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EXHIBIT 2.1
PURCHASE AGREEMENT
among
OPTEL, INC.,
INTERACTIVE CABLE SYSTEMS, INC.
and
ICS LICENSES, INC.
Dated as of March 4, 1998
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TABLE OF CONTENTS
Page
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1. SALE AND PURCHASE; PURCHASE PRICE; ADJUSTMENTS..................................................1
1.1 The Purchase...............................................................................1
1.2 The Purchase Price.........................................................................1
1.3 Adjustments to the Purchase Price..........................................................3
1.4 Resolution of Disputes....................................................................11
2. PAYMENT OF PURCHASE PRICE; ESCROW ARRANGEMENT;
TRANSITION SERVICES AND SUBCONTRACT ARRANGEMENT................................................12
2.1 Payment of Purchase Price.................................................................12
2.2 Ratio Formula.............................................................................13
2.3 Consent Escrow............................................................................13
2.4 Crossings Escrow..........................................................................15
2.5 Title to Shares...........................................................................15
2.6 Delivery of Series B Preferred Stock to ICS
Secured Lenders...........................................................................16
3. CLOSING; TERMINATION...........................................................................16
3.1 Date of Closing...........................................................................16
3.2 Closing...................................................................................16
3.3 Termination...............................................................................17
4. CONDITIONS OF CLOSING..........................................................................18
4.1 Conditions to Each Party..................................................................18
4.2 Buyer's Conditions to Closing.............................................................18
4.2.1 Consent from Senior Lender.....................................................18
4.2.2 Opinion of Counsel to Seller...................................................19
4.2.3 Representations and Warranties;
Covenants......................................................................19
4.2.4 Secretary's Certificates; Organization
Documents......................................................................19
4.2.5 Proceedings....................................................................19
4.2.6 No Adverse Legislation.........................................................20
4.2.7 Changes........................................................................20
4.2.8 Approval and Consents..........................................................20
4.2.9 Other Agreements...............................................................21
4.2.10 Absence of Liens...............................................................22
4.2.11 Non-Conforming Crossings.......................................................22
4.3 Seller's Conditions to Closing........................................................22
4.3.1 No Adverse Legislation.........................................................22
4.3.2 Representations and Warranties;
Covenants......................................................................22
4.3.3 Secretary's Certificate........................................................23
4.3.4 Other Agreements...............................................................23
4.3.5 Opinion of Counsel to Buyer....................................................23
5. EMPLOYEE MATTERS...............................................................................23
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6. COVENANTS......................................................................................25
6.1 Maintain Existence and Obtain Approvals...............................................25
6.2 Assignment of Transmission Licenses and
Permits...............................................................................26
6.3 Access to Information.................................................................26
6.4 Disclosure and Classification of Defaults Under
Rights of Entry.......................................................................26
6.5 Promotional Campaigns.................................................................27
6.6 Certain Payments......................................................................27
6.7 Taxes.................................................................................27
6.8 Maintenance of Properties; Insurance; Books and
Records; Compliance with Law; Relationships...........................................27
6.9 Deliveries............................................................................28
6.10 Filings; Approvals....................................................................29
6.11 Conduct of the Business...............................................................29
6.12 Bulk Sales Compliance.................................................................29
6.13 Assignment of Certain Rights..........................................................30
6.14 Crossing Matters......................................................................30
6.15 Transfer Taxes........................................................................30
6.16 Best Efforts..........................................................................30
6.17 First Offer Rights....................................................................31
6.18 Personal Property.....................................................................31
6.19 Financial Statements..................................................................31
7. REPRESENTATIONS AND WARRANTIES OF SELLER.......................................................31
7.1 Authority; Organization and Qualification;
Capitalization........................................................................31
7.2 Actions Pending.......................................................................32
7.3 Outstanding Debt; Defaults............................................................33
7.4 Material Liabilities; Financial Statements............................................33
7.5 Purchased Assets......................................................................33
7.6 Taxes.................................................................................34
7.7 No Conflicts..........................................................................34
7.8 Material Agreements...................................................................35
7.9 Broker's or Finder's Commissions......................................................36
7.10 Applicable Environmental Regulations..................................................36
7.11 Compliance with Other Laws............................................................36
7.12 ERISA; Labor Agreements...............................................................36
7.13 Possession of Franchises, Licenses, etc...............................................36
7.14 Intellectual Property.................................................................37
7.15 Governmental Consents.................................................................37
7.16 Disclosure............................................................................38
7.17 Closing Statement.....................................................................38
7.18 Investment............................................................................38
7.19 Subscribers, Rights of Entry..........................................................40
7.20 Cable Systems.........................................................................40
7.21 FCC Licenses..........................................................................41
7.22 FCC Applications......................................................................41
7.23 FCC Compliance........................................................................42
7.24 Zoning, Aviation, etc. Compliance.....................................................42
7.25 Compliance with the Copyright Act.....................................................42
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7.26 Must-Carry and Retransmission Consent.................................................42
7.27 Petitions for Special Relief..........................................................43
7.28 Conduct in Ordinary Course............................................................43
7.29 Solvency..............................................................................43
7.30 Effective Competition.................................................................43
7.31 Hard Wire Public Right-of-Way Crossings...............................................43
7.32 Security Services.....................................................................44
8. REPRESENTATIONS AND WARRANTIES OF BUYER........................................................44
8.1 Organization..........................................................................44
8.2 Authority.............................................................................44
8.3 Capital Stock and Other Matters.......................................................44
8.4 Validity of Shares....................................................................46
8.5 No Conflicts..........................................................................46
8.6 Actions Pending.......................................................................46
8.7 Solvency..............................................................................46
8.8 Periodic SEC Filings..................................................................46
8.9 Broker's or Finder's Commissions......................................................47
8.10 Assignee Representation and Warranties................................................47
9. DEFINITIONS....................................................................................47
10. MISCELLANEOUS..................................................................................57
10.1 Indemnification......................................................................57
10.2 Indemnification Procedures, Determination of
Damages, Limitations and Related Matters.............................................58
10.3 Amendments...........................................................................60
10.4 Survival of Representations and Warranties...........................................60
10.5 Successors and Assigns...............................................................60
10.6 Notices..............................................................................60
10.7 Descriptive Headings.................................................................61
10.8 Governing Law; Consent to Exclusive
Jurisdiction.........................................................................61
10.9 Binding Arbitration..................................................................62
10.10 Entire Agreement.....................................................................63
10.11 Severability.........................................................................63
10.12 Public Announcement..................................................................63
10.13 Expenses.............................................................................63
10.14 Confidentiality......................................................................64
10.15 Counterparts.........................................................................64
10.16 No Solicitation or Negotiation.......................................................64
10.17 Further Action.......................................................................65
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PURCHASE AGREEMENT, dated as of March 4, 1998 (the "Agreement"), among
OPTEL, INC., a Delaware corporation ("Buyer"), INTERACTIVE CABLE SYSTEMS, INC.,
a California corporation ("Seller") and ICS LICENSES, INC., a Delaware
corporation ("License Company").
R E C I T A L S:
Seller and License Company own, or hold for use in the Relevant
Markets, the Purchased Assets.
Seller and License Company desire to sell to Buyer, and Buyer desires
to purchase from Seller and License Company, the Purchased Assets, upon the
terms and subject to the conditions set forth herein.
In consideration of the recitals and the mutual agreements and
covenants hereinafter set forth, Buyer, Seller and License Company hereby agree
as follows:
1. SALE AND PURCHASE; PURCHASE PRICE; ADJUSTMENTS.
1.1 The Purchase. Upon the terms and subject to the conditions of this
Agreement, and in reliance upon the representations and warranties contained
herein, at the Closing, Seller and License Company shall sell, convey, transfer,
assign and deliver to Buyer and Buyer shall purchase from Seller and License
Company all of Seller's and License Company's right, title and interest in and
to the Purchased Assets free and clear of all Liens (other than Liens which are
associated with the Assumed Liabilities).
1.2 The Purchase Price. (a) The purchase price for the Purchased Assets
shall be (i) $4,000,000 in cash (the "Cash"), (ii) the aggregate of $60,000,000
face amount of Buyer's Series B 8% PIK Cumulative Preferred Stock, $.01 par
value ( the "Series B Preferred Stock") and (iii) 165,746 shares of Buyer's
Class A Common Stock, $.01 par value (the "Class A Common Stock") ((i), (ii) and
(iii), collectively comprise the "Purchase Price") plus assumption (as of the
Closing) of the Assumed Liabilities, as provided in Section 1.2(b), subject to
the adjustments set forth in Section 1.3 and shall be payable in the manner set
forth in Section 2.
(b) As of the Closing, Buyer shall assume and thereafter pay, perform
and discharge when due, only the Assumed Liabilities. The Assumed Liabilities
(other than the Pre-Closing Liabilities) specifically exclude all past due
amounts and all other payment obligations (including, without limitation, any
amounts payable as a result of a breach) however incurred, arising from any
action or omission prior to the Closing. Seller
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shall retain, and shall be responsible for paying, performing and discharging
when due, and Buyer shall not assume or have any responsibility for, any and all
Liabilities of Seller, including, without limitation, any Indemnified Taxes,
other than the Assumed Liabilities.
(c) Further, Buyer shall have the option to acquire, irrespective of
whether such assets are used in the Business, and, subject to (i) the assumption
of all associated Liabilities arising after the Closing, and (ii) Seller's
obtaining all required consents to their transfer: (A) that certain programming
agreement dated May 12, 1995 between Maxtel Cablevision and American Telecasting
of Denver, Inc., (B) vehicles located in any Relevant Market and the
corresponding leases, if any, (C) leases of (1) head-end sites, (2) microwave
transmission, repeater and receiver sites, (3) office space, (4) storage space
and (5) security deposits relating to the leases, (D) all contracts and
arrangements necessary for the provision of local and long distance telephone
service as currently provided to Billable Phone Subscribers, including, without
limitation, local loop (T- 1) transport circuits, local dialtone, E911, operator
services and telephone listings (collectively, the "Telephone Agreements"), (E)
existing agreements for the provision by third party providers of video signal
feed to certain of the Relevant Properties, including, but not limited to, those
properties identified on Schedule 1.2(C) and (F) existing broadcaster
retransmission consent agreements for those Relevant Markets indicated as "New
Markets" on Schedule 9.4. Twenty (20) Business Days prior to the Closing Date,
Seller shall provide Buyer with a true, correct and complete list of all of the
above described assets (including all Leased Premises Assets (defined below))
and associated Liabilities (including those Liabilities associated with Leased
Premises Assets). Buyer shall exercise the option on or before Fifteen (15)
Business Days prior to the Closing Date, provided, that with respect to
subsections (E) and (F) above, Buyer shall have the right to exercise such
option on the Closing Date. Upon exercise of this option, all such assets shall
be deemed Purchased Assets under this Agreement. Buyer's decision to include
assets under this Section 1.2(c) as part of the Purchased Assets shall not
result in any increase to the Purchase Price payable to Seller at the Closing
and shall not be subject to a Purchase Price Adjustment pursuant to Section
1.3(a) below.
If Buyer chooses to acquire any of the aforesaid assets that require
consent to their transfer, Seller shall use its best efforts to obtain such
consents prior to Closing. Additionally, upon Buyer's request, Seller, at its
own expense, shall use all commercially reasonable efforts to provide Buyer with
an estoppel letter from the lessor of any leased premises described in
subsection (C) above. Further, if Buyer chooses to acquire any of the leased
premises set forth in subsection (C) above, Buyer
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shall be required to purchase (without payment of additional consideration
therefore) all office equipment (i.e. copy machines, fax machines, telephones,
etc.) and office furniture located at such premises (the "Leased Premises
Assets") and shall assume all Liabilities associated with such Leased Premises
Assets.
Notwithstanding the aforesaid, Buyer shall not have the option to
acquire the principal administration office premises of Seller located in
Dallas, Texas and Tampa, Florida.
If Buyer does not elect to purchase an agreement for the provision of
video signal feed pursuant to subsection (E) or a broadcaster retransmission
consent agreement pursuant to subsection (F) above, Seller shall, upon request
by Buyer delivered at Closing, maintain such agreements for the benefit of Buyer
for a period of 90 days from the Closing Date and shall take all actions
necessary to permit Buyer to lawfully receive and retransmit signal pursuant
thereto during such time. Buyer shall reimburse Seller for all of Seller's out
of pocket costs of maintaining such agreements and the provision of signal feed
to Buyer thereunder for such period as set forth in the related agreement as in
effect on the date hereof.
(d) All amounts of the Purchase Price (subject to the adjustments and
escrow arrangements and delivery instructions set forth herein) shall be
distributed directly to Seller or to the ICS Secured Lenders pursuant to the
Earmark Agreement (as defined in Section 2.6). Seller and License Company each
hereby irrevocably waive any rights it may have against Buyer relating to the
distribution of the Purchase Price and shall indemnify, defend and hold harmless
Buyer from and against any Losses that Buyer may suffer arising from claims by
Seller or License Company (or any Person as assignee, transferee or otherwise
making a claim by, through or on behalf of Seller, License Company or any such
assignee or transferee) resulting from such distribution of the Purchase Price
to Seller or the ICS Secured Lenders pursuant to the Earmark Agreement.
1.3 Adjustments to the Purchase Price. The Purchase Price shall be
subject to the following adjustments:
(a) Adjustments Relating to Liabilities. Five (5) Business Days prior
to the Closing, Seller shall deliver to Buyer a statement signed by the chief
executive officer of Seller (the "Closing Statement") certifying such person's
best good faith estimate as of the Closing Date of the amounts of all (i)
Liabilities to repay customer deposits relating to Rights of Entry which are
part of the Purchased Assets, (ii) Liabilities of Seller which include financing
arrangements, capitalized leases, conditional sales arrangements, mortgages and
all other similar
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arrangements with respect to the Purchased Assets that will not be satisfied or
discharged at the Closing (excluding Leased Premises Assets, vehicle and
premises leases), (iii) Pre-Closing Liabilities which Buyer chooses to assume
pursuant to this Section 1.3(a) and (iv) the amounts of all recoverable
deposits, prepaid rent and prepaid royalties (which prepaid royalties are
recoupable against Revenue Share payable to property owners under related Rights
of Entry and which shall not exceed $100,000 in the aggregate) paid by Seller in
respect of a lease, license or other agreement forming part of the Purchased
Assets to the extent such lease, license or other agreement shall be assigned to
Buyer at Closing (the "Transferred Deposits"). The Liabilities under subsections
(i) and (ii) are the "Specified Assumed Liabilities". In addition to the
certification of the amounts of such Liabilities and Transferred Deposits, five
(5) Business Days prior to the Closing, Seller shall provide Buyer with a
description of all such Liabilities and Transferred Deposits. The estimate of
Specified Assumed Liabilities shall be based upon, and prepared in accordance
with, GAAP for all Liabilities that would be reflected on a balance sheet of the
Business prepared in accordance with GAAP, and for all other Liabilities, based
upon a good faith estimate of (i) the present value of all lease or other
similar payments to be made after Closing and (ii) the present value of the cost
to purchase the property at the expiry of the lease or other similar agreement,
in each case discounted at a monthly discount rate of 1.25%.
Notwithstanding the aforesaid, with respect to the Purchased Assets
relating to the Specified Assumed Liabilities, Seller shall use its reasonable
efforts to satisfy such Liabilities prior to Closing and transfer to Buyer
absolute ownership of such Purchased Assets free and clear of any such
Liability. If Seller is unable to satisfy any such Specified Assumed Liability
prior to Closing, Seller shall promptly disclose the same to Buyer and shall
obtain the required consent of the lessor (or other party) to transfer of the
lease (or other agreement) to Buyer prior to Closing at Seller's expense and the
liabilities in respect thereof shall be estimated in the manner set forth in the
aforesaid paragraph and such Liabilities shall become a part of the Specified
Assumed Liabilities for purposes of the adjustment pursuant to this Section
1.3(a).
Fifteen (15) Business Days prior to the Closing, Seller shall provide
Buyer with a description of any outstanding pre-Closing Liabilities with respect
to the Purchased Assets (the "Pre-Closing Liabilities"). Other than Liabilities
for which Seller shall commit to satisfy or discharge at the Closing, Buyer, in
its sole discretion, may elect to assume any or all of such Pre-Closing
Liabilities by notifying Seller in writing seven (7) Business Days prior to the
Closing. If Buyer does not elect
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to assume such Pre-Closing Liabilities, Seller must satisfy such Pre-Closing
Liabilities prior to the Closing.
The Purchase Price payable to the Seller on the Closing Date, shall be
decreased by an amount equal to the sum of all Specified Assumed Liabilities and
assumed Pre-Closing Liabilities as set forth on the Closing Statement and
increased by the sum of the Transferred Deposits.
(b) Other Adjustments.
(i) Subscriber Adjustments. The Closing Statement shall also
certify, as of the Closing Date for the Base Period (defined in
subsection 1.3(b)(ii) below) the number of Cable Subscribers and
Billable Phone Subscribers. If there are less than an aggregate of
42,069 Cable Subscribers and Billable Phone Subscribers on the Closing
Date, the "Subscriber Adjustment Amount" shall be a negative number
equal to the product of (A) $1,750 multiplied by (B) the difference
between the aggregate number of Cable Subscribers and Billable Phone
Subscribers and 42,069. If there are more than an aggregate of 42,069
Cable Subscribers and Billable Phone Subscribers at the Closing Date,
the "Subscriber Adjustment Amount" shall be a positive number equal to
the product of (A) $1,750 multiplied by (B) the difference between the
aggregate number of Cable Subscribers and Billable Phone Subscribers
and 42,069.
(ii) Average Revenue Per Subscriber, Revenue Share and Remaining
Contract Term Adjustment. The Closing Statement shall also certify, as
of the Closing Date for the Base Period (defined below): (A) Seller's
actual Average Monthly Cable Revenue Per Cable Subscriber and Average
Phone Revenue per Billable Phone Subscriber, respectively; (B) Seller's
actual cable Revenue Share and phone Revenue Share; and (C) the average
remaining terms to expiry of Seller's cable Rights of Entry and phone
Rights of Entry, respectively, in Relevant Properties, such averages in
each case weighted by the number of units in the applicable Relevant
Properties. Revenues shall be determined in conformity with GAAP and
shall not include taxes or retroactive, catch-up or extraordinary
revenues.
If the Net Revenue Stream Total (as defined below) exceeds
$67,077,000, the Revenue and Term Adjustment Amount is a positive
amount equal to the excess; if Amount X is less than $67,077,000, the
Revenue and Term Adjustment Amount is a negative amount equal to the
deficiency.
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The Net Revenue Stream Total means the aggregate of:
(A) the actuarial present value of a series of equal, consecutive
monthly payments, for a period of months equal to the
"unit-weighted average remaining term" (which for all purposes
shall not include any renewal or extension, optional or otherwise,
which has not been exercised prior to February 1, 1998) of cable
Rights of Entry, in the amount of (1) 40,387 multiplied by Seller's
actual Average Cable Revenue per Cable Subscriber, less (2) the
Seller's actual cable Revenue Share in each case for the Base
Period; and
(B) the actuarial present value of a series of equal, consecutive
monthly payments, for a period of months equal to the
"unit-weighted average remaining term" of phone Rights of Entry, in
the amount of (1) 1,682 multiplied by Seller's actual Average Phone
Revenue per Billable Phone Subscriber, less (2) the Seller's actual
phone Revenue Share in each case for the Base Period,
all as certified by Seller for the Base Period as hereinafter
described.
For the purposes of this Section 1.3(b)(ii), "actuarial present
value" shall:
(A) be computed using a monthly discount rate of 1.25% per month;
and
(B) for all periods shown in the Annuity Present Value Factor table
presented in Schedule 1.3(b)(ii), be computed in accordance with
such table by multiplying the amount of the monthly consecutive
payment determined for cable or phone, as the case may be, by the
factor that corresponds to the "unit-weighted average remaining
term" of cable or phone, as the case may be; and, for all periods
not shown in such table, shall be calculated by interpolation from
the two points closest to it as shown in the table.
"Base Period" means the calendar month ending immediately prior
to the Closing Date but no earlier than March 1998 for which a
monthly billing cycle has been completed.
(iii) 550 MHz Standard Adjustment. (A) For each of Phoenix,
Arizona; Los Angeles, Orange County, San Diego and San Francisco,
California; Denver, Colorado; Miami, Florida; Dallas and Houston,
Texas; and Chicago, Illinois, Seller shall classify the Relevant
Properties
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situated in each of those markets into four categories (each a
"Category"), with Category I comprised of all properties designated
by Seller on Schedule 7.19 as having 750 MHz bandwith (the
"Category I Properties"), Category II comprised of all properties
designated by Seller on Schedule 7.19 as having 550 MHz bandwith
(the "Category II Properties"), Category III comprised of all
properties designated by Seller on Schedule 7.19 as having 450 MHz
bandwith (the "Category III Properties") and Category IV comprised
of all properties designated by Seller on Schedule 7.19 as having
330 MHz bandwith (the "Category IV Properties").
(B) Buyer shall submit to Seller, in writing, a list of
Relevant Properties which comprise the greater of (x) 20% (based on
units) or (y) two of the Relevant Properties in each Category which
reasonably represent the properties with demographic ratings of A,
B, C and D assigned by Seller in each market, which Buyer will use
as a representative sample of the properties in such market in such
category (the "Sample Properties"). Within 5 days after receipt
thereof, Seller shall provide Buyer with copies of as-built maps
(and digital media, if available) for each of the Sample
Properties. In the event as-built maps are not available for a
Sample Property, Buyer (with Seller's cooperation) shall have the
option to produce such maps, at its own expense, or select similar
properties in such Category for which as-built maps are available.
A designated representative of Buyer shall walk out each of the
Sample Properties with a designated representative of Seller to
verify that the as-built maps are accurate and shall record any
deviations in construction or materials on the as-built maps.
(C) With respect to Categories I and II, based on the completed
as-built maps and manufacturers' equipment specifications and
recommended operating levels, Buyer shall compute signal levels,
signal-to-noise ratios and coherent distortions for each of the
Sample Properties in each of the Categories. If based on such
computations, a Sample Property fails to meet the "Minimum
Performance Specifications for Pass/Fail Testing of Properties
Identified by Seller as 550 MHz and 750 MHz" (the "Test
Specifications") set forth in part I of Schedule 1.3(b)(iii), such
property shall be deemed to be a failed property, unless within 5
days after receipt of written notice of such failure, Seller
provides Buyer with results of an on-site test, conducted at
Seller's expense, in the presence of a designated representative of
Buyer and in accordance
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with a test configuration, subject to Buyer's reasonable approval,
which demonstrate that the failed property meets the Test
Specifications. Failed properties shall be redesigned by Seller to
meet the "Minimum Performance Specifications for Re-Design of
Failing Properties including all Properties Identified by Seller as
450 MHz and 330 MHz" (the "Re-Design Specifications") set forth in
part II of Schedule 1.3(b)(iii) in accordance with a budget using
the labor and material costs in conjunction with the unit prices
set forth on Schedule 1.3(b)(iii). Seller's redesign is subject to
reasonable approval or submittal of an alternate redesign by Buyer.
Seller and Buyer in good faith shall agree upon an alternate
redesign, if necessary.
(D) The number of units in each Sample Property in Category I
and II, respectively, that fail to meet the Test Specifications
shall be totaled and divided by the total number of units in all
Sample Properties in such Category I or II, respectively. Such
quotient shall be referred to as the "Assumed Failed Ratio".
(E) The Assumed Failed Ratios for Category I and II,
respectively, shall be multiplied by the total number of units in
Category I or II, respectively. Such product shall be referred to
as the "Assumed Failed Units in Category I" or "Assumed Failed
Units in Category II", respectively.
(F) The labor and material costs for the redesign of all failed
properties in Category I and II, respectively, shall be totaled and
such total cost shall be divided by the number of Sample Property
units in such Category that fail to meet the Test Specifications to
determine the per unit adjustment price (the "Per Unit Adjustment
Price").
(G) The Per Unit Adjustment Price shall be multiplied by the
Assumed Failed Units in Category I and Assumed Failed Units in
Category II, respectively. Such product shall be referred to as the
"Total Adjustment Price for Category I" and "Total Adjustment Price
for Category II", respectively.
(H) For each of Category III and IV, the Assumed Failed Ratio
shall be deemed to be 100% and the number of Assumed Failed Units
for Category III and Assumed Failed Units for Category IV,
respectively shall be deemed to be 100% of the total number of
units in Category III and Category IV, respectively.
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(I) Using the completed as-built maps and manufacturers'
equipment specifications and recommended operating levels, Seller
shall redesign each Category III and Category IV Sample Property to
meet the ReDesign Specifications in accordance with a budget using
the labor and material costs in conjunction with the unit prices
set forth on Schedule 1.3(b)(iii). Seller's redesign is subject to
reasonable approval or submittal of an alternate redesign by Buyer.
Seller and Buyer in good faith shall agree upon an alternate
redesign, if necessary.
(J) The labor and material costs for all Sample Properties in
Category III and IV, respectively, shall be totaled and such total
cost shall be divided by the total number of Sample Property units
in Category III and Category IV, respectively, to determine the Per
Unit Adjustment Price.
(K) The Per Unit Adjustment Price shall be multiplied by the
total number of units in Category III and Category IV,
respectively. Such product shall be referred to as the "Total
Adjustment Price for Category III" and "Total Adjustment Price for
Category IV", respectively.
(L) In order to meet the Re-Design Specifications, all
redesigns of properties shall be based upon one or more of the
following ten changes, in order of priority (i.e., the lower number
remedy shall be chosen over a higher number remedy if such remedy
will provide an adequate redesign): (1) replacement of passives,
(2) addition of passives, (3) replacement of amplifiers, (4)
relocation of amplifiers, (5) addition of amplifiers, (6)
replacement of cables, (7) addition of cables, (8) replacement of
power supplies, (9) relocation of power supplies and (10) addition
of power supplies.
(M) The 550 MHz Adjustment Amount shall be a negative number
the magnitude of which shall be the amount, if any, by which the
lesser of:
(i) $75 multiplied by the number of units in all of the markets
listed in subsection (A) above;
(ii) the sum of (x) $40 multiplied by the number of Assumed
Failed Units in Category I and II, plus (y) $137.50 multiplied by
the number of units in Category
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III, plus (z) $200 multiplied by the number of units in Category
IV; or
(iii) the aggregate of the Total Adjustment Price for Category I,
Total Adjustment Price for Category II, Total Adjustment
Price for Category III and Total Adjustment Price for
Category IV;
exceeds $1,000,000; for greater certainty, if the lesser of (i), (ii) or (iii)
is less than $1,000,000, the 550 MHz Adjustment Amount shall be zero.
(N) Notwithstanding the aforesaid, Seller shall complete all
redesigns at Seller's sole expense and Buyer shall complete all
alternate redesigns at Buyer's sole expense.
(O) Buyer shall have the option at any time, in its sole
discretion, to waive the 550 MHz Adjustment in its entirety or to
terminate the requirement of a walkout or redesign for a property.
(P) Buyer and Seller shall each use their best efforts and act
in good faith to provide and agree to all items required under this
Section 1.3(b)(iii) to be provided or agreed to by such party.
(Q) To the extent Buyer and Seller are unable to agree to a
proposal under subsection (C) or (I) above, the parties agree to
use Buyer's proposal for purposes of the 550 MHz Adjustment at
Closing. Seller shall have the right after the Closing to dispute
such proposal and seek an adjustment under Section 1.4. All other
disputes between Buyer and Seller relating to issues under this
Section 1.3(b)(iii) shall be resolved by reference to independent
engineers. Buyer and Seller shall share equally all costs and
expenses of the independent engineers.
(c) If the aggregate net sum of the Subscriber
Adjustment Amount, the Revenue and Term Adjustment Amount and the 550 MHz
Adjustment Amount as set forth in Section 1.3(b) is a negative amount: (i) up to
$2,000,000, there shall be no adjustment to the Purchase Price, (ii) more than
$2,000,000, the Purchase Price payable to Seller on the Closing Date shall be
decreased by the difference between the total adjustment and $2,000,000,
provided, that the maximum decrease to the Purchase Price arising under Section
1.3(b) shall be $4,500,000 (the "Adjustment Cap"). If the aggregate net sum of
the Subscriber Adjustment Amount, the Revenue and Term Adjustment Amount and the
550 MHz Adjustment Amount as set forth in Section 1.3(b) is a
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positive number, adjustment pursuant to Section 1.3(b) shall not result in an
increase to the Purchase Price provided, however, that the amount (if any) by
which such positive number exceeds $2,000,000 shall constitute the Indemnity
Basket for purposes of Section 10.1(b).
Each $1,000 of purchase price-adjustment pursuant to Section 1.3 shall
be applied as follows (with amounts not in whole multiples of $1,000 applied in
the same proportion):
(i) by a reduction in the face amount of Series B Preferred
shares issued or to be issued in the amount of $786.96; and
(ii) by a reduction in the number of Class A Common shares issued
or to be issued of 2.17388 shares.
1.4 Resolution of Disputes. Except as otherwise provided in Section
1.3(b)(iii), the Closing Statement and all other scheduled information upon
which the foregoing adjustments are based, which are delivered by Seller shall
be final, binding and conclusive on the parties with respect to adjustments to
the Purchase Price under Section 1.3 unless Buyer submits to Seller a written
notice of any dispute (setting forth in reasonable detail the basis for such
dispute) within 90 days after the Closing. If Buyer delivers a timely notice of
dispute, Seller's Accountants and Buyer's Accountants shall confer to determine
the nature and scope of any disagreement among the parties and shall submit such
issues to the parties for resolution. If Buyer and Seller are unable to reach a
resolution within 30 days after the receipt by Seller of Buyer's written notice
of dispute, then the dispute shall be submitted to Arthur Andersen (or if Arthur
Andersen is unavailable, to another nationally recognized public accounting firm
mutually satisfactory to Buyer and Seller). Buyer and Seller shall provide full
cooperation to such accounting firm. Such accounting firm shall make a final and
binding determination as to the matter or matters in dispute. Buyer and Seller
shall cooperate with each other and with each other's authorized representatives
in order to resolve such dispute as soon as practicable. Within five (5) days
after the final resolution of all disputes relating to the Closing Statement,
Buyer and Seller shall readjust the Purchase Price in the same manner as
provided in Section 1.3. If the payments at Closing by Buyer were greater than
the Purchase Price that should have been paid as finally determined by this
Section 1.4, Seller shall immediately refund such excess amount (less any amount
that may have been paid to Buyer pursuant to Section 10.1 hereof or pursuant to
the Guaranty relating to such dispute) to Buyer, together with interest on such
amount from the Closing Date to the date of such payment at the rate of eight
percent per annum, in the manner set forth below. If the payments at Closing by
Buyer were less than the
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Purchase Price that should have been paid as finally determined by this Section
1.4, Buyer shall immediately pay such additional amount to Seller, together with
interest on such amount from the Closing Date to the date of such payment at the
rate of eight percent per annum, in the manner set forth below. Each $1,000 of
amounts to be refunded by Seller or paid as additional consideration by Buyer
pursuant to Section 1.4 shall be paid as follows (with amounts not in whole
multiples of $1,000 applied in the same proportion):
(i) by the issue or return for cancellation, as the case
may be, of Series B Preferred shares having face
amount and accrued and unpaid dividends in the amount
of $786.96 plus an accretion factor of 8% per annum
from the date of Closing; and
(ii) by the issue or return for cancellation, as the case
may be, of 2.17388 Class A Common shares.
Upon resolution of a dispute, Seller shall pay a percentage of the Accountant's
costs and expenses equal to the percentage of the disputed amount determined in
favor of Buyer and Buyer shall pay a percentage of the Accountant's costs and
expenses equal to the percentage of the disputed amount determined in favor of
Seller. All other costs and expenses of Buyer and Seller associated with
resolving a dispute under this Section 1.4 shall be borne by Buyer and Seller,
respectively.
Nothing in this Section 1.4 shall limit Seller's rights or
remedies under this Agreement or otherwise to dispute information on which the
adjustments in Section 1.3 are based.
2. PAYMENT OF PURCHASE PRICE; ESCROW ARRANGEMENT;
TRANSITION SERVICES AND SUBCONTRACT ARRANGEMENT.
2.1 Payment of Purchase Price. (a) At the Closing, Buyer shall
pay to Seller the Purchase Price (as adjusted to reflect the adjustments
specified in Section 1.3) (but subject to post-Closing adjustment in the event
of a dispute as provided in Section 1.4), less the Consent Escrow Amount and the
Crossings Escrow Amount.
(b) Payments pursuant to this Section 2.1 shall be made as
follows:
(i) Cash by a single wire transfer of immediately
available funds to an account designated by Seller at least five
(5) Business Days prior to the Closing Date;
(ii) subject to the adjustments in Section 1.3, the
escrow arrangements specified in Sections 2.3 and 2.4 and the
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delivery arrangement specified in Section 2.6, delivery to Seller of the Series
B Preferred Stock, in such denominations as Seller shall request in writing five
days prior to the Closing; and
(iii) subject to the adjustments in Section 1.3,
the escrow arrangements specified in Sections 2.3 and 2.4 and the delivery
arrangement specified in Section 2.6, delivery to Seller of the Class A Common
Stock, in such denominations as Seller shall request in writing five days prior
to the Closing.
2.2 Ratio Formula. Each $1,000 amount to be deposited in
and/or released from escrows created pursuant to Sections 2.3, 2.4 and 4.28
shall be comprised of (with amounts not in whole multiples of $1,000 applied in
the same proportion):
(i) $786.96 face amount of Series B Preferred shares,
together with dividends paid or accrued since issue,
and
(ii) 2.17388 Class A Common shares.
2.3 Consent Escrow. (a) At the Closing, Buyer and Seller shall
execute and deliver an escrow agreement substantially in the form of Exhibit A
hereto (the "Consent Escrow Agreement") under which a Person mutually
satisfactory to Buyer and Seller shall act as escrow agent (the "Consent Escrow
Agent"). Buyer shall deposit with the Consent Escrow Agent the amount required
by Section 4.2.8, in conformity with Section 2.2 (the "Consent Escrow Amount"),
which shall be withheld from the Purchase Price payable to Seller at the Closing
as provided in Section 2.1.
(b) Subject to the provisions of this Section 2.3 and the
Consent Escrow Agreement, the Consent Escrow Amount shall be paid to Seller from
time to time as Required Consents are obtained by Seller (and Rights of Entry
and related Purchased Assets are delivered to Buyer free and clear of all
Liens), equal to the Per Subscriber Amount (as defined in Section 9) multiplied
by the number of Cable Subscribers or Billable Phone Subscribers at the Closing
Date that relate to such Required Consents, provided, that 365 days after the
Closing Date, or at Seller's option, upon not less than 30 days prior written
notice to Buyer, 180 days after the Closing Date, all agreements to service
Cable Subscribers and Billable Phone Subscribers for which Required Consents
have not been received shall remain owned by Seller and all remaining amounts of
the Consent Escrow Amount shall be released to Buyer and Seller in the manner
described below. Notwithstanding the above, if after exerting all reasonable
efforts to secure a consent from an owner of any of the properties listed on
Schedule 2.3, Seller believes that it is futile to continue negotiations with
such owner(s) after the
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Closing and prior to such 180th or 365th day, Seller shall advise Buyer of its
efforts and the Right of Entry related to such property shall remain owned by
Seller and the appropriate amount relating to such Right of Entry as provided
below, shall promptly be released to Seller. For each Required Consent which is
not obtained, (i) Seller shall receive in conformity with Section 2.2, the
amount placed in escrow in respect of the contract for which such Required
Consent was not obtained (an "Underlying Contract") multiplied by (y) the
quotient of (A) the number of years (.5 or 1) the Consent Escrow arrangement is
in place (the "Consent Escrow Term"), and (B) the number of years to expiration
of the Underlying Contract, as of the Closing Date, rounded to the nearest year
(the "Contract Expiration Date"), provided that with respect to any of the
properties set forth on Schedule 2.3, the Consent Escrow Term shall be the
fraction of a year (rounded to the nearest one-tenth of a year) during which the
portion of the Consent Escrow Amount for such property was held in escrow and
(ii) Buyer shall receive the balance of the remaining Consent Escrow Amount.
For purposes of this Section 2.3, each of the following shall
be deemed to be the obtaining of a Required Consent during the Consent Escrow
Term: (i) Buyer's execution of a new Right of Entry in lieu of obtaining a
consent, (ii) with respect to a Right of Entry classified under Subsection (ii)
of Section 6.4, the curing or resolution of alleged or existing defaults under
such Right of Entry and the obtaining of a consent (with estoppel language
regarding such cured or resolved defaults) from any third party required by the
terms of such Right of Entry, (iii) with respect to any Right of Entry for which
a franchise or license must be obtained, the effective transfer of such
franchise or license to Buyer and the obtaining of consents, if any, from any
third party required by the terms of such Right of Entry, and (iv) the
expiration of a Right of Entry, or its conversion to a month-to-month basis
following expiry, in each case, and in accordance with its existing terms as of
the date hereof.
(d) At the Closing, Buyer and Seller shall enter
into an agreement in the form of Exhibit B hereto (the "Services and Cooperation
Agreement"), pursuant to which (i) Buyer (through one or more of its
Subsidiaries) and Seller shall perform certain transition services for each
other, (ii) Buyer will subcontract with Seller to service all Cable Subscribers
and Billable Phone Subscribers for which Required Consents have not been
received, from the Closing Date through the Consent Escrow Term or earlier, as
provided in Section 2.4(b) and (iii) Seller will agree to maintain the Telephone
Agreements for the telephone service provided under Rights of Entry acquired by
Buyer where such Telephone Agreements were not assigned to Buyer prior to the
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Closing Date, from the Closing Date until such time as Buyer has entered into
its own Telephone Agreements.
2.4 Crossings Escrow. (a) At the Closing, Buyer and Seller
shall execute and deliver an escrow agreement substantially in the form of
Exhibit C hereto (the "Crossings Escrow Agreement") under which a person
mutually satisfactory to Buyer and Seller shall act as escrow agent (the
"Crossing Escrow Agent") with respect to the escrow fund. Buyer shall deposit
with the Crossings Escrow Agent, in conformity with Section 2.2, $40,000 for
each Non-Conforming Crossing (the "Crossing Escrow Amount"), which shall be
withheld from the Purchase Price payable to Seller at the Closing as provided in
Section 2.1.
(b) Subject to the provisions of this Section 2.4 and the
Crossings Escrow Agreement, the Crossing Escrow Amount for each Non-Conforming
Crossing shall be delivered to Seller in its entirety, in conformity with
Section 2.2, for each NonConforming Crossing for which Seller has completed the
Remedy (as defined in Section 6.14) by the end of the six month period described
in Section 6.14. If the Remedy for a Non-Conforming Crossing is not completed
until after such six month period, upon completion of the Remedy, Seller shall
receive the Crossing Escrow Amount escrowed for such Non-Conforming Crossing
less all out-of-pocket costs incurred by Buyer to complete the Remedy. The
remainder of the funds relating to such Non-Conforming Crossing shall be
released to Buyer at such time.
2.5 Title to Shares. All shares of the Series B Preferred
Stock and Class A Common Stock deposited with the Consent Escrow Agent (the
"Consent Shares") and the Crossings Escrow Agent (the "Crossings Shares") shall
be registered in the name of, and deemed delivered to, Seller as of the Closing
Date, notwithstanding the fact that such Consent Shares and Crossings Shares are
held in escrow by the respective Escrow Agents pursuant to the Escrow
Agreements; provided, that Seller shall deliver on the Closing Date to the
respective Escrow Agents stock powers endorsed in blank representing the Consent
Shares and Crossings Shares. Notwithstanding anything to the contrary in this
Agreement or in the Crossings Escrow Agreement, but subject at all times to
Buyer's rights in and to the Crossings Escrow Amount pursuant to the terms of
this Agreement and the Crossings Escrow Agreement, the ICS Secured Lenders may
have a security interest, pursuant to the terms of the ICS Amended and Restated
Note Purchase Agreement (and the other related loan documents referred to
therein), in and to the Crossings Escrow Amount, to the extent of Seller's
ownership interest in such amount. Pursuant to the Bailee Letter, substantially
in the form of Exhibit D hereto (the "Bailee Letter"), the Crossings Escrow
Agent shall act as bailee of the Crossings Escrow Amount for the ICS Secured
Lenders and shall deliver all amounts from the
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Crossings Escrow Fund which are to be delivered to Seller, pursuant to the terms
of this Agreement and the Crossings Escrow Agreement, to the ICS Collateral
Agent.
2.6 Delivery of Series B Preferred Stock to ICS Secured
Lenders. Seller shall provide Buyer with a copy of an Earmark Agreement among
Seller, Buyer and the ICS Secured Lenders, substantially in the form of Exhibit
E hereto (the "Earmark Agreement"), pursuant to which (a) Buyer shall be
directed to deliver a specified portion of the Series B Preferred Stock (and to
the extent set forth therein, Class A Common Stock), which is not subject to an
escrow agreement or other encumbrance, to such ICS Secured Lenders in lieu of
Seller and (b) the ICS Secured Lenders shall each make the representations and
warranties which are set forth in Section 7.18 of this Agreement with respect to
any shares of Series B Preferred Stock (and to the extent applicable, any shares
of Class A Common Stock) received by such ICS Secured Lender. Buyer agrees to
deliver such portion of the shares of Series B Preferred Stock (and to the
extent applicable, shares of Class A Common Stock) (in all cases, after escrows
are provided for) to the ICS Secured Lenders at the address set forth in the
Earmark Agreement. Seller acknowledges that any delivery to the ICS Secured
Lenders pursuant to this Section 2.6 shall be deemed to be a delivery to Seller.
If Seller does not provide Buyer with the Earmark Agreement, Buyer shall deliver
to Seller all portions of the Purchase Price which are not subject to an escrow
arrangement.
3. CLOSING; TERMINATION.
3.1 Date of Closing. Upon the terms and subject to the
conditions of this Agreement, the sale and purchase of the Purchased Assets
contemplated by this Agreement shall take place at a closing (the "Closing") to
be held at the offices of Kronish, Lieb, Weiner & Hellman LLP (or at such other
place as the parties may agree in writing) at 10:00 A.M. New York time on March
31, 1998, or on a date mutually designated by Seller and Buyer, but in no event
later than five (5) Business Days after the date when each of the conditions
specified in Article 4 has been fulfilled (or waived by the party entitled to
waive that condition). (The date on which the Closing is held is referred to
herein as the "Closing Date".)
3.2 Closing. (a) At the Closing the following shall occur
simultaneously, and none shall be deemed to occur without the occurrence of all
of the others:
(i) Seller shall deliver to Buyer bills of
sale, assignments, endorsements, releases and such
other documents and instruments (collectively,
"Transfer Documentation") as may be necessary or
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appropriate to convey and vest in Buyer, good and
marketable title in and to the Purchased Assets that
are tangible assets, and all of Seller's
right, title and interest to the Purchased Assets
that are intangible assets, free and clear of all
Liens;
(ii) Buyer shall deliver to Seller an
assumption agreement and such other documents and
instruments as may be necessary or appropriate for
Buyer to assume the Assumed Liabilities;
(iii) Buyer shall deliver the Purchase Price
in the manner set forth in Section 2.
(b) From time to time, pursuant to the reasonable request of
Buyer delivered to Seller after the Closing Date, Seller, at Seller's expense
and without any further consideration, will execute and deliver to Buyer such
instruments and documents of conveyance and transfer, and do and cause to be
done such acts or things, as Buyer may reasonably request in order to more
effectively sell, convey, transfer and assign to Buyer, or to perfect or record
Buyer's interest in or title to, or to enable Buyer to use, any and all of the
Purchased Assets, or otherwise to carry out the purposes and intent of this
Agreement. From and after the Closing, each of Buyer and Seller shall have the
right and authority to endorse the other's name on any check or other instrument
received by it on account of any accounts receivable title to which such party
shall have after the Closing pursuant to this Agreement. Buyer shall deliver
promptly to Seller any and all payments of accounts receivable relating to
services performed by Seller prior to the Closing Date which are received by
Buyer after the Closing Date.
3.3 Termination. (a) This Agreement may be terminated at
any time prior to the Closing:
(i) by written agreement executed by Seller
and Buyer;
(ii) by Buyer or Seller if the Closing has
not occurred on or before October 31, 1998, provided
that the non-occurrence of the Closing is not
attributable to a breach of the terms hereof by the
party seeking termination; or
(iii) by Buyer, in its sole discretion, if
the aggregate adjustments to the Purchase Price as
provided in Section 1.3 (b) would have exceeded
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$4,500,000 without application of the Adjustment Cap.
(b) Upon any termination of this Agreement pursuant to Section
3.3(a), this Agreement shall become void and have no effect, without any
liability on the part of any party hereto or its directors, officers or
stockholders in respect of this Agreement, except (i) the provisions of Sections
3.3, 10.1, 10.2, 10.3, 10.5, 10.6, 10.8, 10.9, 10.11, 10.15 and Article 9, shall
survive such termination, and (ii) that nothing herein shall limit the right of
either Buyer or Seller to seek damages for breach of this Agreement.
4. CONDITIONS OF CLOSING.
4.1 Conditions to Each Party. The obligations of each party to
consummate the transactions contemplated by this Agreement at the Closing shall
be subject to the satisfaction, at or prior to the Closing, of the following
conditions:
(a) All notifications required pursuant to the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR
Act"), to carry out the transactions contemplated by this Agreement shall have
been made, and the applicable waiting period and any extensions thereof shall
have expired or been terminated, without the imposition of any material burden
or condition on any party hereto.
(b) No order of any Governmental Body (including a court
order) shall have been entered that enjoins, restrains or prohibits consummation
of the transactions contemplated by this Agreement, or puts in doubt the
validity of this Agreement or any document contemplated herein in any material
respect. No proceeding before any Governmental Body shall be pending or
threatened that (i) restrains, prohibits, prevents or materially changes, or
presents a substantial possibility of restraining, prohibiting, preventing or
materially changing, the terms of the transactions contemplated by this
Agreement or (ii) presents a substantial possibility of resulting in material
Losses to any party hereto in each case arising from the transactions
contemplated by this Agreement.
4.2 Buyer's Conditions to Closing. The obligation of Buyer to
consummate the transactions contemplated by this Agreement at the Closing shall
be subject to the satisfaction, at or prior to the Closing, of the following
conditions:
4.2.1 Consent from Senior Lender. Buyer shall have
received consent from the requisite number of lenders under that certain Credit
Agreement dated as of December 19, 1997, by and among TVMAX Telecommunications,
Inc., Optel, Inc., the
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lenders listed thereon, Goldman Sachs Credit Partners L.P., Canadian Imperial
Bank of Commerce and General Electric Capital Corporation, to consummate the
transactions contemplated by this Agreement.
4.2.2 Opinion of Counsel to Seller. Buyer shall have
received from Fulbright & Jaworski L.L.P. a legal opinion addressed to Buyer and
dated the Closing Date, the material provisions of which are set forth on
Exhibit F.
4.2.3 Representations and Warranties; Covenants. The
representations and warranties contained in Section 7 shall be true and correct
in all material respects when made and as of the Closing Date except to the
extent, and only to the extent, that any exceptions thereto are fully disclosed
to Buyer; Seller and License Company shall have duly performed and complied in
all material respects with all agreements and conditions required by this
Agreement to be performed or complied with by it prior to the Closing Date;
Seller and License Company shall have delivered to Buyer an Officer's
Certificate, dated the Closing Date to the foregoing effect. The Closing
Statement shall be true, correct and complete in all material respects.
4.2.4 Secretary's Certificates; Organization Documents.
(a) Buyer shall have received a certificate, dated the Closing Date, of the
Secretary of Seller and License Company, respectively to which are attached: (i)
a true and complete copy of the articles of incorporation of Seller and License
Company, respectively, as then amended and in force, (ii) a true and complete
copy of the bylaws of Seller and License Company, respectively, as then in
force, (iii) a certificate of good standing, dated within five (5) Business Days
of Closing, of the secretary of state of the state of incorporation for Seller
and License Company, respectively, and (iv) resolutions of the board of
directors of Seller and License Company, respectively, and all other corporate
proceedings of Seller and License Company authorizing the execution and delivery
of this Agreement by Seller and License Company, respectively, the agreements
and instruments contemplated herein, and the consummation of the transactions
contemplated hereby. Such Secretary's certificate shall also certify the names
and offices of the officers of Seller and License Company, respectively,
authorized to execute this Agreement and the other documents to be delivered
hereunder on behalf of Seller and License Company, respectively.
4.2.5 Proceedings. All required corporate and other
proceedings taken or required to be taken in connection with the transactions
contemplated hereby and all documents incident thereto shall be reasonably
satisfactory in form and substance to Buyer and its counsel, and Buyer and its
counsel shall have received all such counterpart originals or certified
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or other copies of such documents as each of them may reasonably request.
4.2.6 No Adverse Legislation. No legislation, order, rule,
ruling or regulation shall have been enacted, promulgated or made by or on
behalf of any Governmental Body nor shall any decision of any court of competent
jurisdiction within the United States have been rendered which, in Buyer's
reasonable judgment, could reasonably be expected to materially and adversely
affect (a) the validity or enforceability of this Agreement or any of the
transactions contemplated hereby or (b) the Purchased Assets or the Business or
Buyer's rights thereto or use thereof.
4.2.7 Changes. From the date hereof to and including the
Closing Date, there shall not have been any changes in or effects on the
Purchased Assets or Seller, which could, in the aggregate, without application
of the Adjustment Cap, result in an adjustment to the Purchase Price pursuant to
Section 1.3(b) which could exceed $4,500,000, nor shall there have been any
development or discovery of any material contingency or other Liability which
could reasonably be expected to have such effect or result in a Material Adverse
Effect on the Business, but only to the extent such changes or effects are not
included or considered in any adjustment to the Purchase Price pursuant to
Section 1.3.
4.2.8 Approval and Consents. (a) Each of Seller, License
Company and Buyer shall have duly received all authorizations, consents,
approvals, licenses, franchises, permits and certificates (including, without
limitation, all telecommunication licenses necessary to conduct the Business) by
or of all federal, state and local governmental authorities and of all third
Persons which (i) are reasonably necessary for the execution and delivery of
this Agreement or (ii) the failure of which to obtain, in the aggregate, would
be reasonably likely to interfere with Buyer's use and enjoyment of any of the
Purchased Assets or would otherwise adversely affect the Business or the
consummation of the transactions contemplated hereby (the "Required Consents"),
and all Required Consents shall be in full force and effect at the time of the
Closing and Buyer shall have received such certificates or other evidence as
Buyer may reasonably request to establish compliance with these conditions
provided that a consent shall not be deemed to be required for any property
which is not subject to a Right of Entry, is subject to a Right of Entry which
can be terminated by the property owner on 30 days' notice (or less) or which
Seller is currently servicing pursuant to a Right of Entry which has expired.
Notwithstanding the aforesaid, with respect to consents from property owners,
this condition shall be deemed satisfied if consents are received from property
owners representing 70% of
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the aggregate number of all Cable Subscribers and Billable Phone Subscribers
which are included in the Business, provided that (i) a portion of the Purchase
Price, in conformity with Section 2.2, in the amount of the Per Subscriber
Amount multiplied by the Cable Subscribers and Billable Phone Subscribers
affected by the Required Consents that have not been obtained, shall be paid
into the Consent Escrow, as provided in Section 2.3 and shall be released
pursuant to such Section and the Consent Escrow Agreement, and (ii) after the
Closing Seller shall use its best efforts to obtain such Required Consents as
promptly as practicable. Buyer shall cooperate with Seller and use its
commercially reasonable efforts to assist Seller in obtaining the remaining
Required Consents as set forth in Section 6.1 and shall not take any action
reasonably likely to cause property owners to refuse to grant such consents. For
purposes of the aforesaid and Section 6.1, in the case of a Right of Entry for
which a franchise or license is required, a Required Consent shall be deemed
received upon transfer of the franchise or license to Buyer and upon receipt of
all other Required Consents from third parties required by the terms of the
Right of Entry. Further, if a Right of Entry associated with a default disclosed
pursuant to Section 6.4 is classified under: (a) subsection (i) of Section 6.4,
such Right of Entry shall be treated in the same manner as those Rights of Entry
for which there is no alleged or existing default; (b) subsection (ii) of
Section 6.4, such Right of Entry shall be deemed to contain a Required Consent
and shall be subject to the terms of the Consent Escrow and a Required Consent
shall be deemed received upon the curing or resolution of alleged or existing
defaults under such Right of Entry and the obtaining of a Required Consent (with
estoppel language regarding such cured or resolved defaults) from third parties
required by the terms of the Right of Entry. Notwithstanding any other provision
of this Agreement, with respect to the Consent Escrow Amount for those Rights of
Entry which are classified under Subsection (ii) of Section 6.4, such amount
shall equal the Per-Subscriber Amount multiplied by the total number of Cable
Subscribers and Billable Phone Subscribers subject to Rights of Entry which are
classified under Subsection (ii) of Section 6.4, less an aggregate of 800 Cable
Subscribers and Billable Phone Subscribers.
(b) Buyer shall have received written consents from each
external accountant or auditor of Seller permitting access to the financial
statements and work papers, and the right to use such financial statements, work
papers and the information contained therein, in each case in the manner
described in Section 6.5(a).
4.2.9 Other Agreements. Each party other than Buyer shall
have duly executed and delivered each of the documents and instruments described
in Section 3.2(a) to be
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executed and delivered by it and each of the following agreements:
(a) the Consent Escrow Agreement;
(b) the Crossing Escrow Agreement;
(c) a Stockholders Agreement, substantially in the form of
Exhibit G hereto (the "Stockholders Agreement") governing
Seller's rights with respect to the Class A Common Stock
and Series B Preferred Stock received by Seller as part of
the Purchase Price;
(d) the Services and Cooperation Agreement;
(e) the Non-Competition Agreement;
(f) the mutual release, substantially in the form of
Exhibit H hereto (the "Mutual Release"); and
(g) a guaranty, substantially in the form of Exhibit I
hereto (the "Guaranty").
4.2.10 Absence of Liens. At the Closing, Seller shall
provide Buyer with evidence reasonably satisfactory to Buyer of the release of
all Liens relating to the Purchased Assets.
4.2.11 Non-Conforming Crossings. Seller shall have
delivered to Buyer Five (5) Business Days prior to the Closing a true and
correct list of all Non-Conforming Crossings.
4.3 Seller's Conditions to Closing. The obligation of Seller to
consummate the transactions contemplated by this Agreement at the Closing shall
be subject to the satisfaction, at or prior to the Closing, of the following
conditions:
4.3.1 No Adverse Legislation. No legislation, order, rule,
ruling or regulation shall have been enacted, promulgated or made by or on
behalf of any Governmental Body nor shall any decision of any court of competent
jurisdiction within the United States have been rendered, which in Seller's
reasonable judgment, could reasonably be expected to materially and adversely
affect the validity or enforceability of this Agreement or of any of the
transactions contemplated hereby.
4.3.2 Representations and Warranties; Covenants. The
representations and warranties contained in Section 8 shall be true and correct
in all material respects when
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made and as of the Closing Date; Buyer shall have duly performed and complied in
all material respects with all agreements and conditions required by this
Agreement to be performed or complied with by it prior to the Closing Date; and
Buyer shall have delivered to Seller an Officer's Certificate, dated the Closing
Date, to the foregoing effect.
4.3.3 Secretary's Certificate. Seller shall have received
a certificate, dated the Closing Date, of the Secretary of Buyer to which are
attached resolutions of the board of directors of Buyer authorizing the
execution and delivery of this Agreement, the agreements and documents
contemplated herein and the consummation of the transactions contemplated
hereby. Such Secretary's certificates shall also certify the names and
signatures of the officers of Buyer authorized to sign this Agreement and the
other documents to be delivered hereunder.
4.3.4 Other Agreements. Each party other than Seller shall
have duly executed and delivered each of the documents and instruments described
in Section 3.2 to be executed and delivered by it and each of the following
agreements:
(a) the Consent Escrow Agreement;
(b) the Crossings Escrow Agreement;
(c) the Stockholders Agreement;
(d) the Registration Rights Agreement, substantially in
the form of Exhibit J hereto (the "Registration Rights
Agreement" governing Seller's registration rights with
respect to the Class A Common Stock and Series B Preferred
Stock received by the Seller as part of the Purchase
Price;
(e) the Services and Cooperation Agreement;
(f) the Mutual Release.
4.3.5 Opinion of Counsel to Buyer. Seller shall have
received from Kronish, Lieb, Weiner & Hellman LLP, a legal opinion addressed to
Buyer and dated the Closing Date, the material provisions of which are set forth
on Exhibit K hereto.
5. EMPLOYEE MATTERS. (a) From and after the Closing, Buyer shall not be
obligated to hire or retain any employee engaged in the Business. Each of Seller
and Buyer acknowledge and agree that Buyer shall have no Liability or obligation
whatsoever to the employees engaged in the Business (including, without
limitation, any obligation to hire or retain any such employees for any period
of time following the Closing or any
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Liability or obligation relating to any period prior to the Closing whether
asserted at any time before, on or after the Closing Date) and Seller shall pay
and discharge any and all such Liabilities and obligations (including, without
limitation, any severance or similar liabilities arising from Buyer's failure to
hire any such employees at any time on or within six months after the Closing
and any liability of Buyer under the WARN Act arising from the transactions
contemplated by this Agreement) (collectively, "Employee Liabilities"). Seller
shall indemnify and hold Buyer harmless from any and all Losses not reflected as
Liabilities on the Closing Statement based upon, attributable to or resulting
from or arising out of any Employee Liability including, but not limited to
severance costs or accrued benefits, any costs associated with compliance with
COBRA and any liability under the WARN Act. Notwithstanding any other provision
of this Agreement, the obligation of Seller under this Section 5 shall survive
the Closing until the applicable statute of limitations shall have expired.
(b) At least ten (10) Business Days prior to the Closing Date,
Buyer shall deliver to Seller a written list (the "Employee List") of all those
employees (subject to Section 5(e), below) to whom Buyer shall offer temporary
employment agreements, after the Closing. Buyer may offer employment, either
temporary or permanent, to employees of the Business upon terms and conditions
solely within its absolute discretion. Offers of employment to employees engaged
in the Business may be made orally or in writing, at Buyer's sole discretion.
Buyer and Seller shall agree upon the text of the initial announcement to
employees of the Business with respect to this Agreement and employment
opportunities following the Closing, which announcement shall be made as
promptly as practicable after the date hereof. Seller shall make no other
communications with employees engaged in the Business relating to prospective
employment following the Closing. Buyer agrees to use its reasonable best
efforts to complete the Employee List as early as possible prior to ten (10)
Business Days before the Closing Date.
(c) Buyer shall have no obligation to credit any employees for
pre-Closing service for any purpose, including eligibility, vesting or
determining the amount of any benefit or payment due to any employee, except as
required by law.
(d) Seller shall retain responsibility for and continue to pay
all expenses and benefits for all employees of Seller engaged in the Business at
the Closing and their covered dependents with respect to claims incurred on or
prior to the Closing Date in accordance with existing policies and as required
by law, and shall comply with all requirements of COBRA following the Closing.
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6. COVENANTS.
6.1 Maintain Existence and Obtain Approvals. Until the
Closing, Seller and License Company shall do all things necessary to maintain
its respective corporate existence. Seller shall diligently and in good faith
use its best efforts to procure all Required Consents (as such term is referred
to in Section 4.2.8). Buyer shall cooperate and support Seller in its efforts to
obtain all Required Consents, including, without limitation, paying to Seller,
on and after the Closing Date, 50% of the costs paid, per Cable Subscriber and
Billable Phone Subscriber, to obtain each Required Consent up to $1,000,000 (50%
of $2,000,000) in the aggregate but only up to $100 (50% of $200) per Cable
Subscriber and Billable Phone Subscriber relating to any such Required Consent.
Notwithstanding the aforesaid (but still subject to the aggregate limit), to the
extent a Cable Subscriber and Billable Phone Subscriber is the same Person and
is being provided service under one Right of Entry for both phone and cable
services, Buyer shall only be required to pay up to $100 for such subscriber.
Costs paid per Cable Subscriber and Billable Phone Subscriber shall include,
cash incentive payments, the present value (using a monthly discount rate of
1.25%) of any increased amount of Revenue Share and capital costs of equipment.
Except as set forth below, Seller shall not enter into any agreements with
property owners which would require costs to be paid or incurred, including, but
not limited to undertaking to provide additional services by Buyer without
obtaining Buyer's prior written consent to such agreement. Subject to the
maximum dollar amounts stated above, Seller shall not be required to obtain the
written consent of Buyer prior to offering (i) cash incentives, (ii) an
improvement of the terms of Revenue Share or (iii) a commitment to provide up to
ten additional channels, and to the extent required, additional programming may
be selected from the list set forth on Schedule 6.1 (with no more than one
sports channel set forth on Schedule 6.1 per property), to Cable Subscribers, in
connection with obtaining a consent; provided, that Seller may offer to provide
programming which is not listed on Schedule 6.1 provided that the related Right
of Entry states that such programming is not included in the basic program tier
and will be subject to additional per subscription charges. Notwithstanding the
aforesaid, Seller may not offer any programming under subsection (iii) if it
would require the placement of any additional, or relocation of any existing,
satellite receiving dishes at the related property. Seller shall be required to
obtain Buyer's written consent prior to entering into an agreement to provide
more than ten additional channels or any particular programming other than that
permitted above to Cable Subscribers. Further, Seller shall consult and
cooperate with Buyer in reaching any agreements to obtain Required Consents.
Notwithstanding anything herein to the contrary, under no circumstances shall
Seller make any representation as to the
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costs of services to be provided on and after the Closing Date under any Right
of Entry other than as provided in such Rights of Entry on the date hereof. To
the extent there exist restrictions in a Right of Entry limiting, in any
respect, Buyer's ability to raise costs of service, Seller shall not be
permitted to offer additional channels or programming under such Right of Entry
pursuant to this Section 6.1 without Buyer's prior consent.
6.2 Assignment of Transmission Licenses and Permits. Seller
shall use its best efforts to procure all consents to assign transmission
licenses and permits from Seller and License Company to Buyer in all Relevant
Markets.
6.3 Access to Information. Seller shall provide to Buyer and
its authorized agents and representatives (including its auditors and legal
counsel) reasonable access to the books, records, properties and proceedings
relating to Seller (as the same may be related to the Purchased Assets and the
Business) other than such books and records that are subject to attorney-client
privilege. Seller shall deliver to Buyer copies of all FCC licenses, franchise
agreements, pole attachment agreements, access agreements, right-of-way
agreements, right of entry agreements, subscriber agreements, a list of all
programming, leases and other agreements of Seller (relating to the Purchased
Assets and the Business) as promptly as practicable. Seller shall promptly give
notice to Buyer of any occurrence or event, including the commencement of any
litigation, investigation or proceeding, which, in either case, if not cured or
if adversely determined could reasonably be expected to have a Material Adverse
Effect. Without limiting the aforesaid (a) if any party hereto receives a notice
of any order or proceeding described in Section 4.1(b), such party shall
deliver, as promptly as practicable, notice of such order or proceeding,
together with all pleadings and correspondence received in connection therewith,
to the other parties hereto and (b) if any party hereto becomes aware of any
matter described in Section 4.2.6, such party shall notify the other parties of
such matter as promptly as practicable.
6.4 Disclosure and Classification of Defaults Under Rights of
Entry. To the extent Seller deems it to be appropriate, after the execution of
this Agreement, Seller shall deliver estoppel letters to the property owners
associated with Rights of Entry for which there is an alleged or existing
default, with a request that such owners execute the estoppel letter and return
it to Seller at least six (6) Business Days prior to Closing. Additionally,
Seller shall make all other reasonable efforts between the date of this
Agreement and the Closing Date to resolve any alleged or existing defaults. Five
(5) Business Days prior to Closing, Seller shall deliver to Buyer a copy of all
estoppel letters and other resolutions received by
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Seller and shall disclose to Buyer all alleged and existing defaults under the
Rights of Entry in the Relevant Markets for which an estoppel letter or
resolution satisfactory to Buyer was not received, specifying the details of
each default and providing copies of all correspondence relating thereto.
At such time, Buyer in consultation with Seller, shall
determine whether such defaults are (i) frivolous or can be cured without any
significant post Closing expenditures or other commitments which are not set
forth in the Right of Entry or (ii) all other defaults.
In order to determine whether Rights of Entry should be
classified under subsections (i) or (ii), Buyer shall have the right to confer,
with participation by Seller, with the owners of the properties corresponding to
the Rights of Entry in a manner that Buyer, in its sole discretion, deems
appropriate.
Rights of Entry classified under the aforesaid Subsections (i)
and (ii) shall be treated in the manner set forth in Section 4.2.8.
6.5 Promotional Campaigns. Schedule 6.5 sets forth a calendar
and description of all of Seller's discount and promotional campaigns from
December 1997 through June 1998. From the date hereof until the Closing, Seller
shall not conduct any promotional and discount campaigns other than those set
forth on Schedule 6.5.
6.6 Certain Payments. Until the Closing, Seller shall pay or
discharge or cause to be paid or discharged, before the same shall become
delinquent, (i) all Taxes, fees, assessments and governmental charges levied or
imposed upon or collectible by Seller and (ii) all lawful claims for labor,
materials, supplies and any other claims which, if unpaid, might by law
reasonably be expected to become a Lien upon the Purchased Assets; provided,
that where any of the foregoing are being contested by Seller in good faith by
appropriate proceedings, such payments shall be paid by Seller upon a resolution
of such contest in favor of the opposing party.
6.7 Taxes. After the Closing, Seller will pay all Taxes
relating to the Business for periods on or prior to the Closing Date when such
Taxes are due and payable by Seller, except as any of the foregoing are being
contested in good faith by appropriate proceedings, in which case such Taxes
shall be paid by Seller upon a resolution of such contest in favor of the
opposing party.
6.8 Maintenance of Properties; Insurance; Books and Records;
Compliance with Law; Relationships. Until the Closing,
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(a) Seller shall (i) maintain and keep the Purchased Assets in
their condition and state of repair and working order that existed as of the
date hereof, ordinary course wear and tear excepted and (ii) do or cause to be
done all things reasonably necessary or appropriate to preserve and keep in full
force all rights, licenses, franchises, rights of entry, approvals,
authorizations, consents, permits and other authorizations necessary or
desirable to enable Seller to operate the Business as currently conducted;
(b) Seller shall maintain insurance with respect to the
Purchased Assets in accordance with past practices;
(c) Seller shall keep proper books of record and accounts, in
which full and correct entries shall be made of all (i) financial transactions
relating to the Purchased Assets and the Business, in accordance with GAAP
consistent with past practices;
(d) Seller shall (i) conduct the Business in the usual,
regular and ordinary manner consistent with past practices and (ii) comply in
all material respects, and conduct the Business in material compliance, with all
statutes, laws, ordinances, or rules and regulations and orders of Governmental
Bodies to which Seller or any of its assets and properties or the Business is
subject; and
(e) Subject to Section 5, Seller shall use commercially
reasonable efforts to (i) provide Buyer with the opportunity to discuss
employment with the employees of Seller who are engaged in the Business and (ii)
preserve Seller's current relationships with its customers and other Persons
with whom it has a significant business relationship.
6.9 Deliveries. (a) Until the Closing, Seller shall deliver to
Buyer promptly such periodic financial and/or operating data with respect to the
Business or Purchased Assets as Buyer may reasonably request, including, without
limitation, any audited financial statements that may have been prepared,
provided that nothing herein shall require Seller to prepare audited financial
statements relating to the Purchased Assets.
Without limiting the foregoing, both before and after the Closing, Seller shall
provide Buyer with access to all audited financial statements and workpapers of
its internal and external accountants and shall procure from all such external
accountants all consents necessary for such access and otherwise necessary for
Buyer to comply with any reporting requirements that Buyer, in its sole
discretion, determines that it may have under the Securities Exchange Act of
1934, as amended, and the rules and regulations promulgated thereunder or under
the terms of any indenture or other instrument of Buyer and its affiliates.
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(b) Buyer is hereby authorized to deliver a copy of any
financial statement or certificate delivered pursuant to this Section 6.9 to any
Governmental Body having jurisdiction over it or any financing source that
requests such information; provided, however, that Buyer shall take any and all
steps as may be reasonable to maintain the confidentiality of such information
and material in keeping with their obligations to maintain information in
confidence under the terms hereof and all prior agreements still in force and
effect.
(c) Seller shall also deliver to Buyer, promptly upon receipt
by it, any other reports or other copies of any reports from Seller's auditors,
copies of any correspondence to or from or filings with the FCC or any other
Governmental Body relating to the Business or the Purchased Assets covering all
periods within twelve (12) months prior to the Closing Date.
6.10 Filings; Approvals. (a) Seller, License Company and Buyer, as
promptly as practicable, each shall file or supply, or cause to be filed or
supplied, all applications, notifications and information required to be filed
or supplied by any of them, by any Governmental Body in connection with this
Agreement or the consummation of the transactions contemplated hereby, including
but not limited to any filings pursuant to the HSR Act. Seller and Buyer each,
as promptly as practicable, shall use all reasonable efforts to obtain or make,
or cause to be obtained or made, all Required Consents necessary to be obtained
or made by it, in order for each of them so to consummate such sale and transfer
and such transactions.
(b) Seller and Buyer shall coordinate and cooperate with each
other in exchanging such information and supplying such reasonable assistance as
may be reasonably requested by the other in connection with the filings and
other actions contemplated by this Section 6.10.
6.11 Conduct of the Business. Prior to the Closing, Seller (with
respect to the Business and the Purchased Assets) (a) shall conduct the Business
only in the usual, regular and ordinary manner consistent with past practices
and (b) shall not (i) take any action to diminish the aggregate value of the
Purchased Assets, (ii) disburse any of the Purchased Assets to any other Person
(iii) take any action to frustrate the transactions contemplated by this
Agreement, (iv) create, incur, assume, or suffer to exist any Liens of any kind
against or upon any of the Purchased Assets, or (v) without Buyer's written
consent, create any Subsidiaries.
6.12 Bulk Sales Compliance. Buyer hereby waives compliance by
Seller with the provisions of the bulk sales law of any state, and Seller shall
pay and discharge when due all claims
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of creditors that could be asserted against Buyer or its Affiliates by reason of
such non-compliance to the extent that liabilities to such creditors are not
specifically assumed by Buyer under this Agreement. Seller shall indemnify,
defend and hold harmless Buyer from and against any Losses arising from Seller's
failure to comply with any such bulk sales law. The foregoing indemnity shall
continue indefinitely and shall not be subject to any limitation set forth in
Section 10.1.
6.13 Assignment of Certain Rights. Without limiting any rights
Buyer may otherwise have pursuant to this Agreement or otherwise, at the
Closing, Seller shall provide Buyer with all the benefits of any confidentiality
agreements to which Seller may be a party or a beneficiary relating to the
Purchased Assets (to the extent not otherwise transferred to Buyer as part of
the Purchased Assets) by either assigning all of the rights to enforce such
agreements to Buyer (to the extent such rights are assignable) or undertaking to
enforce any such agreement, for the benefit of Buyer, upon Buyer's demand.
6.14 Crossing Matters. Until the 180th day after the Closing Date,
Seller shall use its best efforts and act as promptly as practicable to obtain a
franchise agreement on terms reasonably acceptable to Buyer for or otherwise
eliminate (a "Remedy") each Non-Conforming Crossing, provided that any Remedy
shall not adversely effect the ability of Buyer to service the Cable Subscribers
and Billable Phone Subscribers. Seller, in its sole discretion, may choose the
Remedies and shall use its own funds to pay the costs and expenses of such
Remedies. If there are still Non-Conforming Crossings in existence at the end of
such 180 day period, Buyer, in its sole discretion, shall either (a) direct
Seller to continue, in good faith, its efforts to complete the Remedy for some
or all of such Non-Conforming Crossings or (b) choose another Remedy, which, for
properties located in Houston, may be the connection of the property to Buyer's
fiber optic network and, for other properties, may include, without limitation,
obtaining a franchise, building out a microwave link or any other remedy, for
each remaining NonConforming Crossing, and in which case Buyer shall have sole
authority for obtaining such Remedy (with the cooperation and assistance of
Seller).
6.15 Transfer Taxes. Seller shall pay or cause to be paid all
Taxes and other expenses of transferring the Purchased Assets as contemplated
hereunder, including, without limitation, all sales, use, real estate transfer,
conveyance, gains, stamp, value added and other similar taxes (including any
interest, penalties and additions thereto).
6.16 Best Efforts. Upon the terms and subject to the conditions
hereof, each of the parties hereto shall use its
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reasonable best efforts to take or cause to be taken all actions and to do or
cause to be done all things necessary to satisfy, as promptly as practicable
after the date hereof, and in any case on or before October 31, 1998, the
conditions to the Closing and to consummate the transactions contemplated by
this Agreement and the other agreements contemplated herein. Without limitation,
(a) each party shall use its best efforts to prepare all filings under the HSR
Act as promptly as practicable after the date hereof and to respond promptly to
any requests from the Federal Trade Commission and the Department of Justice
relating thereto, and (b) Seller shall be primarily responsible for obtaining,
and shall use its best efforts to obtain, all other Required Consents. The Buyer
shall cooperate with Seller to obtain such consents as set forth in Section 6.1.
Periodically between the date hereof and the Closing Date, and in no event less
frequently than weekly, Seller shall provide Buyer with a status report (which
report may be oral) describing in reasonable detail its efforts to obtain
Required Consents and the results of such efforts.
6.17 First Offer Rights. Within one year after the Closing Date,
if Seller proposes to sell, assign or transfer (a) any Right of Entry associated
with a property listed on Schedule 2.3 which has been released to Seller in
accordance with Section 2.3, or (b) any other Right of Entry for which a
Required Consent was not received (other than for those properties included in
the Consent Escrow pursuant to Section 4.2.8), Seller shall first make a bona
fide good faith offer to sell such Rights of Entry to Buyer, such offer to be
negotiated exclusively between Buyer and Seller for up to 30 days.
6.18 Personal Property. Between the date hereof and the Closing
Date, to the extent any of the Purchased Assets located at a Relevant Property
or otherwise set forth on Schedule 7.5(d) is removed from such property or
ceases to be in good working order, Seller shall replace such assets with
substantially similar assets or repair such assets.
6.19 Financial Statements. Promptly after completion thereof, and
in no event more than 15 days after the date hereof, Seller shall deliver to
Buyer the final balance sheet of Seller as of October 31, 1997 and final
statements of income and cash flows of the Business for the ten (10) months
ended October 31, 1997.
7. REPRESENTATIONS AND WARRANTIES OF SELLER. Seller hereby represents
and warrants to Buyer as follows:
7.1 Authority; Organization and Qualification; Capitalization. (a)
Each of License Company and Seller has all requisite corporate power and
authority and legal capacity to
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enter into this Agreement and each agreement contemplated hereby, to carry out
its obligations hereunder and thereunder and to consummate the transactions
contemplated hereby and thereby. The execution, delivery and performance of this
Agreement and each of the agreements contemplated hereby to which Seller and
License Company is a party have been duly authorized by all required action on
the part of Seller and/or License Company, as applicable. This Agreement has
been, and upon its execution each of the other agreements contemplated hereby
will be, duly executed and delivered by Seller and License Company and (assuming
due authorization, execution and delivery by Buyer) this Agreement constitutes,
and upon License Company's and Seller's execution of each of the other
agreements contemplated hereby will constitute, the legal, valid and binding
obligation of Seller and License Company enforceable against Seller and License
Company in accordance with its respective terms.
(b) Each of License Company and Seller is a corporation, duly
organized, validly existing and in good standing under the laws of the state of
its incorporation. Seller is duly authorized to do business in each of the
Relevant Markets. Each of License Company and Seller has the power to own its
properties and to carry on its business as currently being conducted and as
intended to be conducted. All corporate actions taken by Seller and License
Company have been duly authorized and Seller and License Company have not taken
any action that in any respect conflicts with, constitutes a default under or
results in a violation of any provision of its respective articles of
incorporation or bylaws. True and complete copies of the articles of
incorporation and bylaws of Seller and License Company, as in effect on the date
hereof, have been delivered by Seller to Buyer. Other than ICS Communications,
LLC, Activetel L.D., Inc., ICS Systems, Inc. (formerly M.A. Equity Holdings),
Maxtel Communications Corporation and License Company Seller has no Subsidiaries
and no investments or interests in any other Person. Each of ICS Communications,
LLC, ICS Systems, Inc. (formerly M.A. Equity Holdings) and Maxtel Communications
Corporation do not conduct the Business and do not hold assets which are used in
the Business. Activetel L.D., Inc. does not hold any of the Purchased Assets.
License Company has no Subsidiaries and no investments or interests in any other
Person.
7.2 Actions Pending. Except as set forth on Schedule 7.2, there is no
action, suit or proceeding, or to the best knowledge of Seller, investigation,
pending or, to the best knowledge of Seller, threatened, against or affecting
Seller, License Company and any of the Purchased Assets or the Business, by or
before any court, arbitrator or administrative tribunal or Governmental Body.
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7.3 Outstanding Debt; Defaults. Except as set forth on Schedule 7.3,
each of License Company and Seller (i) has no outstanding Indebtedness (other
than Indebtedness relating solely to the Retained Businesses that does not
impose or support any Lien or any other restriction on any of the Purchased
Assets), and (ii) is not in violation of or in default in any material respect
under or with respect to any lease, license, permit, contract or agreement
(including oral and informal arrangements) to which it is a party and effects
the Purchased Assets or the Business and each such lease, license, permit,
contract or agreement is in full force and effect. To the best knowledge of
Seller, no other party to any such lease, license, contract or agreement is in
default in any material respect. Seller has provided to Buyer a true and
complete copy of each such lease, license, permit, contract or agreement.
7.4 Material Liabilities; Financial Statements. (a) There are no
material Liabilities, accrued or contingent, of Seller or License Company
relating to the Business or Purchased Assets that are not disclosed in Schedule
7.4.
(b) Seller has furnished Buyer with a draft balance sheet of it as
of October 31, 1997 and draft statements of income and cash flows of the
Business for the ten (10) months ended October 31, 1997. The draft financial
statements and after completion and delivery to Buyer pursuant to Section 6.19,
the final balance sheet and statements of income and cash flows (in both cases,
including any related schedules and/or notes) are true and correct in all
material respects, have been prepared in accordance with GAAP consistently
applied throughout the periods involved and show all liabilities, direct and
contingent, of Seller required to be shown in accordance with such principles.
The draft balance sheet fairly presents the condition of Seller as at October
31, 1997, and the statements of income and cash flows fairly presents the
results of the operations of the Business and its cash flows for the periods
indicated.
7.5 Purchased Assets. (a) Seller owns, leases or has the legal right to
use all of the Purchased Assets, and, with respect to contract rights, Seller is
a party to and enjoys the right to the benefits of all contracts, agreements and
other arrangements used by Seller in the Business. License Company owns all of
the licenses used by Seller in the Business. Except as set forth on Schedule
7.5(a), each of Seller and License Company has good and marketable title to, or,
in the case of leased or subleased Purchased Assets, valid and subsisting
leasehold interests in, all its Purchased Assets, free and clear of all Liens.
Seller has valid and enforceable rights from all third parties and Governmental
entities to maintain the poles or similar attachments used or held for use in
the Business at their present locations. Additionally, Schedule 7.5(a) shall
identify
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all leased and subleased Purchased Assets specifying the terms
and conditions of all related leases.
(b) The Purchased Assets constitute all the properties, assets and
rights, other than cash and receivables, forming a part of, used, held or
intended to be used in, and all such properties, assets and rights as are
necessary in the conduct of, the Business. All of the Purchased Assets are being
sold "as is".
(c) Upon the consummation of the transactions contemplated by this
Agreement to be consummated at the Closing, Seller will deliver good, valid and
marketable title to, or lease, under valid and subsisting leases, the Purchased
Assets free and clear of any Liens and without incurring any penalty or other
adverse consequence, including, without limitation, any increase in rentals,
royalties, or license or other fees imposed as a result of, or arising from, the
consummation of the transactions contemplated by this Agreement, except as
provided in this Agreement or set forth on Schedule 7.5(c).
(d) Set forth on Schedule 7.5(d) is a true and complete list of
equipment, tools, supplies, furniture, fixtures, personalty, vehicles, rolling
stock and other tangible personal property (the "Personal Property") located in
the Relevant Markets or categories of such Personal Property, in the case of
items of lesser value. The Personal Property constitutes all of the equipment,
tools, supplies, furniture, fixtures, personalty, vehicles, rolling stock and
other tangible personal property as is necessary to conduct the Business in the
ordinary and customary course, consistent with past practices. Seller has caused
the Personal Property to be maintained in accordance with good business
practice.
(e) Seller owns no real property located in any of the Relevant
Markets.
7.6 Taxes. Except as set forth on Schedule 7.6, Seller has filed all
Federal, state and other income Tax returns or reports which are required to be
filed, all such Tax returns or reports are true, correct and complete in all
material respects and Seller has paid all Taxes as shown on said returns and on
all assessments received by it to the extent that such Taxes have become due and
are payable by Seller, except as any of the foregoing are being contested in
good faith by appropriate proceedings; and no Tax lien has been filed and, to
the best knowledge of Seller, no claim is being asserted with respect to any Tax
or other similar charge.
7.7 No Conflicts. Except as set forth on Schedule 7.7, neither the
execution or delivery of this Agreement or any
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agreement contemplated hereby, nor fulfillment of or compliance with the terms
and provisions hereof and thereof, nor the consummation of the transactions
contemplated hereby and thereby, will conflict with or result in a breach of the
terms, conditions or provisions of, or constitute a default under, or result in
any violation of, or result in the creation of any Lien upon any of the
Purchased Assets of Seller or License Company pursuant to, or require any
consent under (which has not been obtained or waived), or give to any third
Person any rights of termination, amendment, acceleration, suspension,
revocation or cancellation of, (i) the articles of incorporation or bylaws of
Seller or License Company, (ii) any award of any arbitrator or any order,
judgment, decree, statute, law, rule or regulation to which Seller or License
Company or any material amount of its respective properties, assets or business
is subject or (iii) any note, bond, mortgage or indenture, contract, agreement,
lease, sublease, license, permit, franchise or other instrument or arrangement
to which Seller or License Company is a party or by which any of its respective
assets or properties is bound or affected.
7.8 Material Agreements. Schedule 7.8 is a complete and correct list as
of the Closing Date of all agreements, contracts and commitments of the
following types related to the Business, written or oral, to which the Seller
and License Company is a party or by which either of them or any of their
respective assets is bound as the date hereof: (a) mortgages indentures,
security agreements, guarantees, pledges and other agreements and instruments
relating to the borrowing of money or extension of credit; (b) agreements and
arrangements with Affiliates; (c) sales, agency, manufacturer's representative
or distributorship agreements; (d) licenses of patent, trademark and other
rights relating to any Intellectual Property; (e) leases of equipment or
machinery requiring rental payments of more than $5,000 per year each and all
leases of real property; (f) joint venture agreements; and (g) other agreements,
contracts and commitments that in any case involve payments or receipts of more
than $5,000 in any fiscal year or $15,000 in total (collectively, "Material
Agreements"). Seller has delivered or made available to Buyer complete and
correct copies of all written Material Agreements together with all amendments
thereto, and accurate descriptions of all oral Material Agreements. Except as
set forth on Schedule 7.8, each Material Agreement is in full force and effect
and is binding upon Seller or License Company, as applicable, and with respect
to the other parties thereto, to the Seller's knowledge is binding upon such
other parties in each case in accordance with its terms. Except as set forth in
Schedule 7.8, there does not exist under any Material Agreement any material
default by the Seller or License Company, and with respect to the other parties
thereto, to the Seller's knowledge by any other party, under any Material
Agreement or event or
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condition which, after notice or lapse of time or both, would constitute such a
default.
7.9 Broker's or Finder's Commissions. Except for a brokerage fee that
may be payable to CMD Ventures, LLC which shall be paid by Seller, no broker's
or finder's fee or commission will be payable by Seller or License Company with
respect to the transactions contemplated by this Agreement.
7.10 Applicable Environmental Regulations. Except as would not,
individually or in the aggregate, have a Material Adverse Effect, Seller and
License Company are each in compliance with all applicable laws, rules,
regulations and other requirements of Governmental Bodies relating to health,
safety, hazardous materials, pollution or the environment ("Environmental Laws")
and with all such licenses, permits, authorizations, certificates, exemptions
and approvals required by such Environmental Laws. Except as would not,
individually or in the aggregate, have a Material Adverse Effect, Seller and
License Company have not performed or suffered any act or practice which could
reasonably be expected to give rise to, and have not otherwise incurred,
Liability to any Person under any Environmental Laws.
7.11 Compliance with Other Laws. Seller and License Company have each
conducted and shall continue to conduct the Business in compliance in all
material respects with all laws, rules and regulations and orders of
Governmental Bodies, and Seller and License Company is not in violation in any
material respect of any such law, rule, regulation or order of a Governmental
Body with the exception of any and all Schedules in Section 7 detailing
non-compliance.
7.12 ERISA; Labor Agreements. Except as set forth in Schedule 7.12,
Seller and License Company do not have, or in the past has it ever had, any
plan, agreement or arrangement, written or otherwise, subject to ERISA or any
Liability to the PBGC. Seller and License Company are not currently, or in the
past have ever been, a party to any collective bargaining agreement. Schedule
7.12 sets forth a complete list of all employees of Seller and License Company
engaged in activities relating to the Business and their rates of compensation.
7.13 Possession of Franchises, Licenses, etc. Seller and License Company
each possess all franchises, certificates, licenses, permits, approvals and
other authorizations from governmental political subdivisions or Governmental
Bodies, including the FCC, that are necessary for the ownership, maintenance and
operation of the Purchased Assets or for the conduct of the Business as it is
now operated. All such franchises, certificates, licenses, permits, approvals
and other
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authorizations are in full force and effect, and neither License Company nor
Seller is in violation of any thereof in any material respect. Neither Seller
nor License Company has received any notice from any Governmental Body (or from
any third party or other Person requesting such action) revoking, cancelling,
rescinding, modifying or refusing to renew, or threatening to take any such
action with respect to, any such franchise, certificate, license, permit,
approval or other authorization. Except as set forth on Schedule 7.13, all such
franchises, certificates, licenses, permits, approvals and authorizations held
by Seller and License Company relating to the Business or the Purchased Assets
are freely transferable to Buyer subject to prior Government Body and FCC
approvals, where applicable. Following consummation of the transaction
contemplated to be consummated at the Closing and receipt of any required
Government Body and FCC approvals, Buyer will receive the benefits (without any
diminution) of all such franchises, certificates, licenses, permits, approvals
and authorizations.
7.14 Intellectual Property. Except as set forth on Schedule 7.14, Seller
and License Company owns or possesses adequate, or has paid appropriate
compulsory copyright fees for, licenses or other valid rights to use all
patents, patent rights, trademarks, trademark rights, trade names, trade name
rights, copyrights, service marks, trade secrets, applications for trademarks
and for service marks, mask works, know-how and other proprietary rights and
information necessary for the conduct of the Business as currently conducted or
as contemplated to be conducted by Seller and License Company, and Seller and
License Company are each unaware of any assertion or claim, or any state of
facts that could give rise to a claim, challenging the validity of any of the
foregoing. The conduct of the Business as currently conducted and as
contemplated to be conducted does not and will not conflict in any material way
with any patent, patent right, license, trademark, trademark right, trade name,
trade name right, service mark, mask work or copyright of any third party. There
are no infringements of any proprietary rights owned by or licensed by or to
Seller or License Company. Except as set forth on Schedule 7.14, Seller and
License Company have not licensed or otherwise permitted the use by any third
party of any proprietary information.
7.15 Governmental Consents. Neither the nature of the Business or any of
the businesses, assets or properties used in the Business, nor the nature of the
Purchased Assets, nor any relationship between Seller and License Company and
any other Person, nor any circumstance in connection with the transactions
contemplated by this Agreement is such as to require on behalf of Seller or
License Company, any consent, approval or other action by or any notice to or
filing with any court or administrative body or Governmental Body in connection
with the execution,
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delivery and performance of this Agreement, except for filings under the HSR Act
and consents, approvals and other actions, notices and filings which have been
obtained, taken and completed, as applicable, including, but not limited to all
required prior approvals from the FCC and any other Government Body.
7.16 Disclosure. The information relating to the Purchased Assets and
the Business provided to Buyer by Seller and License Company is complete and
accurate in all material respects, does not contain a misstatement of a material
fact and does not omit to state any material fact necessary to make the
information provided not misleading. Without limiting the aforesaid, all
information provided by Seller which is used to calculate the adjustments set
forth in Section 1.3 and all information provided pursuant to Section 1.2, when
delivered by Seller will be true, correct and complete, including without
limitation, information regarding Liabilities and Assumed Liabilities, the 550
MHz Relevant Properties, the number of defaults existing under Rights of Entry,
the "unit weighted average remaining term" of all Rights of Entry, actual Phone
and Cable Revenue Share, the number of Cable Subscribers and Billable Phone
Subscribers, the Average Cable Revenue Per Cable Subscriber and Average Phone
Revenue Per Billable Phone Subscriber, respectively, and the number of fully
activated cable and telephone passings and associated Rights of Entry.
7.17 Closing Statement. The information set forth on the Closing
Statement and any and all information used to calculate the information set
forth on the Closing Statement (including, without limitation, amounts of all
Specified Assumed Liabilities) is true, correct and complete in all respects.
7.18 Investment. (a) Seller is an "Accredited Investor" as that term is
defined in Rule 501(a) promulgated under the Securities Act of 1933, as amended
(the "Act"). Seller has experience in analyzing and investing in companies like
Buyer and is capable of evaluating the merits and risks of an investment in
Buyer and has the capacity to protect its own interests. Seller is aware of
Buyer's business affairs and financial condition, and has acquired information
about Buyer sufficient to reach an informed and knowledgeable decision to
acquire the Series B Preferred Stock and Class A Common Stock. Seller
understands that investment in the Series B Preferred Stock and Class A Common
Stock is subject to a high degree of risk. Seller can bear the economic risk of
its investment, including the full loss of its investment, and by reason of its
business or financial experience or the business or financial experience of its
professional advisors has the capacity to evaluate the merits and risks of its
investment and protect its
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own interest in connection with the purchase of the Series B Preferred Stock and
Class A Common Stock.
(b) The shares of Series B Preferred Stock and Class A Common
Stock to be acquired by Seller pursuant to this Agreement are being acquired for
its own account and with no intention of distributing or reselling such shares
or any part thereof in any transaction that would be in violation of the
securities laws of the United States of America, or any state, without
prejudice, however, to the rights of the Seller at all times to sell or
otherwise dispose of all or any part of such shares under an effective
registration statement under the Act, or under an exemption from such
registration available under the Act, and subject, nevertheless, to the
disposition of the Seller's property being at all times within its control. If
Seller should in the future decide to dispose of any of the shares of Series B
Preferred Stock or Class A Common Stock, the Seller understands and agrees that
it may do so only in compliance with the Stockholder's Agreement and the Act and
applicable state securities laws, as then in effect. Without limiting the
generality of the preceding sentences of this Section 7.18(b), but subject to
the pledge in favor of the ICS Secured Lenders and delivery to the ICS Secured
Lenders in accordance with the Earmark Agreement, the Seller has not offered or
sold any portion of the securities to be acquired by it and Seller has no
present intention of reselling or otherwise disposing of any portion of the
securities. Other than as set forth in the previous sentence, Seller represents
that it does not have any contract, undertaking, agreement or arrangement with
any person to sell, transfer or grant participation to such person or to any
third person, with respect to any of the securities.
(c) Seller has independently, and based on such information as it
has deemed appropriate, made its own analysis and decision to enter into this
Agreement, and specifically, has made its own independent investigation and
evaluation of the Series B Preferred Stock and Class A Common Stock in
connection with the transactions contemplated hereunder. Seller further
acknowledges that (i) except as expressly provided in this Agreement, Buyer
makes no representation or warranty and assumes no responsibility with respect
to the accuracy of any statements, warranties or representations made in or in
connection with the Series B Preferred Stock or the Class A Common Stock or any
other information relating to the Series B Preferred Stock or Class A Common
Stock or any other matter including, without limitation, information received
from third parties or pursuant to Seller's due diligence investigations of Buyer
and without limitations Seller acknowledges that Buyer has made no
representation or warranty with respect to Buyer's internal analyses,
projections, business plans, or any document delivered or disclosed to it
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except as expressly set forth in this Agreement, and (ii) Seller has had access
to, or will have access on or prior to the Closing Date to, copies of all
documents and information (including the representations and warranties of Buyer
contained in this Agreement) as it has deemed appropriate to make its own
investment analysis and decision to enter into this Agreement.
7.19 Subscribers, Rights of Entry. Schedule 7.19 is a complete and
correct list of all Rights of Entry relating to the Business and the number of
Cable Subscribers and Billable Phone Subscribers served pursuant to each such
Right of Entry. True, accurate and complete copies of all Rights of Entry listed
in Schedule 7.19 have been delivered by Seller to Buyer. Except as set forth in
Schedule 7.19, all Rights of Entry, including all amendments thereto, (a) are in
writing and are legal, valid, binding and enforceable in accordance with their
terms, (b) if held by Seller, are freely transferable to Buyer and (c) the
validity and enforceability (including the rights of Buyer to such Rights of
Entry following the Closing) of the same will not be adversely affected by the
consummation of any of the transactions contemplated by this Agreement. Except
as set forth in Schedule 7.19, no material default of any Person exists under
any of the Rights of Entry, and the parties thereto other than Seller have no
offsets or defenses to the enforcement thereof. Additionally, Schedule 7.19
accurately sets forth the properties to which Seller provides service in the
conduct of the Business the ("Relevant Properties), the locations of such
properties, the number of units to such services at each of such locations, the
number of Cable Subscribers and Billable Phone Subscribers to such services at
each of such locations, the date of the Rights of Entry relating to each
property and the expiration of such Right of Entry. All Relevant Properties set
forth on Schedule 7.19 are located within the Relevant Markets. Additionally,
Schedule 7.19 sets forth a complete and correct list, for each Relevant
Property, of the source of signal feed used in the Business, specifying whether
such feed is SMATV on premises, 18ghz or another type of feed (and a description
thereof).
7.20 Cable Systems. Schedule 7.20 hereto lists all "cable systems," as
defined by the Act and FCC Rules, operated by Seller and License Company and
relating to the Business (collectively, "Cable Systems"), the name of the
franchise authority ("Franchisor"), if any, the date on which the franchise was
awarded and the date on which the franchise is scheduled to expire (if not
renewed). Except as set forth on Schedule 7.20 with respect to each such Cable
System and since March 31, 1995, Seller and License Company (i) has timely filed
all required registration statements with the FCC pursuant to FCC Rule 76.12,
(ii) has timely filed all required equal employment opportunity reports with the
FCC pursuant to FCC Rule 76.77, such reports are true and accurate, and the FCC
has certified compliance in
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response to each such report except for the 1997 report which was filed after
the due date and has not yet been certified by the FCC, (iii) is in compliance
with all FCC programming requirements, including the children's programming
provisions of FCC Rule 76.225, (iv) has timely filed all reports, including
those required by FCC Rule 76.403, and is in compliance with the record-keeping
and inspection requirements of FCC Rules 76.307 and 76.601, (v) has not received
any notice of non-compliance from any franchisor pursuant to FCC Rule 76.309 and
meets or exceeds the customer service provisions set forth in that rule, (vi)
complies with the requirements of FCC Rule 76.601 and is in compliance with the
applicable technical standards of FCC Rule 76.605, and (vii) is in compliance
with the aeronautical interference provisions of FCC Rules 76.610-76.615.
7.21 FCC Licenses. Schedule 7.21 correctly sets forth all of the FCC
licenses, permits, approvals and authorizations (collectively, "FCC Licenses")
used or planned to be used by Seller and License Company in connection with the
Business and correctly sets forth the entity holding such FCC License, the call
sign or file number and expiration date of each such FCC License. Neither Seller
nor License Company is required to hold any other FCC License to conduct the
Business. Each such FCC License has been duly and validly issued or assigned to
Seller or License Company by or with the consent of the FCC pursuant to
procedures which comply with all requirements of applicable law, is in full
force and effect, and is unimpaired, and Seller and License Company each have
the right to use all FCC Licenses in the ordinary course of business for the
operation of the Business. Seller and License Company are each in compliance in
all material respects with the FCC Licenses and FCC Rules, and there is no known
conflict with the valid rights of others which could adversely affect the FCC
Licenses, the Business or Seller or License Company. There is no complaint or
proceeding pending before the FCC, or to the best knowledge of Seller or License
Company threatened, or other event that has occurred, which could reasonably be
expected to result in the forfeiture, revocation, impairment, non-renewal or
adverse modification, of any such FCC License, or the imposition of a financial
or other penalty upon Seller or License Company. All facilities authorized
pursuant to the FCC Licenses were timely constructed in accordance with such FCC
License and all provisions of the Communications Act of 1934, as amended (the
"Act") and the rules promulgated and policies adopted under the Act
(collectively, "FCC Rules") and are operating in compliance therewith.
7.22 FCC Applications. Schedule 7.22 sets forth all applications
(collectively, "FCC Applications") that are pending before the FCC with respect
to the Business, the file number of each such application and the date on which
it was accepted for filing by the FCC. Each of the FCC Applications complies in
all
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material respects with FCC Rules and policies. There are no petitions, protests,
objections, or other proceedings, formal or informal, pending or threatened,
before the FCC requesting dismissal, denial, reconsideration or reinstatement
which, if granted, could result in the denial, dismissal, return, or non-grant
of any FCC Application, the issuance of a cease and desist order, or the
imposition of any administrative or judicial sanction.
7.23 FCC Compliance. Except as set forth in Schedule 7.20, Seller and
License Company have each timely filed with the FCC all reports and filings
(collectively, "Reports") relating to the Business which are required to be
filed by it under the Act and FCC Rules, including, without limitation, FCC
Rules relating to equal employment opportunity.
7.24 Zoning, Aviation, etc. Compliance. Except as set forth in Schedule
7.24, none of the facilities used in the Business violates the provisions of any
applicable federal, state, or local aviation regulation (including FCC and
Federal Aviation Administrative tower markings and lighting requirements),
building restriction, zoning ordinance or regulation, and each such facility is
zoned, if required, so as to permit the commercial uses intended by the owner or
occupier thereof, and there are no outstanding variances or special use permits
affecting any of such facilities or the uses thereof.
7.25 Compliance with the Copyright Act. Except as set forth on Schedule
7.14, Seller and License Company have each (i) (a) duly filed in a timely manner
all registration statements, statements of account and other filings relating to
the operation of the Business which are required to be filed under the Copyright
Act and under any local laws and rules, (b) conducted the Business in compliance
with the Copyright Act and the rules and regulations of the Copyright Office,
and (c) timely submitted any and all notices, statements of account, or other
instruments required under the Copyright Act and the Rules and Regulations of
the Copyright Office for a license to carry all broadcast stations previously or
currently carried on the Seller's systems; and (ii) timely remitted all required
payments and royalty fees for the carriage of such stations. Neither Seller nor
License Company is liable to any Person for copyright infringement under the
Copyright Act or trademark infringement under the applicable federal and state
statutes and regulations as a result of its business operations, its conduct of
the Business or otherwise.
7.26 Must-Carry and Retransmission Consent. Schedule 7.26 lists each
Broadcast Station (as defined below) which is carried on each Cable System
pursuant to the must-carry provisions of FCC Rules 76.51-76.62, and the channel
on which it is carried. Schedule 7.26 also separately lists each Broadcast
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Station carried pursuant to a retransmission consent agreement, and the channel
on which it is carried. Except as set forth on Schedule 7.26 there is no dispute
pending or threatened with respect to the carriage of any Broadcast Station.
Seller and License Company have each complied with all Broadcast Station
notification provisions of FCC Rule 76.58 and the must-carry record-keeping
provisions of FCC Rule 76.302 with respect to each Cable System, and with all
other FCC Rules regarding must-carry and retransmission consent. Each Broadcast
Station signal carried by the Cable Systems is carried either pursuant to the
must-carry obligations of the Cable Systems or pursuant to a valid and binding
agreement between Seller and the Broadcast Station (or License Company and the
Broadcast Station) authorizing the retransmission of the Broadcast Station
signal. For purposes of this Section 7.26, the term "Broadcast Station" means,
in connection with signals retransmitted, a local commercial television station,
as defined in FCC Rule 76.55(c), a qualified low power station, as defined in
FCC Rule 76.55(d), or a qualified noncommercial educational television
broadcasting station as defined in FCC Rule 76.55(a), but does not include a
"superstation" as defined by FCC Rule 76.64(c)(2).
7.27 Petitions for Special Relief. Neither License Company nor Seller
has received or have knowledge of any petition for special relief or document so
styled filed against or with respect to Seller or License Company concerning any
matters which under FCC Rules can be raised in a petition for special relief, in
each case relating to the Business.
7.28 Conduct in Ordinary Course. Since January 19, 1998, Seller and
License Company have each conducted the Business only in the usual, regular and
ordinary manner consistent with past practices and have not, except as in the
ordinary course, (i) taken any action to diminish the aggregate value of the
Purchased Assets, (ii) disbursed any of the Purchased Assets to any other
Person, (iii) taken any action to frustrate the transactions contemplated by
this Agreement, (iv) created, incurred, assumed or suffered to exist any Liens
of any kind against or upon any of the Purchased Assets or (v) created any
Subsidiaries.
7.29 Solvency. Upon and immediately following the Closing, Seller will
be Solvent.
7.30 Effective Competition. The Cable Systems are either exempt from
rate regulation or are subject to "effective competition" as defined in FCC Rule
76.905(b). No franchisor has certified to the FCC as a pre-condition to rate
regulation.
7.31 Hard Wire Public Right-of-Way Crossings. Schedule 7.31 sets forth a
complete and correct list of all hard
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wire public right-of-way crossings relating to the Purchased Assets or the
Business. Except as set forth on Schedule 7.31, Seller has valid, binding and
enforceable rights and franchises to maintain such crossings and all such rights
and franchises are freely transferable to Buyer.
7.32 Security Services. Schedule 7.32 is a true, complete and correct
list of all Relevant Properties for which Seller has agreements with respect to
the provision of security services, specifying the corresponding Right of Entry,
whether such security service is performed at Seller's option or is required by
the Right of Entry and all subcontract arrangements to provide the security
services. Seller has provided Buyer with copies of all contracts and
subcontracts relating to such security services.
8. REPRESENTATIONS AND WARRANTIES OF BUYER. Buyer represents and warrants to
Seller as follows:
8.1 Organization. Buyer is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware.
8.2 Authority. Buyer has all requisite power and authority to enter into
this Agreement and each agreement contemplated hereby to which it is to be a
party, to carry out its obligations hereunder and thereunder and to consummate
the transactions contemplated hereby and thereby. The execution, delivery and
performance of this Agreement and each of the agreements contemplated hereby to
which it is a party have been duly authorized by all required corporate action
on the part of Buyer. This Agreement has been, and upon its execution of each of
the agreements contemplated hereby will be, duly executed and delivered by
Buyer, and (assuming due authorization, execution and delivery by Seller) this
Agreement constitutes, and upon execution by Buyer, each of the agreements
contemplated hereby will constitute, legal, valid and binding obligations of
Buyer enforceable against Buyer in accordance with their respective terms.
8.3 Capital Stock and Other Matters. (a) Schedule 8.3 sets forth the
authorized capital stock of Buyer, the number of each class of shares issued and
outstanding, the number of each class of shares reserved for issuance pursuant
to convertible securities, options and other agreements, and the number of each
class of shares held by Buyer in its treasury on the date hereof. Schedule 8.3
assumes that the convertible notes, including accrued interest, issued by Buyer
and held by VPC Corporation ("GVL Notes") will be converted at a price equal to
or greater than $82.18 as may be adjusted in accordance with their terms. No
bonds, debentures, notes or other indebtedness of Buyer having
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the right to vote (or convertible into securities having the right to vote) on
any matters on which holders of shares of capital stock of Buyer may vote are
issued or outstanding on the date hereof. All of the issued and outstanding
shares of Buyer's capital stock are validly issued, fully paid and
nonassessable.
Seller acknowledges that from and after the date hereof, Buyer may,
without limit, issue securities or make changes in its capital structure as it
deems appropriate, including the conversion into Class B Common shares of the
GVL Notes or the Series A Preferred Shares at a price equal to or greater than
$82.18, as may be adjusted in accordance with its terms, and the grant of stock
options to employees, in the conduct of its business and without restrictions by
Seller. Seller further acknowledges that in the event of such a change in the
Buyer's capital structure there shall be no adjustment to the Purchase Price,
except in the case of (i) stock dividends on Common Stock or (ii) capital
reorganizations.
Additionally, Seller acknowledges that Buyer expects to issue, at a time
prior to or after the Closing Date, a series of preferred stock of Buyer (the
"Series A Preferred Stock") which shall be issued in redemption, conversion,
exchange or otherwise for the GVL Notes. Seller further acknowledges that the
Series A Preferred Stock shall have a priority in all respects to the Series B
Preferred Stock. Although the precise terms of the Series A Preferred Stock have
not yet been determined, the Series A Preferred Stock will only be entitled to
receive dividends payable in shares of such series at an annual rate equal to or
less than 15% of the liquidation preference thereof and will not be convertible
into common equity of Buyer at a price less than $82.18 per share.
(b) Except as set forth in the Stockholder Agreement dated as of August
15, 1997 (the "Existing Stockholder Agreement") among VPC Corporation, Capital
Communications CDPQ Inc. and Buyer, no class of capital stock is entitled to
preemptive rights. Except for the Existing Stockholder Agreement and the Warrant
Agreement dated as of July 3, 1997 granted by Buyer to Gordon Hecht, the Warrant
Agreement dated as of September 1, 1996 granted by Buyer to James A. Kofalt, the
Warrant Agreement dated as of July 11, 1997 granted by Buyer to Rory Cole and
the Restated Incentive Stock Plan of Buyer, there are no stockholder agreements,
voting trusts or other contracts or agreements to which Buyer is a party or by
which it is bound relating to the voting or transfer of any shares or units of
any class of shares of Buyer.
(c) A complete and correct copy of the Certificate of Designation
setting forth the terms and conditions of the Series B Preferred Stock is
attached hereto as Exhibit L.
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8.4 Validity of Shares. When the shares of Class A Common Stock
and Series B Preferred Stock, as the case may be, are issued and delivered,
against payment therefor, at the Closing as provided herein, each such share
shall be validly issued, fully paid and a nonassessable share of capital stock
of Buyer.
8.5 No Conflicts. Neither the execution or delivery of this
Agreement or any agreement contemplated hereby, nor fulfillment of or compliance
with the terms and provisions hereof and thereof, nor the consummation of the
transactions contemplated hereby and thereby, will conflict with or result in a
breach of the terms, conditions or provisions, of or constitute a default under,
or result in any violation of, or result in the creation of any Lien upon any of
the properties or assets of Buyer pursuant to, or require any consent under, or
give to any third Person any rights of termination, amendment, acceleration,
suspension, revocation or cancellation of, (i) the certificate of incorporation
or bylaws of Buyer, (ii) any award of any arbitrator or any order, judgment,
decree, statute, law, rule or regulation to which Buyer or is subject, or (iii)
any note, bond mortgage or indenture, contract, agreement lease, sublease,
license, permit, franchise or other instrument or arrangement to which Buyer is
a party or by which any of Buyer's assets or properties are bound or affected,
except for filings under the HSR Act.
8.6 Actions Pending. There is no action, suit, investigation or
proceeding pending or, to the best knowledge of Buyer, threatened, against or
affecting Buyer or any of its properties or rights, by or before any court,
arbitrator, administrative tribunal or governmental body that is reasonably
likely to materially impair Buyer's ability to consummate the transactions
contemplated by this Agreement.
8.7 Solvency. Buyer is, and immediately after the consummation of
the transactions contemplated hereby will be, Solvent.
8.8 Periodic SEC Filings. Buyer has delivered to Seller its (a)
Annual Report on Form 10-K for the year ended August 31, 1997 as filed with the
SEC; (b) its amendment to Form 10-K on Form 10K-A for the year ended December
31, 1997 as filed with the SEC on February 17, 1998; and (c) all other reports
or registration statements filed by Buyer with the SEC since December 31, 1996
(collectively, the "Buyer SEC Documents"). Except to the extent amended or
corrected by subsequent filings included in the Buyer SEC Documents, as of their
respective dates, the Buyer SEC Documents were prepared in accordance with the
requirements of the Securities Act of 1933, as amended, and the Exchange Act, as
the case may be, and the rules and
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regulations thereunder and did not contain any untrue statement of a material
fact or omit to state a material fact required to be stated therein or necessary
to make the statements therein, in light of the circumstances under which they
were made, not misleading. Except to the extent amended or corrected by
subsequent filings included in the Buyer SEC Documents, the financial statements
of Buyer and its Subsidiaries included in the Buyer SEC Documents comply as to
form in all material respects with applicable accounting requirements and the
published rules and regulations of the SEC with respect thereto, have been
prepared in accordance with generally accepted accounting principles (except, in
the case of unaudited statements, as permitted by Form 10-Q of the SEC) applied
on a consistent basis (except as may be indicated in the notes thereto) and
fairly present the consolidated financial position of Buyer and its consolidated
Subsidiaries as of the dates thereof and the consolidated results of their
operations and cash flows and for the periods then ended (subject, in the case
of unaudited statements, to normal year-end audit adjustments).
8.9 Broker's or Finder's Commissions. No broker's or finder's fee
or commission will be payable by Buyer with respect to the transactions
contemplated by this Agreement.
8.10 Assignee Representation and Warranties. If Buyer exercises
its assignment rights pursuant to Section 10.5, then Buyer represents and
warrants as of the Closing Date that the representation, and warranties in
Sections 8.1, 8.2, 8.5, and 8.9 made with respect to Buyer shall be true and
correct as applicable to Assignee, mutatis, mutandis.
9. DEFINITIONS.
As used herein, the following terms shall have the following meanings:
550 MHz Relevant Properties: means all properties situated in the
markets listed in paragraph (A) of Section of 1.3(b)(iii).
550 MHz Standard: means the "550 MHz Performance Standard"
described in Schedule 1.3(b)(iii).
Act: means 47 U.S.C.ss. 522.
Affiliate: means with respect to any Person, another Person
directly or indirectly controlling, controlled by, or under direct or indirect
common control with, such Person.
Aggregate Cable Revenue: means for all Relevant Markets in the
aggregate, the monthly revenues billed in respect
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of all cable services provided by Seller, and for which (a) in the case of bulk
contracts the accounts are not more than 60 days past due and (b) in the case of
retail contracts, the accounts are not more than 90 days past due and, in each
case, for which the standard deposit and installation fees for such services (in
accordance with Seller's customary practices of the Business) have been billed.
Aggregate Phone Revenue: means for all Relevant Markets in the
aggregate, the monthly revenues billed in respect of all phone services provided
by Seller, and for which (a) in the case of bulk contracts the accounts are not
more than 60 days past due and (b) in the case of retail contracts, the accounts
are not more than 90 days past due and, in each case, for which the standard
deposit and installation fees for such services (in accordance with Seller's
customary practices of the Business) have been billed.
Aggregate Revenue: means for all Relevant Markets in the
aggregate, the monthly revenues billed in respect of all cable and phone
services provided by Seller, and for which (a) in the case of bulk contracts the
accounts are not more than 60 days past due and (b) in the case of retail
contracts, the accounts are not more than 90 days past due and, in each case,
for which the standard deposit and installation fees for such services (in
accordance with Seller's customary practices of the Business) have been billed.
Assignee: means one or more wholly owned Subsidiaries of Buyer,
and Transmission Holdings, Inc. with respect to any federal licenses assigned.
Assumed Liabilities: means the Specified Assumed Liabilities, the
assumed Pre-Closing Liabilities and Liabilities arising after the Closing Date
which are associated with assets described in Section 1.2(c) which are
transferred to Buyer on the Closing Date.
Average Cable Revenue Per Cable Subscriber: means the monthly
Aggregate Cable Revenue divided by the number of Cable Subscribers in the same
market(s) and period(s).
Average Phone Revenue Per Billable Phone Subscriber: means the
monthly Aggregate Phone Revenue divided by the number of Billable Phone
Subscribers in the same market(s) and period(s).
Billable Phone Subscribers: means, residential subscribers
receiving service on a for-charge basis at Seller's undiscounted rates in a
Relevant Property, whose account is not more 90 days past due for a retail
contract and excluding those
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properties for which (a) there is no PBX or service is not being offered or (b)
there is either no contract or a month-to-month contract where Seller has
received notice that its service to such properties is or will be terminated or
Seller has knowledge that another operator has been granted the right to service
such properties.
Broadcast Station: has the meaning specified in Section 7.24.
Business: means the cable television, telephone, residential
security and telecommunications business of Seller in the Relevant Markets.
Business Day: means any day which is not a Saturday or Sunday or
other day on which banks are required or authorized by law to close in the State
of New York.
Buyer: has the meaning specified in the introduction.
Buyer's Accountants: means the accounting firm of Deloitte &
Touche, LLP.
Buyer Indemnified Parties: has the meaning specified in Section
10.1(a).
Cable Subscriber: means, individual residential subscribers to the
basic cable service tier in retail properties and fully activated units in bulk
contract properties, which comprise the Relevant Properties, and which, as of
the Closing, are active subscribers to the cable services offered by Seller,
whose account is not more than 90 days past due for a retail contract and 60
days past due for a bulk contract and excluding those properties for which there
is either no contract or a month-to-month contract where Seller has received
notice that its service to such properties is or will be terminated or Seller
has knowledge that another operator has been granted the right to service such
properties.
Capitalized Lease Obligations: means all rental obligations which,
under GAAP in effect on the day incurred, are required to be capitalized on the
books of Seller, in each case to the extent of the amount thereof accounted for
as indebtedness (net of interest expense) in accordance with GAAP.
Claim: has the meaning specified in Section 10.2.
Closing: has the meaning specified in Section 3.1.
Closing Date: has the meaning specified in Section 3.1.
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Closing Statement: has the meaning specified in Section 1.3(a).
COBRA: means Consolidated Omnibus Budget Reconciliation Act of
1985, as amended.
Employee Liabilities: has the meaning specified in Section 5(a).
Employee List: has the meaning specified in Section 5(b).
Environmental Laws: has the meaning specified in Section 7.9.
ERISA: means the Employee Retirement Income Security Act of 1974,
as amended.
Escrow Agents: means the Consent Escrow Agent and the Crossings
Escrow Agent.
Escrow Agreements: means the Consent Escrow Agreement and the
Crossings Escrow Agreement.
Expenses: has the meaning specified in Section 10.1(a).
FCC: means the Federal Communications Commission or any successor
thereto.
FCC Applications: has the meaning specified in Section 7.22.
FCC Licenses: has the meaning specified in Section 7.21.
GAAP: means United States generally accepted accounting principles
consistently applied throughout the period or periods in question.
Governmental Body: means any government or any political
subdivision thereof, whether federal, state, local or foreign, any agency,
instrumentality or authority thereof (including, without limitation, the FCC),
and any court or arbitrator (public or private).
Indebtedness: means, with respect to any Person, (a) all
indebtedness of such Person, whether or not contingent, for borrowed money, (b)
all obligations of such Person evidenced by notes, bonds, debentures or other
similar instruments, (c) all obligations of such Person as lessee under leases
that have been
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or should be, in accordance with GAAP, recorded as capital leases, (d) all
obligations, contingent or otherwise, of such Person under acceptance, letter of
credit or similar facilities, (e) all Indebtedness of others referred to in
clauses (a) through (d) above guaranteed directly or indirectly in any manner by
such Person, or in effect guaranteed directly or indirectly by such Person
through any agreement or arrangement, and (f) all Indebtedness referred to in
clauses (a) through (d) above secured by any Lien on property owned by such
Person, even though such Person has not assumed or become liable for the payment
of such Indebtedness.
Indemnified Taxes: means any Taxes paid or payable by Buyer or any
person with whom Buyer pays Taxes on a consolidated, combined, or similar basis
with respect to any taxable year or period of Seller or predecessor entities of
Seller which ends on or before the Closing Date, including any tax liability of
Seller which arises as a result of the transactions contemplated by this
Agreement. Indemnified Taxes also includes any Taxes paid or payable by Buyer or
any person with whom Buyer pays Taxes on a consolidated, combined, or similar
basis with respect to any taxable year or period of Seller which begins before
and ends after the Closing Date, to the extent such Taxes are attributable to
the activities of Seller on or before the Closing Date, including any tax
liability of Seller which arises as a result of the transactions contemplated by
this Agreement but only to the extent such liability is not reflected as a
liability on the Closing Statement.
Internal Revenue Code: means the Internal Revenue Code of 1986, as
amended, and the rules and regulations promulgated thereunder.
ICS Amended and Restated Note Purchase Agreement: means the
Amended and Restated Note Purchase Agreement, dated as of October 15, 1997,
among the Seller, Nomura Holding America Inc., MCI Telecommunications
Corporation and Nomura International Trust Company, as collateral agent, as
amended, supplemented or otherwise modified from time to time in accordance with
its terms.
ICS Secured Lenders: means the holders from time to time of (i)
the notes issued pursuant to the ICS Amended and Restated Note Purchase
Agreement and (ii) the Additional Notes (as such term is defined in the ICS
Amended and Restated Note Purchase Agreement).
Liabilities: means any and all debts, liabilities and obligations,
whether accrued or fixed, absolute or contingent, matured or unmatured or
determined or undetermined, including, without limitation, deposits owing to
customers in properties
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included in Purchased Assets and those arising under any law, rule or regulation
of any Governmental Body (including, without limitation, Indemnified Taxes),
those arising under any contract, agreement, arrangement, commitment or
undertaking or those to or in respect of employees or leased employees of
Seller.
Leased Premises Assets: shall have the meaning set forth in
Section 1.2(c).
Lien: means any mortgage, pledge, security interest, encumbrance,
lien or charge of any kind, including any agreement to give any of the
foregoing, any conditional sale or other title retention agreement, any lease in
the nature thereof, and the filing of or agreement to give any financing
statement under the Uniform Commercial Code of any jurisdiction (other than
filings for notice purposes only where the secured party named on the financing
statement can not look to the Purchased Assets as security for any obligations
of Seller to such party).
Losses: has the meaning specified in Section 10.1(a).
Material Adverse Effect: means any circumstance, change in, or
effect on, the Business or the Purchased Assets that, individually or in the
aggregate with any other circumstances, changes in, or effects on, the Business
or the Purchased Assets: (a) is, or could reasonably be expected to be,
materially adverse to the business, operations, assets or Liabilities
(including, without limitation, contingent Liabilities), employee relationships,
customer or supplier relationships, prospects, results of operations or the
condition (financial or otherwise) of the Business or the Purchased Assets or
(b) could reasonably be expected to materially adversely affect the ability of
Buyer to operate or conduct the Business in the manner in which it is currently
operated or conducted by Seller.
Non-Competition Agreement: means the agreement to be entered into
at the Closing by Buyer and Seller in the form attached as Exhibit M.
Non-Conforming Crossing: means a hard wire crossing of public
right of way using wiring owned or leased by Seller, for which, in Buyer's
reasonable judgment, a required franchise, permit or other required
authorization has not been obtained.
Notice: has the meaning specified in Section 10.6.
Officer's Certificate: means as to any Person, a certificate of
its president, vice president, chief financial officer, treasurer or controller
or, in the case of a partnership or limited liability company, an equivalent
officer of a general
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partner or manager or an individual general partner or manager, or in the case
of an individual, such Person himself.
PBGC: means the Pension Benefit Guaranty Corporation established
pursuant to Section 4002 of ERISA, or any successor entity thereto.
Per Subscriber Amount: means an amount calculated at Closing equal
to (a) $80,243,108, as adjusted in accordance with Section 1.3(b), divided by
(b) the number of Cable Subscribers and Billable Phone Subscribers included in
the Purchased Assets.
Permitted Liens: means Purchase Money Security Interests,
landlord's liens, mechanics' liens, repairmen's liens and other similar liens,
if any, that do not materially detract from the value of the property subject
thereto or materially interfere with the manner in which it is currently being
used in the Business, or materially impair the operations of the Business, and
Taxes, general and special assessments not in default without penalty or
interest and Liens to secure Capitalized Lease Obligations to the extent they
exist on the date hereof.
Person: means an individual, partnership, joint venture,
corporation, limited liability company, trust or other entity or any
Governmental Body or subdivision, agency, commission or authority thereof.
Pre-Closing Liabilities: shall have the meaning set forth in
Section 1.3(a),
Purchase Money Debt: means debt of Seller incurred to finance an
acquisition of assets which is secured by a Purchase Money Security Interest.
Purchase Money Security Interest: means a purchase money security
interest within the meaning of Section 9-107 of the Uniform Commercial Code, as
in effect on the date hereof.
Purchase Price: has the meaning specified in Section 1.1.
Purchased Assets: means all the assets, business and operations,
other than cash and receivables, of Seller relating to the Business including,
without limitation:
(i) all cable passings including, without limitation, those
located at the properties listed in Schedule 7.19;
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(ii) all telephone passings including, without limitation, those
located at the properties listed in Schedule 7.19;
(iii) all franchises, licenses, permits, real property rights and
assessments held or pending;
(iv) all Rights of Entry including, without limitation, those
listed in Schedule 7.19;
(v) all other contracts, agreements and arrangements including,
but not limited to, leases relating to the Business;
(vi) all transmission licenses and permits;
(vii) all head-ends, satellite receiving dishes, signal
processing equipment, modulators, IRD's, amplifiers, active
and passive electronic devices, converter boxes, remotes,
wiring, microwave transmissions and repeater and receiver
equipment;
(viii) the 60 day customary usage inventory of spare parts and
supplies (the specific inventory to be agreed upon between
Buyer and Seller Five (5) Business Days prior to Closing);
(ix) technical and test equipment and other current assets
(other than cash and receivables), systems, computers,
office equipment, books and records;
(x) all of the equipment, tools, supplies, furniture, fixtures,
personalty, vehicles, rolling stock and other tangible
personal property set forth on Schedule 7.5(d) plus any
additional items of a similar nature which are acquired or
received by Seller between the date hereof and the Closing
Date;
(ix) all microwave paths and licenses in any Relevant Market.
Purchased Assets do not include: (w) stock and corporate governance books and
records, (x) assets which are physically located at and associated only with
properties which by agreement of the parties are excluded from this transaction,
(y) inventory of spare parts and supplies which are excluded from subsection
(viii) above, and (z) idle equipment which is not physically
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located at any Relevant Property, not required to service a Relevant Property
and not scheduled on Schedule 7.5(d).
Ratio Formula: has the meaning specified in Section 2.2.
Relevant Markets: means the metropolitan areas listed on Schedule
9.4.
Relevant Properties: means those properties listed on Schedule
7.19.
Reports: has the meaning specified in Section 7.20.
Required Consents: has the meaning specified in Section 4.2.8.
Retained Businesses: means any business of Seller unassociated
with a Relevant Market.
Revenue Share: means determined in accordance with GAAP on an
accrual basis, and on a monthly basis, the dollar amount accrued payable
pursuant to Rights of Entry to owners or managers of properties from gross
revenues collected pursuant to such Rights of Entry. For purposes of clarity,
Revenue Share shall be calculated without regard to the period in which Revenue
Share was actually paid or offset against prepaid royalties.
Rights of Entry: means valid, lawful, binding and enforceable
written agreements in favor of Seller to provide exclusive video programming
delivery service, telephone service and/or telecommunications service to Cable
Subscribers and/or Billable Phone Subscribers.
Seller: has the meaning specified in the introduction.
Seller Indemnified Parties: has the meaning specified in Section
10.1(c).
Seller's Accountants: means the accounting firm of Deloitte and
Touche, LLP.
Services and Cooperation Agreement: means the agreement to be
entered into at the Closing by Buyer and Seller in the form attached as Exhibit
B.
Solvent: means, with respect to any Person on a particular date,
that on such date (a) the fair value of the property of such Person is greater
than the total amount of Liabilities, including, without limitation, contingent
Liabilities, of such Person, (b) the present fair salable value
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of the assets of such Person is not less than the amount that will be required
to pay the probable Liability of such Person on its debts as they become
absolute and matured, (c) such Person does not intend to, and does not believe
that it will, incur debts or Liabilities beyond such Person's ability to pay as
such debts and Liabilities mature and (d) such Person is not engaged in business
or a transaction, and is not about to engage in business or a transaction, for
which such Person's property would constitute an unreasonably small capital.
Specified Assumed Liabilities: has the meaning set forth in
Section 1.3(a).
Subsidiary: means, as to any Person, a corporation or other Person
of which shares or similar securities having voting power to elect a majority of
the board of directors or other managers are at the time owned, directly or
indirectly, through one or more intermediaries, by such Person.
Tax or Taxes: means any and all taxes, fees, levies, duties,
tariffs, imposts, and other charges of any kind (together with any and all
interest, penalties, additions to tax and additional amounts imposed with
respect thereto) imposed by any government or taxing authority, including,
without limitation: taxes or other charges on or with respect to income,
capital, gains, capital gains, franchises, windfall or other profits, gross
receipts, property, sales, use, capital stock, payroll, employment, social
security, workers' compensation, unemployment compensation, or net worth and
alternative minimum taxes; taxes or other charges in the nature of excise,
withholding, ad valorem, stamp, transfer, value added, or gains taxes; license,
registration and documentation fees; and customs' duties, tariffs, and similar
charges.
Tax Authority: means any federal, state, local or foreign taxing
authority, court, or tax administrative body.
Tax Proceeding: means an examination, investigation, audit,
hearing, or other proceeding conducted by a Tax Authority regarding a Tax
Return. A Tax Proceeding also includes a proceeding in federal Tax Court and a
state or local administrative proceeding.
Tax Return: means any tax return or other tax reporting document
filed or required to be filed by or on behalf of Seller with a Tax Authority
which relates to Indemnified Taxes.
Upgrade: has the meaning specified in Section 1.3(b).
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WARN: Worker Adjustment and Retraining Notification Act of 1988,
as amended.
10. MISCELLANEOUS.
10.1 Indemnification. (a) Seller shall indemnify and hold Buyer
and its directors, officers, employees, affiliates, agents, successors and
assigns (collectively, the "Buyer Indemnified Parties") harmless from and
against any and all losses, liabilities, obligations, damages, claims,
deficiencies, costs and expenses ("Losses") based upon, attributable to,
resulting from or arising out of: (i) the Liabilities other than the Assumed
Liabilities (to the extent not misrepresented by Seller); (ii) any
misrepresentation or breach of representation or warranty made by Seller herein,
(iii) subject to paragraph (b) below facts or circumstances not fully disclosed
to Buyer prior to the Closing which facts or circumstances were used in
computing the Purchase Price adjustment set forth in Section 1.3(b); (iv)
liabilities relating to the period prior to the Closing through completion of a
Remedy which directly relate to the Non-Conforming Crossings (v) breach or
non-fulfillment of any agreement or covenant on the part of Seller under this
Agreement or any of the agreements contemplated hereby; (vi) all Indemnified
Taxes; (vii) any brokerage claims by CMD Ventures, LLC or any other broker with
respect to this transaction, (viii) Seller's obligations under the Services and
Cooperation Agreement; and (ix) any and all notices, actions, suits,
proceedings, demands, assessments, judgments, costs, penalties and expenses,
including attorneys' and other professionals' fees (including, without
limitation, reasonable attorneys' and other professionals' fees and expenses
incurred in any action or proceeding between the parties hereto or between any
party hereto (if such party is the prevailing party) and a third party, if such
matter is subject to the indemnification provisions of this Article 10) and
charges incurred in connection with the investigation, defending or preparing to
defend the foregoing (collectively, "Expenses").
(b) Notwithstanding anything in this Section 10.1 to the
contrary, if the aggregate net sum of the Subscriber Adjustment Amount, the
Revenue and Term Adjustment Amount, and the 550 MHz Adjustment Amount is a
positive number in excess of $2,000,000, a Buyer Indemnified Party shall only be
entitled to seek indemnity for Losses under subsections (ii) and (iii) of
Section 10.1(a), in excess of an amount (the "Basket") equal to the excess of
such sum over $2,000,000.
(c) Buyer shall indemnify and hold Seller and its directors,
officers, shareholders, employees, heirs, executors, administrators, affiliates,
agents, successors and assigns (collectively, the "Seller Indemnified Parties")
harmless from
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and against any and all Losses based upon, attributable to or resulting from (i)
any misrepresentation, breach of representation or warranty made by Buyer
herein, (ii) any breach or non-fulfillment of any covenant or agreement on the
part of Buyer under this Agreement or any of the agreements contemplated hereby,
(iii) any Assumed Liabilities and (iv) any and all Expenses incident to the
foregoing.
(d) Except as set forth below, an indemnifying party may be
liable for Losses arising under Section 10.1(a)(ii) or 10.1(c)(i) only if
written notice of a claim for indemnity in respect of such subject matter is
given to the indemnifying parties on or prior to the first anniversary of the
Closing Date (except that (i) such day shall be the day of expiration of the
applicable statute of limitations in respect of breaches of the representations
and warranties in Section 7.6, (ii) such day shall be three years after the
Closing Date in respect of breaches of the representations and warranties in
Sections 7.2, 7.3, 7.5, 7.9, 7.10 and 7.23, and (iii) other than the time limits
for accrual of a cause of action under applicable law, there shall be no time
limit on the ability of any party to bring a claim for any loss arising from
intentional misrepresentation or fraud).
10.2 Indemnification Procedures, Determination of Damages,
Limitations and Related Matters. (a) In the event that any legal proceedings,
including, without limitation, any Tax Proceeding, shall be instituted or that
any claim or demand ("Claim") shall be asserted by any Person in respect of
which indemnity may be sought under Section 10.1(a) or Section 10.1(c), the
indemnified party shall reasonably and promptly cause written notice of the
assertion of any Claim of which it has knowledge which is subject to such
indemnity to be forwarded to the indemnifying party; provided, however, that the
failure to notify the indemnifying party shall not affect the indemnifying
party's obligation hereunder except to the extent of actual prejudice. The
indemnifying party shall have the right, at its sole option and expense, to be
represented by counsel of its choice, which shall be satisfactory to the
indemnified party in the reasonable exercise of its discretion. In the event the
indemnifying party is Seller and it acknowledges in writing its obligation to
indemnify the Buyer Indemnified Parties against any Losses that may result from
such Claim, and if such Claim is for monetary damages only and the defense of
such Claim by Seller will not, in the judgment of Buyer, otherwise materially
adversely impact the Business or any Buyer Indemnified Party in any manner
whatsoever, then (and under no other circumstances) Seller shall have the right
to defend against, negotiate, settle or otherwise deal with any Claim which
relates to any Losses indemnified against hereunder; provided, however, that no
settlement shall be made without the prior written consent of Buyer, which shall
not
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unreasonably withhold or delay its consent. In the event the indemnifying party
is Buyer and Buyer acknowledges in writing its obligation to indemnify Seller
Indemnified Parties against any Losses that may result from such Claim, and if
such Claim is for monetary damages only and the defense of such Claim by Buyer
will not, in the judgment of Seller, otherwise materially adversely impact any
Seller Indemnified Party in any manner whatsoever, then (and under no other
circumstances) Buyer shall have the right to defend against, negotiate, settle
or otherwise deal with any Claim which relates to any Losses indemnified against
hereunder; provided, however, that no settlement shall be made without the prior
written consent of Seller, which shall not unreasonably withhold or delay its
consent. If the indemnifying party elects to defend against, negotiate, settle
or otherwise deal with any Claim which relates to any Losses subject to
indemnity hereunder, it shall within Fifteen (15) Business Days (or sooner, if
the nature of the Claim so requires) notify the indemnified party of its intent
to do so. If the indemnifying party shall not be entitled to, or elects not to,
defend against, negotiate, settle or otherwise deal with any Claim which relates
to any Losses subject to indemnity hereunder, fails to notify the indemnified
party of its election as herein provided or contests its obligation to provide
indemnity hereunder, the indemnified party may defend against, negotiate, settle
or otherwise deal with such Claim. If the indemnified party defends any Claim,
then the indemnifying party shall periodically reimburse the indemnified party
for the expenses of defending such Claim promptly following submission of
invoices therefor. The indemnified party may not settle any Claim without the
prior written consent of the indemnifying party, which shall not unreasonably
withhold or delay its consent. If the indemnifying party shall assume the
defense of any Claim, the indemnified party may participate, at its own expense,
in the defense of such Claim; provided, however, that the indemnified party
shall be entitled to participate in any such defense with separate counsel, at
the expense of the indemnifying party, if (i) requested by the indemnifying
party so to participate or (ii) in the reasonable opinion of counsel to the
indemnified party a conflict or potential conflict exists between the
indemnified party and the indemnifying party that would make such separate
representation advisable; and provided, further, that the indemnifying party
shall not be required to pay for more than one such counsel for all indemnified
parties in connection with any Claim. The parties agree to cooperate fully with
each other in connection with the defense, negotiation or settlement of any such
Claim.
(b) After any final judgment or award shall have been rendered by
a court, arbitration panel or administrative agency of competent jurisdiction
and the expiration of the time in which to appeal therefrom, or a settlement
shall have been
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consummated, or any indemnified party shall have paid or experienced Losses for
which an indemnified party shall be entitled to indemnification under Section
10.1(a) or Section 10.1(c) or the indemnified party and the indemnifying party
shall have arrived at a mutually binding agreement with respect to a Claim, the
indemnified party shall forward to the indemnifying party notice of any sums due
and owing by the indemnifying party pursuant hereto with respect to such matter
and the indemnifying party shall be required to pay all of the sums so due and
owing to the indemnified party as described below.
(c) The Buyer Indemnified Parties shall not be deemed to have
notice of any Claim by virtue of knowledge of facts relating thereto acquired on
or prior to the Closing Date by a Person employed by Seller prior to the
Closing.
(d) Except as described in clause (e) below, indemnity
payments for Losses due to an indemnified party under this Section 10.2 shall be
made by wire transfer of immediately available funds to an account designated by
the indemnified party, within Five (5) business days after the date of the
notice referred to in Section 10.2(b).
10.3 Amendments. This Agreement may not be amended except in a
writing signed by, or on behalf of, all parties hereto.
10.4 Survival of Representations and Warranties. All
representations and warranties contained herein or made in writing by or on
behalf of any party hereto in connection herewith shall survive the Closing as
provided for in Section 10.1.
10.5 Successors and Assigns. All covenants and agreements in this
Agreement contained by or on behalf of the parties hereto shall bind and inure
to the benefit of the respective successors and assigns of the parties, whether
so expressed or not. This Agreement shall not be assignable by any party hereto
without the prior consent of the other party, provided, however, that Buyer may
assign any part or all of its interest under this Agreement to Assignee or any
other wholly-owned Subsidiary or Subsidiaries, in which case, both Buyer and
Assignee or such other Subsidiary or Subsidiaries shall be jointly and severally
liable for all obligations so assigned.
10.6 Notices. (a) All notices, consents, instructions and other
communications required or permitted under this Agreement (collectively,
"Notice") shall be effective only if given in writing and shall be considered to
have been duly given when (i) delivered by hand, (ii) sent by telecopier (with
receipt confirmed), provided that a copy is mailed (on the same
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date) by certified or registered mail, return receipt requested, postage
prepaid, or (iii) received by the addressee, if sent by Express Mail, Federal
Express or other reputable express delivery service (receipt requested), or by
first class certified or registered mail, return receipt requested, postage
prepaid. Notice shall be sent in each case to the appropriate addresses or
telecopier numbers set forth below (or to such other addresses and telecopier
numbers as a party may from time to time designate as to itself by notice
similarly given to the other parties in accordance herewith, which shall not be
deemed given until received by the addressee). Notice shall be given:
(1) to Buyer at:
Optel, Inc.
1111 West Mockingbird Lane
Suite 1000
Dallas, Texas
Attn: General Counsel
Telecopier: (214) 634-3889
copy to: Kronish, Lieb, Weiner & Hellman LLP
1114 Avenue of the Americas
New York, New York 10036
Attn: Eric Simonson
Telecopier: (212) 479-6275
(2) to Seller at:
1901 N. Glenville Drive
Suite 800
Richardson, Texas 75081
Attn: Kevin Schottlaender, President and
Carl Koenig
Telecopier: (972) 669-6016 and (972) 669-6113
10.7 Descriptive Headings. The descriptive headings of the several
Sections and paragraphs of this Agreement are inserted for convenience only and
do not constitute a part of this Agreement.
10.8 GOVERNING LAW; CONSENT TO EXCLUSIVE JURISDICTION. THIS
AGREEMENT IS BEING DELIVERED IN THE STATE OF NEW YORK AND SHALL BE CONSTRUED AND
ENFORCED IN ACCORDANCE WITH, AND THE RIGHTS OF THE PARTIES SHALL BE GOVERNED BY,
THE LAW OF SUCH STATE APPLICABLE TO CONTRACTS ENTERED INTO AND TO BE PERFORMED
WHOLLY WITHIN SUCH STATE. SUBJECT TO SECTION 10.9, ANY LEGAL ACTION OR
PROCEEDING WITH RESPECT TO THIS AGREEMENT MAY BE BROUGHT EXCLUSIVELY IN THE
COURTS OF THE STATE OF NEW YORK OR OF THE UNITED STATES OF AMERICA FOR THE
SOUTHERN DISTRICT OF NEW YORK, AND, BY EXECUTION AND DELIVERY OF THIS AGREEMENT,
BUYER AND SELLER HEREBY ACCEPT FOR THEMSELVES AND IN RESPECT OF THEIR
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PROPERTY, GENERALLY AND UNCONDITIONALLY, THE EXCLUSIVE JURISDICTION OF THE
AFORESAID COURTS. EACH OF BUYER AND SELLER HEREBY WAIVES, AND AGREES NOT TO
ASSERT, AS A DEFENSE IN ANY ACTION, SUIT OR PROCEEDING FOR THE INTERPRETATION OR
ENFORCEMENT OF THIS AGREEMENT, THAT IT IS NOT SUBJECT THERETO OR THAT SUCH
ACTION, SUIT OR PROCEEDING MAY NOT BE BROUGHT OR IS NOT MAINTAINABLE IN SAID
COURTS OR THAT THIS AGREEMENT MAY NOT BE ENFORCED IN OR BY SAID COURTS OR THAT
ITS PROPERTY IS EXEMPT OR IMMUNE FROM EXECUTION, THAT THE SUIT, ACTION OR
PROCEEDING IS BROUGHT IN AN INCONVENIENT FORUM, THAT THE VENUE OF THE SUIT,
ACTION OR PROCEEDING IS IMPROPER OR (PROVIDED THAT PROCESS SHALL BE SERVED IN
ANY MANNER REFERRED TO IN THE FOLLOWING SENTENCE) THAT SERVICE OF PROCESS UPON
SUCH PARTY IS INEFFECTIVE. EACH OF BUYER AND SELLER AGREES THAT SERVICE OF
PROCESS IN ANY SUCH ACTION, SUIT OR PROCEEDING MAY BE MADE UPON IT IN ANY MANNER
PERMITTED BY THE LAWS OF THE STATE OF NEW YORK OR THE FEDERAL LAWS OF THE UNITED
STATES OR AS FOLLOWS: (I) BY PERSONAL SERVICE OR (II) BY CERTIFIED OR REGISTERED
MAIL TO THE PARTY FOR WHICH INTENDED AT ITS ADDRESS FOR NOTICE PURSUANT TO
SECTION 10.6. SERVICE OF PROCESS UPON ANY PARTY IN ANY MANNER REFERRED TO IN THE
PRECEDING SENTENCE SHALL BE DEEMED IN EVERY RESPECT EFFECTIVE SERVICE OF PROCESS
UPON SUCH PARTY.
10.9 BINDING ARBITRATION. ANY CONTROVERSY, CLAIM OR DISPUTE
ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE BREACH, TERMINATION,
ENFORCEABILITY OR VALIDITY THEREOF, INCLUDING WITHOUT LIMITATION THE
DETERMINATION OF THE SCOPE OR APPLICABILITY OF THIS AGREEMENT TO ARBITRATE,
SHALL BE DETERMINED EXCLUSIVELY BY BINDING ARBITRATION IN NEW YORK, NEW YORK
BEFORE ONE ARBITRATOR. THE ARBITRATION SHALL BE GOVERNED BY THE AMERICAN
ARBITRATION ASSOCIATION UNDER ITS COMMERCIAL ARBITRATION RULES AND ITS
SUPPLEMENTARY PROCEDURES FOR LARGE, COMPLEX DISPUTES, PROVIDED THAT THE PERSON
ELIGIBLE TO BE SELECTED AS THE ARBITRATOR SHALL BE LIMITED TO AN ATTORNEY-AT-LAW
WHO (I) IS ON THE AAA'S LARGE, COMPLEX CASE PANEL OR A CENTER FOR PUBLIC
RESOURCES ("CPR") PANEL OF DISTINGUISHED NEUTRALS, OR WHO HAS PROFESSIONAL
CREDENTIALS SIMILAR TO THE ATTORNEYS LISTED ON SUCH AAA AND CPR PANELS, AND (II)
WHO HAS PRACTICED LAW FOR AT LEAST 15 YEARS AS AN ATTORNEY IN NEW YORK
SPECIALIZING IN EITHER GENERAL COMMERCIAL LITIGATION OR GENERAL CORPORATE AND
COMMERCIAL MATTERS.
NO PROVISION OF, NOR THE EXERCISE OF ANY RIGHTS UNDER, SECTION
10.9(a) SHALL LIMIT THE RIGHT OF ANY PARTY TO REQUEST AND OBTAIN FROM A COURT
HAVING JURISDICTION BEFORE, DURING OR AFTER THE PENDENCY OF ANY ARBITRATION,
PROVISIONAL OR ANCILLARY REMEDIES AND RELIEF INCLUDING, BUT NOT LIMITED TO,
INJUNCTIVE OR MANDATORY RELIEF OR THE APPOINTMENT OF A RECEIVER. THE INSTITUTION
AND MAINTENANCE OF AN ACTION OR JUDICIAL PROCEEDING FOR, OR PURSUIT OF,
PROVISIONAL OR ANCILLARY REMEDIES SHALL NOT CONSTITUTE A WAIVER OF THE RIGHT OF
BUYER, EVEN IF BUYER IS THE
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PLAINTIFF, TO SUBMIT THE DISPUTE TO ARBITRATION IF BUYER WOULD OTHERWISE HAVE
SUCH RIGHT.
IN ANY SUCH ARBITRATION PROCEEDING, THE ARBITRATOR SHALL NOT HAVE
THE POWER OR AUTHORITY TO AWARD PUNITIVE DAMAGES TO ANY PARTY. JUDGMENT UPON THE
AWARD RENDERED MAY BE ENTERED IN ANY COURT HAVING JURISDICTION (AND WITHOUT
REGARD TO SECTION 10.8).
EACH OF THE PARTIES SHALL, SUBJECT TO THE AWARD OF THE
ARBITRATORS, PAY AN EQUAL SHARE OF THE ARBITRATORS' FEES. THE ARBITRATORS SHALL
HAVE THE POWER TO AWARD RECOVERY OF ALL COSTS AND FEES (INCLUDING ATTORNEYS'
FEES, ADMINISTRATIVE FEES, ARBITRATORS' FEES, AND COURT COSTS) TO THE PREVAILING
PARTY.
10.10 Entire Agreement. Other than the Confidentiality Agreement
dated February 2, 1998 among Buyer, Seller, Nomura Holding America Inc., MCI
Telecommunications Corporation, Chanin & Company, Houlihan, Lokey, Howard &
Zukin, this Agreement and the other writings referred to herein or delivered
pursuant hereto contain the entire agreement among the parties with respect to
the subject matter hereof and supersedes all prior and contemporaneous
arrangements or understandings with respect thereto. Nothing in this Agreement
is intended to confer any rights or remedies under or by reason of this
Agreement on any Persons other than Seller and Buyer and their respective
successors and permitted assigns.
10.11 Severability. Any provision of this Agreement that is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
10.12 Public Announcement. Neither Buyer on the one hand, nor
Seller on the other hand, nor any of their respective officers, directors or
advisors shall make any public announcement or report with respect to this
Agreement or its subject matter, without the prior written consent of Buyer and
Seller unless (and only to the extent) such announcement or report is necessary
to comply with legal requirements or to bring about the consummation of the
Closing.
10.13 Expenses. Except as expressly provided in this Agreement,
each party hereto agrees to pay its cash expenses, including the fees and
disbursements of its own advisors and counsel.
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10.14 Confidentiality. Seller agrees to, and shall cause its
agents, representatives, Affiliates and employees to: (i) treat and hold as
confidential (and not disclose or provide access to any Person to) all
information relating to trade secrets, processes, intellectual property
applications, product development, price, customer and supplier lists, pricing
and marketing plans, policies and strategies, details of client, customer,
subscriber and consultant contracts and agreements, operations methods, product
development techniques, business acquisition plans, new personnel acquisition
plans and all other confidential information with respect to the Business, (ii)
in the event that Seller or any such agent, representative, Affiliate or
employee becomes legally compelled to disclose any such information, provide
Buyer with prompt written notice of such requirement so that Buyer may seek a
protective order or other remedy or waive compliance with this Section 10.14,
(iii) in the event that such protective order or other remedy is not obtained,
or Buyer waives compliance with this Section 10.14, furnish only that portion of
such confidential information which is legally required to be provided and
exercise its best efforts to obtain assurances that confidential treatment will
be accorded such information, and (iv) promptly furnish (prior to, at, or as
soon as practicable following, the Closing) to Buyer any and all copies (in
whatever form or medium) of all such confidential information then in the
possession of Seller or any of its agents, representatives, Affiliates or
employees, and destroy any and all additional copies then in the possession of
Seller or any of its agents, representatives, Affiliates or employees of such
information and of any analyses, compilations, studies or other documents
prepared, in whole or in part, on the basis thereof; provided, however, that
this sentence shall not apply to any information that, at the time of
disclosure, is available publicly and was not disclosed in breach of this
Agreement by Seller or its agents, representatives, Affiliates or employees.
Seller agrees and acknowledges that remedies at law for any breach of its
obligations under this Section 10.14 are inadequate and that in addition thereto
Buyer shall be entitled to seek equitable relief, including injunction and
specific performance, in the event of any such breach.
10.15 Counterparts. This Agreement may be executed in multiple
counterparts, each of which shall be deemed an original, and it shall not be
necessary in making proof of this Agreement to produce or account for more than
one such counterpart.
10.16 No Solicitation or Negotiation. Seller immediately shall
cease and cause to be terminated all existing discussions, conversations,
negotiations and other communications with any Persons conducted heretofore with
respect to any proposal or offer to acquire or purchase all or any portion of
the Purchased Assets or to enter into any extraordinary business
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transaction involving or otherwise relating to the Business or the Purchased
Assets. Seller shall notify Buyer promptly if any such proposal or offer, or any
inquiry or other contact with any Person with respect thereto, is made and
shall, in any such notice to Buyer, indicate in reasonable detail the identity
of the Person making such proposal, offer, inquiry or contact and the terms and
conditions of such proposal, offer, inquiry or other contact. Seller agrees not
to, without the prior written consent of Buyer, release any Person from, or
waive any provisions of, any confidentiality or standstill agreement to which
Seller is a party.
10.17 Further Action. Each of the parties hereto shall use all
reasonable efforts to take, or cause to be taken, all appropriate action, do or
cause to be done all things necessary, proper or advisable under applicable
laws, and execute and deliver such documents and other papers, as may be
required to carry out the provisions of this Agreement and consummate and make
effective the transactions contemplated by this Agreement.
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IN WITNESS WHEREOF, the parties have executed, or caused to be
executed, this Agreement as of the date first above written.
OPTEL, INC.
By: /s/ MICHAEL E. KATZENSTEIN
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Name: Michael E. Katzenstein
Title: Vice President Legal Affairs,
General Counsel and Secretary
By: /s/ STEPHEN DUBE
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Name: Stephen Dube
Title: Vice President, Operations
INTERACTIVE CABLE SYSTEMS, INC.
By: /s/ KEVIN SCHOTTLAENDER
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Name: Kevin Schottlaender
Title: President
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ICS LICENSES, INC.
By:/s/ KEVIN SCHOTTLAENDER
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Name: Kevin Schottlaender
Title: President