contained in this Section 5.19, Seller
shall have no obligation to comply with the terms of this Section 5.19 if Seller
is unable to locate or produce any such financial information after good faith
efforts to do so.
5.20. Certain Retransmission Contracts. Buyer agrees to use
--------------------------------
commercially reasonable efforts to obtain authorization to carry, from and after
Closing, the signals referenced in Section 6.1.9 below, and Seller shall, at no
expense to Seller, cooperate with and assist Buyer in obtaining such
authorization to the extent Seller reasonably deems appropriate.
6. CONDITIONS PRECEDENT TO OBLIGATIONS OF BUYER AND SELLER TO CLOSE
----------------------------------------------------------------
6.1. Conditions Precedent to Obligations of Buyer to Close. The
-----------------------------------------------------
obligations of Buyer to consummate the transactions contemplated by this
Agreement to occur at the Closing shall be subject to the satisfaction, on or
before the Closing Date, of each and every one of the following conditions, all
or any of which may be waived, in whole or in part, by Buyer for purposes of
consummating such transactions:
6.1.1. Representations and Warranties. All representations and
------------------------------
warranties of Seller contained in this Agreement shall be true and complete in
all material respects at and as of the Closing Date as though such
representations and warranties were made at and as of such time except for
changes contemplated by this Agreement.
6.1.2. Covenants and Conditions. Seller shall have in all
------------------------
material respects performed and complied with all material covenants, agreements
and conditions required by this Agreement to be performed or complied with by it
prior to or on the Closing Date.
6.1.3. No Injunction, Etc. No action, suit or other proceeding
------------------
shall have been instituted, threatened or proposed before any Governmental
Authority to enjoin, restrain, prohibit or obtain substantial damages in respect
of, or which is related to, or arising out of, this Agreement or the
consummation of the transaction contemplated hereby.
6.1.4. Consents. Each of the following Consents shall have been
--------
duly obtained and delivered to Buyer: (i) the Consents of the Franchising
Authorities listed on Schedule 3.8; (ii) the Consents of the FCC listed on
Schedule 3.8, except for any FCC consent to any business radio license that
Seller reasonably expects can be obtained within 120 days after the Closing and
so long
30
as a temporary authorization is available to Buyer under FCC rules with respect
thereto; and (iii) such other consents as designated by an asterisk on Schedule
3.8.
6.1.5. Deliveries. Seller shall have made or stand willing and able
----------
to make all the deliveries to Buyer set forth in Section 7.3.
6.1.6. Material Adverse Effect. Between the date of this Agreement
-----------------------
and the Closing Date, there shall have been no Material Adverse Effect.
6.1.7. Financing. The financial institutions that are providing
---------
financing to Buyer in connection with the Closing shall not have exercised the
"material adverse changes" provision in their commitment letter or credit
agreement (the "Bank MAC"), the exact language of such provision being set forth
on Schedule 6.1.7.
6.1.8. Subscribers. As of the Closing Date, there shall be no fewer
-----------
than (i) 9,000 Equivalent Subscribers, in the event the Closing is on or before
August 15, 1997, or (ii) 9,100 Equivalent Subscribers, in the event the Closing
is after August 15, 1997.
6.1.9. Retransmission Consents. Buyer shall have obtained
-----------------------
authorization, on terms reasonable and customary in the industry for cable
system operators and broadcast stations of similar size, to carry KCBS, KNBC,
KABC, KTTV, KTLA and KCOP on the System from and after Closing.
6.2. Conditions Precedent to Obligations of Seller to Close. The
------------------------------------------------------
obligations of Seller to consummate the transactions contemplated by this
Agreement to occur at the Closing shall be subject to the satisfaction, on or
before the Closing Date, of each and every one of the following conditions, all
or any of which may be waived, in whole or in part, by Seller for purposes of
consummating such transactions:
6.2.1. Representations and Warranties. All representations and
------------------------------
warranties of Buyer contained in this Agreement shall be true and complete in
all material respects at and as of the Closing Date as though such
representations and warranties were made at and as of such time except to the
extent changes are permitted or contemplated pursuant to this Agreement.
6.2.2. Covenants and Conditions. Buyer shall have in all material
------------------------
respects performed and complied with all material covenants, agreements and
conditions required by this Agreement to be performed or complied with by it
prior to or on the Closing Date.
6.2.3. No Injunction, Etc. No action, suit or other proceeding shall
------------------
have been instituted, threatened or proposed before any Governmental Authority
to enjoin, restrain, prohibit or obtain substantial damages in respect of, or
which is related to, or arising out of, this Agreement or the consummation of
the transaction contemplated hereby.
31
6.2.4. Deliveries. Buyer shall have made or stand willing and able to
----------
make all the deliveries set forth in Section 7.4.
7. CLOSING AND CLOSING DELIVERIES
------------------------------
7.1. Closing. The Closing shall take place at 10:00 a.m. on a date to be
-------
mutually agreed upon, not fewer than five and not more than 15 Business Days
following the date upon which the conditions set forth in Section 6.1.4 hereof
shall have been satisfied, or on such other date as Buyer and Seller may
mutually agree (the "Closing Date"). Seller acknowledges that Buyer's health
care plan allows for the addition of new employees only on specified days of the
month, and Seller agrees to schedule the Closing Date at such time as to
accommodate Buyer's obligation to provide health care plan coverage to the
Transferred Employees effective as of the Closing Date. The Closing shall be
held at the offices of Cooperman Levitt Winikoff Lester & Newman, P.C., 800
Third Avenue, New York, New York 10022, or will be conducted by mail or at such
other place and time as the parties may agree.
7.2. Like-Kind Exchange. On the Closing Date, Buyer and Seller shall be
------------------
prepared to effectuate the transfer of the Purchase Price, Deposit and Assets in
a manner that enables Seller to qualify the transaction as part of a like-kind
exchange of property within the meaning of Section 1031 of the Code.
7.3. Deliveries by Seller. Prior to or on the Closing Date, Seller shall
--------------------
deliver to Buyer the following, in form and substance reasonably satisfactory to
Buyer and its counsel:
7.3.1. Transfer Documents. Duly executed warranty bills of sale,
------------------
assignments and other transfer documents which shall be sufficient to vest good
title to the Assets in the name of Buyer or its permitted assignees, free and
clear of any claims, liabilities, mortgages, liens, pledges, conditions, charges
or encumbrances of any nature whatsoever except for Permitted Encumbrances;
7.3.2. Consents. The original of each Consent listed on Schedule 3.8
--------
subject to Section 6.1.4;
7.3.3. Officer's Certificate. A certificate, dated as of the Closing
---------------------
Date, executed by the President or a Vice President of Seller, certifying to his
knowledge, without personal liability: (i) that the representations and
warranties of Seller contained in this Agreement are true and complete in all
material respects at and as of the Closing Date as though made on and as of such
time, except for changes contemplated by this Agreement; and (ii) that Seller
has, in all material respects, performed and complied with all material
covenants, agreements and conditions required by this Agreement to be performed
or complied with by Seller prior to or on the Closing Date;
7.3.4. Secretary's Certificate. A certificate, dated as of the
-----------------------
Closing Date, executed by the Secretary of Seller, without personal liability:
(i) certifying that the resolutions, as attached to such certificate, were duly
adopted by Seller's Board of Directors and stockholders (if required),
authorizing and approving the execution of this Agreement and the consummation
of the transaction
32
contemplated hereby and that such resolutions remain in full force and effect;
(ii) certifying as to the incumbency of each signatory to this Agreement
executed by Seller; and (iii) certifying that Seller is duly formed and validly
existing under the laws of the State of Delaware, together with a true and
complete copy of Seller's articles of incorporation, certified by the Secretary
of State of the State of Delaware, and good standing certificates of recent
dates from the Secretary of State of the States of California and Delaware; and
7.3.5. Opinions of Counsel. Opinions of Seller's counsel dated as of
-------------------
the Closing Date, substantially in the forms attached hereto as Exhibit D-1 and
-----------
Exhibit D-2.
- -----------
7.4. Deliveries by Buyer. Prior to or on the Closing Date, Buyer shall
-------------------
deliver to Seller or, at Seller's direction, to a Qualified Intermediary, the
following, in form and substance reasonably satisfactory to Seller and its
counsel:
7.4.1. Purchase Price. The Purchase Price, as adjusted as provided in
--------------
Section 2.4 (subject to credit for the Deposit, together with interest thereon);
7.4.2. Assumption Agreements. Appropriate assumption agreements
---------------------
pursuant to which Buyer shall assume and undertake to perform the Assumed
Liabilities;
7.4.3. Officer's Certificate. A certificate, dated as of the Closing
---------------------
Date, executed by a Member of Buyer, certifying to his knowledge, without
personal liability (i) that the representations and warranties of Buyer
contained in this Agreement are true and complete in all material respects as of
the Closing Date as though made on and as of that date; and (ii) that Buyer has,
in all material respects, performed all of its obligations and complied with all
of its material covenants set forth in this Agreement to be performed or
complied with by Buyer on or prior to the Closing Date;
7.4.4. Secretary's Certificate. A certificate, dated as of the
-----------------------
Closing Date, executed by a Member of Buyer, without personal liability: (i)
certifying that the resolutions, as attached to such certificate, were duly
adopted by Buyer's management committee and/or members as required by applicable
law and Buyer's articles of organization and operating agreement, authorizing
and approving the execution of this Agreement and the consummation of the
transaction contemplated hereby and that such resolutions remain in full force
and effect; (ii) certifying as to the incumbency of each signatory to this
Agreement executed by Buyer; and (iii) certifying that Buyer is duly formed and
validly existing under the laws of the State of Delaware, together with a true
and complete copy of Buyer's articles of organization, certified by the
Secretary of State of the State of Delaware, and good standing certificates of
recent dates from the Secretary of State of the States of California and
Delaware; and
7.4.5. Opinion of Counsel. An opinion of Buyer's counsel dated as of
------------------
the Closing Date, substantially in the form attached hereto as Exhibit E.
---------
33
8. TERMINATION
-----------
8.1. Method of Termination. This Agreement constitutes the binding and
---------------------
irrevocable agreement of the parties to consummate the transactions contemplated
hereby, subject to and in accordance with the terms hereof, the consideration
for which is (i) the covenants, representations, warranties and agreements set
forth in this Agreement; and (ii) the expenditures and obligations incurred and
to be incurred by Buyer on the one hand, and by Seller, on the other hand, in
respect of this Agreement, and this Agreement may be terminated or abandoned
only as follows:
8.1.1. By the mutual consent of Seller and Buyer; or by Seller or
Buyer if any condition to Closing set forth in Section 6.1.3 or 6.2.3 is not
fulfilled and the failure of such condition is not a result of a breach of
warranty or nonfulfillment of any covenant or agreement by Buyer or Seller
contained in this Agreement; or by Buyer if the condition to Closing set forth
in Section 6.1.7 is not fulfilled;
8.1.2. By Buyer after November 30, 1997, if any of the conditions set
forth in Section 6.1 hereof to which the obligations of Buyer are subject (other
than the conditions set forth in Sections 6.1.3 and 6.1.7) have not been
fulfilled or waived, and provided that the failure to fulfill such condition is
not a result of a breach of warranty or nonfulfillment of any covenant or
agreement by Buyer contained in this Agreement; or
8.1.3. By Seller after November 30, 1997, if any of the conditions
set forth in Section 6.2 hereof to which the obligations of Seller are subject
(other than the conditions set forth in Section 6.2.3) have not been fulfilled
or waived, and provided that the failure to fulfill such condition is not a
result of a breach of warranty or nonfulfillment of any covenant or agreement by
Seller contained in this Agreement.
8.2. Rights Upon Termination.
-----------------------
8.2.1. In the event of a termination of this Agreement pursuant to
Section 8.1.1 hereof, the Buyer shall be entitled to the return of the Deposit
and all interest accrued thereon, each party shall pay the costs and expenses
incurred by it in connection with this Agreement, and no party (or any of its
officers, directors, members, employees, agents, representatives or
stockholders) shall be liable to any other party for any cost, expense, damage
or loss of anticipated profits hereunder.
8.2.2. In the event of a termination of this Agreement pursuant to
Section 8.1.2 hereof, Buyer shall be entitled to the return of the Deposit and
all interest accrued thereon and, if Seller is in breach of this Agreement, also
shall have the right to seek all remedies available to it as provided hereunder
or at law or equity, including the remedy of specific performance; provided,
however, that Buyer shall not be entitled to recover monetary damages from
Seller in excess of $2,000,000 under any circumstances. In the event of any
action to enforce this Agreement, Seller hereby waives the defense that there is
an adequate remedy at law.
34
8.2.3. In the event of a termination of this Agreement pursuant to
Section 8.1.3 xxxreof as a result of a breach of this Agreement by Buyer, Seller
shall have the right to pursue all xxxgal or equitable remedies, other than
specific performance, for breach of contract or otherwise, in xxxhich case the
Deposit and all interest accrued thereon shall be applied toward any damage
award, xxxt in no event shall the Deposit and any interest accrued thereon be
deemed the sole source of funds xxx the recovery of any such damage award;
provided, however, that Seller shall not be entitled to cover monetary damages
from Buyer in excess of $2,000,000 under any circumstances. In the xxxent of any
action to enforce this Agreement, Buyer hereby waives the defense that there is
an equate remedy at law.
SURVIVAL OF REPRESENTATIONS AND WARRANTIES AND INDEMNIFICATION
--------------------------------------------------------------
9.1. Representations and Warranties. All representations, warranties,
------------------------------
covenants and xxxreements contained in this Agreement or in documents or
instruments delivered pursuant hereto xxxll be deemed continuing
representations, warranties, covenants and agreements, and shall survive Closing
Date for a period ending on the first anniversary of the Closing Date; provided,
however, xxxt the representations and warranties regarding tax and environmental
matters contained in xxxtions 3.13 and 3.15 and the representations and
warranties regarding title to the Assets contained Sections 3.5 and 3.6 shall
survive for the period of the applicable statute of limitations.
9.2. Indemnification by Seller. Seller shall indemnify and hold Buyer
-------------------------
harmless against xxxi with respect to, and shall reimburse Buyer for:
9.2.1. Any and all losses, liabilities or damages resulting from any
untrue xxxresentation, breach of warranty or nonfulfillment of any covenant by
Seller contained herein;
9.2.2. Any and all obligations of Seller not assumed by Buyer
pursuant to the terms xxxeof;
9.2.3. Any and all losses, liabilities or damages resulting from or
relating to Seller's xxxration or ownership of the System or Assets prior to the
Closing Date; and
9.2.4. Any and all actions, suits, proceedings, claims, demands,
assessments, xxxgments, costs and expenses, including, without limitation,
reasonable legal fees and expenses, xxxdent to any of the foregoing or incurred
in investigating or attempting to avoid the same or to xxxose the imposition
thereof, or in enforcing this indemnity.
9.3. Indemnification by Buyer. Buyer shall indemnify and hold Seller
------------------------
harmless against with respect to, and shall reimburse Seller for:
9.3.1. Any and all losses, liabilities or damages resulting from any
untrue xxxesentation, breach of warranty or nonfulfillment of any covenant by
Buyer contained herein;
9.3.2. Any and all of the Assumed Liabilities;
35
9.3.3. Any and all losses, liabilities or damages resulting from or
relating to Buyer's operation or ownership of the System or Assets on and after
the Closing Date; and
9.3.4. Any and all actions, suits, proceedings, claims, demands,
assessments, judgments, costs and expenses, including, without limitation,
reasonable legal fees and expenses, incident to any of the foregoing or incurred
in investigating or attempting to avoid the same or to oppose the imposition
thereof, or in enforcing this indemnity.
9.4. Procedure for Indemnification. The procedure for indemnification
-----------------------------
shall be as follows:
9.4.1. The party claiming indemnification (the "Claimant") shall
promptly give notice to the party from whom indemnification is claimed (the
"Indemnifying Party") of any claim, whether between the parties or brought by a
third party, specifying (i) the factual basis for such claim; and (ii) the
estimated amount of the claim. If the claim relates to an action, suit or
proceeding filed by a third party against Claimant, such notice shall be given
by Claimant within five days after written notice of such action, suit or
proceeding was given to Claimant; provided that failure to give such notice
within such five-day period shall not bar or otherwise prejudice Claimant's
rights to indemnification with respect to such third-party action, suit or
proceeding unless any defense, claim, counterclaim or crossclaim of the
Indemnifying Party is prejudiced thereby.
9.4.2. Following receipt of notice from the Claimant of a claim
(other than a claim brought by a third party), the Indemnifying Party shall have
30 days to make such investigation of the claim as the Indemnifying Party deems
necessary or desirable. For the purposes of such investigation, the Claimant
agrees to make available to the Indemnifying Party and/or its authorized
representative(s) the information relied upon by the Claimant to substantiate
the claim. If the Claimant and the Indemnifying Party agree at or prior to the
expiration of said 30-day period (or any mutually agreed upon extension thereof)
to the validity and amount of such claim, the Indemnifying Party shall
immediately pay to the Claimant the full amount of the claim subject to the
terms and in accordance with the procedures set forth herein. If the Claimant
and the Indemnifying Party do not agree within said period (or any mutually
agreed upon extension thereof), the Claimant may seek appropriate legal or
equitable remedy.
9.4.3. With respect to any claim by a third party as to which the
Claimant is entitled to indemnification hereunder, the Indemnifying Party shall
have the right at its own expense, to participate in or assume control of the
defense of such claim, with counsel of its choice, and the Claimant shall
cooperate fully with the Indemnifying Party. If the Indemnifying Party elects to
assume control of the defense of any third-party claim, the Claimant shall have
the right to participate in the defense of such claim at its own expense. In the
event that the Indemnifying Party desires to compromise or settle any such
claim, Claimant shall have the right to consent to such settlement or
compromise; provided, however, that if such settlement or compromise is for
money damages only to be paid by the Indemnifying Party, and will include a full
release and discharge of Claimant, and Claimant withholds its consent to such
compromise or settlement, Buyer and Seller agree that (i) the Indemnifying
Party's liability shall be limited to the amount of the proposed
36
settlement or compromise, and upon payment of such amount to Claimant, the
Indemnifying Party shall thereupon be relieved of any further liability with
respect to such claim, and (ii) from and after such date of payment, Claimant
will undertake all legal costs and expenses in connection with any such claims.
If the Indemnifying Party fails to defend any claim within a reasonable time,
Claimant shall be entitled to assume the defense thereof, and the Indemnifying
Party shall be liable to Claimant for its expenses reasonably incurred,
including attorneys' fees and payment of any settlement amount or judgment. If
the Indemnifying Party does not elect to assume control or otherwise participate
in the defense of any third party claim, it shall be bound by the results
obtained by the Claimant with respect to such claim.
9.4.4. If a claim, whether between the parties or by a third party,
requires immediate action, the parties will make every effort to reach a
decision with respect thereto as expeditiously as possible.
9.5. Limitation on Indemnification: Exclusive Remedy.
-----------------------------------------------
9.5.1. Seller shall not be required to indemnify Buyer under Section
9.2 until the aggregate amount of Buyer's claims exceeds $100,000 (the
"Threshold Amount"), and if such claims exceed the Threshold Amount, Buyer shall
be entitled to recover all of its losses, including, without limitation, the
amount of the Threshold Amount.
9.5.2. Seller's liability under Section 9.2 shall be limited to
losses or damages not exceeding in the aggregate $4,000,000.
9.5.3. The amount payable by Seller to Buyer with respect to Section
9.2 shall be reduced by the amount of any insurance proceeds received by Buyer
with respect to losses, liabilities or damages, and each of the parties hereby
agrees to use reasonable efforts to collect any and all insurance proceeds to
which it may be entitled in respect to any such losses, liabilities or damages.
Such amount payable shall be further reduced by the amount of any tax benefit
actually realized (including by refund or by reduction or offset against taxes
otherwise payable had the losses, liabilities or damages not been sustained) by
Buyer (or the affiliated or combined group of which it is a member) by reason of
the payment or incurrence by Buyer of the losses, liabilities or damages for
which indemnity is sought or the occurrence of the event giving rise to such
losses, liabilities or damages. To the extent that insurance proceeds are
received and/or a tax benefit is realized after payment has been made by Seller
to Buyer, Buyer shall promptly pay an amount equal to such proceeds or benefit
to Seller.
9.5.4. After the Closing Date, the sole and exclusive remedy of any
party for any misrepresentation or any breach of a warranty or covenant set
forth in or made pursuant to this Agreement shall be a claim for indemnification
under and pursuant to this Article 9.
9.5.5. Notwithstanding the foregoing, the Threshold Amount and other
limitations contained in this Section 9.5 shall not apply to indemnification
claims brought by Buyer relating to
37
the liabilities of Seller that are not Assumed Liabilities ad for which Buyer
did not receive a credit pursuant to Section 2.5.4.
10. MISCELLANEOUS
-------------
10.1. Notices. All notices, demands and requests required or permitted to
-------
be given under the provisions of this Agreement shall be (i) in writing; (ii)
delivered by personal delivery, facsimile transmission (to be followed promptly
by written confirmation mailed by certified mail as provided below) or sent by
commercial delivery service or certified mail, return receipt requested; (iii)
deemed to have been given on the date of personal delivery, the date of
transmission and receipt of facsimile transmissions, or the date set forth in
the records of the delivery service or on the return receipt; and (iv) addressed
as follows:
If to Seller: c/o Cox Communications, Inc.
1400 Lake Hearn Drive, N.E.
Atlanta, Georgia 30319
Attn: Mr. John M. Dyer
Facsimile No.: (404) 847-6336
With a copy to: Dow, Lohnes & Albertson, PLLC
1200 New Hampshire Avenue, N.W.
Suite 800
Washington, DC 20036-6802
Attn: Stuart A. Sheldon, Esq.
Facsimile No.: (202) 776-2222
If to Buyer: c/o Mediacom LLC
90 Crystal Run Road
Suite 406-A
Middletown, New York 10941
Attn: Mr. Rocco B. Commisso, Manager
Facsimile No.: (914) 695-2699
With a copy to: Cooperman Levitt Winikoff Lester & Newman, P.C.
800 Third Avenue
New York, New York 10022
Attn: H. Frances Kleiner, Esq.
Facsimile No.: (212) 755-2839
or to any such other persons or addresses as the parties may from time to time
designate in a writing delivered in accordance with this Section 10.1.
10.2. Benefit and Binding Effect. Neither party hereto may assign this
--------------------------
Agreement without the prior written consent of the other party; provided,
however, that Seller may assign some or all
38
of its rights but not its obligations under this Agreement to a Qualified
Intermediary for purposes of effecting a like-kind exchange of property under
Section 1031 of the Code without Buyer's consent. This Agreement shall be
binding upon and inure to the benefit of the parties hereto and their respective
successors and permitted assigns.
10.3. Bulk Transfer. Buyer acknowledges that Seller has not and will not
-------------
file any bulk transfer notice or otherwise complied with applicable bulk
transfer laws, and the parties agree to waive compliance with same. Seller shall
indemnify and hold harmless Buyer from and against any claims or liabilities
asserted against Buyer by any creditor of Seller or the System by reason of such
noncompliance.
10.4. Governing Law. This Agreement shall be governed, construed and
-------------
enforced in accordance with the laws of the State of Delaware, without regard to
the conflicts of law principles of such state.
10.5. Headings. The headings herein are included for ease of reference only
--------
and shall not control or affect the meaning or construction of the provisions of
this Agreement.
10.6. Gender and Number. Words used herein, regardless of the gender and
-----------------
number specifically used, shall be deemed and construed to include any other
gender, masculine, feminine or neuter, and any other number, singular or plural,
as the context requires.
10.7. Entire Agreement. This Agreement, all schedules ad exhibits hereto,
----------------
and all documents and certificates to be delivered by the parties pursuant
hereto collectively represent the entire understanding and agreement between
Buyer and Seller with respect to the subject matter hereof. All schedules and
exhibits attached to this Agreement shall be deemed part of this Agreement and
incorporated herein, where applicable, as if fully set forth herein. This
Agreement supersedes all prior negotiations between Buyer and Seller with
respect to the transaction contemplated hereby, and all letters of intent and
other writings relating to such negotiations, and cannot be amended,
supplemented or modified except by an agreement in writing which makes specific
reference to this Agreement or an agreement delivered pursuant hereto, as the
case may be, and which is signed by the party against which enforcement of any
such amendment, supplement or modification is sought.
10.8. Cooperation and Further Assurances. Buyer and Seller shall cooperate
----------------------------------
fully with each other and their respective counsel and accountants in connection
with any actions required to be taken as part of their respective obligations
under this Agreement, and Buyer and Seller shall execute such other documents as
may be necessary and desirable to the implementation and consummation of this
Agreement, and otherwise use diligent efforts to consummate the transaction
contemplated hereby and to fulfill their obligations hereunder. Each party
covenants that at any time, and from time to time, after the Closing Date, it
will execute such additional instruments and take such actions as may be
reasonably requested by the other parties to confirm or perfect or otherwise to
carry out the intent and purposes of this Agreement.
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10.9. Waiver of Compliance; Consents. Except as otherwise provided in this
------------------------------
Agreement, any failure of any of the parties to comply with any obligation,
representation, warranty, covenant, agreement or condition herein may be waived
by the party entitled to the benefits thereof, but such waiver or failure to
insist upon strict compliance with such obligation, representation, warranty,
covenant, agreement or condition shall not operate as a waiver of, or estoppel
with respect to, any subsequent or other failure.
10.10. Severability. If any provision of this Agreement or the application
------------
thereof to any person or circumstance shall be invalid or unenforceable to any
extent, the remainder of this Agreement and the application of such provision to
other persons or circumstances shall not be affected thereby and shall be
enforced to the greatest extent permitted by law; provided however that the
economic and legal substance of the transactions contemplated by this Agreement
is not affected in any manner that is materially adverse to any party affected
by such invalidity or unenforceability.
10.11. Counterparts. This Agreement may be signed in any number of
------------
counterparts with the same effect as if the signature on each such counterpart
were upon the same instrument.
10.12. No Third Party Beneficiaries. This Agreement constitutes an
----------------------------
agreement solely among the parties hereto, and, except as otherwise provided
herein, is not intended to and will not confer any rights, remedies, obligations
or liabilities, legal or equitable on any person other than the parties hereto
and their respective successors or assigns, or otherwise constitute any person a
third party beneficiary under or by reason of this Agreement.
10.13. 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 shall not apply in any construction or
interpretation of this Agreement.
10.14. Time of the Essence. Time is of the essence under this Agreement. If
-------------------
the last day permitted for the giving of any notice or the performance of any
act required or permitted under this Agreement falls on a day that 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.
10.15. Definition of Knowledge. References in this Agreement to "to the
-----------------------
knowledge of Seller," "to Seller's knowledge," "of which Seller has knowledge"
and the like shall mean the actual knowledge of John M. Dyer, Vice
President--Financial Planning and Analysis of Cox Communications, Inc., David J.
Head, Director of Investment Planning of Cox Communications, Inc., and Mark
Stucky, Director of Public Affairs for Orange County of CoxCom, Inc.
10.16. Cure. Each party will promptly notify the other of any fact, event,
----
circumstance or action the existence or occurrence of which would cause any of
such party's representations or warranties under this Agreement not to be true
and correct in any material respect. Notwithstanding the foregoing, for all
purposes under this Agreement, the existence or occurrence of any event or
circumstance that constitutes a breach of a representation or warranty or the
nonfulfillment of any
40
pre-Closing covenant or agreement of Buyer or Seller contained in this Agreement
(including, without limitation, the schedules hereto) on the date such
representation or warranty is made or the fulfillment of such pre-Closing
covenant or agreement is due, shall not constitute a breach of such
representation or warranty or the nonfulfillment of such pre-Closing covenant or
agreement if such event or circumstance is cured on or prior to the Closing
Date.
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IN WITNESS WHEREOF, this Agreement has been executed by Buyer and Seller as
of the date first above written.
BUYER:
-----
MEDIACOM CALIFORNIA LLC
By: Mediacom LLC, a member
By: /s/ Rocco B. Commisso
------------------------------
Name: Rocco B. Commisso
Title: Manager
SELLER:
------
COXCOM, INC.
By:
-----------------------------------
Name: John M. Dyer
Title: Vice President
GUARANTY
--------
MEDIACOM LLC hereby unconditionally guarantees the full and timely payment
and performance by Buyer of Buyer's obligations set forth in the foregoing Asset
Purchase Agreement and in all other agreements and instruments hereafter
executed in connection with the transactions contemplated therein. The guarantee
provided herein is an absolute and continuing guarantee and shall not be
affected by any amendment of the foregoing Asset Purchase Agreement, or any
renewal or extension of the time for performance by Buyer of any of its
obligations thereunder, or any indulgences or waivers with respect thereto.
Mediacom LLC hereby waives presentment for payment or performance, notice of
nonpayment or nonperformance, demand and protest.
MEDIACOM LLC
By: /s/ Rocco B. Commisso
-----------------------------------
Name: Rocco B. Commisso
Title: Manager
42
IN WITNESS WHEREOF, this Agreement has been executed by Buyer and Seller as
of the date first above written.
BUYER:
-----
MEDIACOM CALIFORNIA LLC
By: Mediacom LLC, a member
By:
------------------------------
Name: Rocco B. Commisso
Title: Manager
SELLER:
------
COXCOM, INC.
By: /s/ John M. Dyer
-----------------------------------
Name: John M. Dyer
Title: Vice President
GUARANTY
--------
MEDIACOM LLC hereby unconditionally guarantees the full and timely payment
and performance by Buyer of Buyer's obligations set forth in the foregoing Asset
Purchase Agreement and in all other agreements and instruments hereafter
executed in connection with the transactions contemplated therein. The guarantee
provided herein is an absolute and continuing guarantee and shall not be
affected by any amendment of the foregoing Asset Purchase Agreement, or any
renewal or extension of the time for performance by Buyer of any of its
obligations thereunder, or any indulgences or waivers with respect thereto.
Mediacom LLC hereby waives presentment for payment or performance, notice of
nonpayment or nonperformance, demand and protest.
MEDIACOM LLC
By:
-----------------------------------
Name: Rocco B. Commisso
Title: Manager
42