▇▇▇ #▇▇▇▇▇▇▇.▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
ASSET PURCHASE AGREEMENT
BY AND BETWEEN
AMERICAN CABLE TV INVESTORS 5, LTD.
AND
▇▇▇▇▇▇ ACQUISITION PARTNERS, L.L.L.P.
DATED AS OF
NOVEMBER 29, 1996
TABLE OF CONTENTS
Page
ARTICLE I 1
1. Definitions 1
Accountants 1
Accounts Receivable 1
Adjustment Time 1
Affiliate 1
Alternative Transaction 1
Assets 2
Assumed Liabilities 2
Basic Services 2
Basic Subscriber Rate 2
Best of Seller's Knowledge 2
Business 2
Business Day 2
Buyer 2
Buyer Financial Statement 2
Buyer Interim Financial Statement 2
Cable Act 2
Closing 3
Closing Date 3
Code 3
Communications Act 3
Consents 3
Copyright Act 3
Deposit 3
Employer 3
Employer Plans 3
Encumbrance 3
Environmental Law 3
Equipment 3
Equivalent Basic Subscribers 4
ERISA 4
Escrow Agent 4
Escrow Agreement 4
Exchange Act 4
Excluded Assets 4
Excluded Liabilities 4
Exhibits 4
Extension 5
FCC 5
i
Final Adjustments Report 5
Franchise Areas 5
Franchise Fee 5
GAAP 5
General Partner 5
Governmental Authority 5
Governmental Permits 5
Hazardous Substances 5
Homes Passed 6
HSR Act 6
Indemnity Escrow Agent 6
Indemnity Escrow Agreement 6
Intangibles 6
IRS 6
Legal Requirement 6
Limited Partners 6
Management Agreement 6
Must Carry Election 6
1996 Financial Statements 7
Partnership Agreement 7
Pay TV 7
Permitted Encumbrances 7
Person 7
Preliminary Adjustments Report 7
Prime Rate 7
Purchase Price 7
Real Property 7
Regulatory Requirement 7
Required Consents 7
Retransmission Consent Agreements 8
Schedules 8
SEC 8
Securities Act 8
Seller 8
Seller Contracts 8
Seller's Escrow 8
Seller Financial Statements 8
System 8
Taking 8
Tax Return 8
Taxes 8
TCI 8
Telecom Act 9
Termination Date 9
WARN Act 9
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ARTICLE II 9
2. Purchase and Sale of Assets 9
2.1 Purchase and Sale of Assets 9
2.2 Time and Place of Closing 9
ARTICLE III 10
3. Consideration 10
3.1 Consideration for the Assets 10
3.2 Purchase Price Prorations 10
3.3 Purchase Price Adjustments 11
3.4 Preliminary and Final Settlements 12
3.5 Disputed Liabilities 14
3.6 Allocation of Purchase Price 14
ARTICLE IV 14
4. Assumed Liabilities and Excluded Assets 14
4.1 Assignment and Assumption 14
4.2 Excluded Assets 15
ARTICLE V 15
5. Representations and Warranties of Seller 15
5.1 Organization and Qualification 15
5.2 Authority and Validity 16
5.3 Consents and Approvals; No Violation 16
5.4 Complete Systems 16
5.5 Title 17
5.6 Real Property 17
5.7 Environmental Matters 17
5.8 Compliance with Law; Governmental Permits 17
5.9 Seller Contracts 18
5.10 Copyright Compliance 18
5.11 Financial Statements 19
5.12 Legal Proceedings 19
5.13 Employment Matters 19
5.14 System Information 21
5.15 Finders and Brokers 21
5.16 Tax Matters 21
5.17 Condition of Assets 21
5.18 Regulation of Rates 21
5.19 Insurance 21
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5.20 No Other Commitment to Sell 21
ARTICLE VI 22
6. Buyer's Representations and Warranties 22
6.1 Organization and Qualification 22
6.2 Authority and Validity 22
6.3 No Breach or Violation 22
6.4 Litigation 23
6.5 Financial Statements 23
6.6 Adequate Financing 23
6.7 Finders and Brokers 23
6.8 Qualification of Buyer 24
ARTICLE VII 24
7. Additional Covenants 24
7.1 Access to Premises and Records 24
7.2 Continuity and Maintenance of Operations; Financial
Statements; Correspondence 24
7.3 Employee Matters 26
7.4 Franchise Extension 26
7.5 Environmental Report 26
7.6 Consents 27
7.7 HSR Notification 27
7.8 Notification of Certain Matters 28
7.9 Risk of Loss; Condemnation 28
7.10 Adverse Changes 28
7.11 Action By Limited Partners 29
7.12 No Solicitation 29
7.13 Sales and Transfer Taxes and Fees 30
7.14 Commercially Reasonable Efforts 30
7.15 Title Insurance 30
7.16 FCC Form 626 31
7.17 Forms 394 31
ARTICLE VIII 31
8. Conditions Precedent to Obligations of Buyer 31
8.1 HSR Act 31
8.2 Governmental or Legal Action 31
8.3 Accuracy of Representations and Warranties. 31
8.4 Performance of Agreements 31
8.5 No Material Adverse Change 32
8.6 Consents and Extensions 32
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8.7 Transfer Documents 32
8.8 Opinions of Seller's Counsel 32
8.9 Opinion of Seller's FCC Counsel 32
8.10 Discharge of Liens 32
8.11 Noncompete Agreement 32
8.12 Additional Documents and Acts 32
8.13 Indemnity Escrow Agreement 33
8.14 1996 Financial Statements 33
8.15 Certificates 33
ARTICLE IX 33
9. Conditions Precedent to Obligations of Seller 33
9.1 HSR Act 33
9.2 Governmental or Legal Actions 33
9.3 Accuracy of Representations and Warranties 33
9.4 Performance of Agreements 33
9.5 Consents 34
9.6 Opinions of Buyer's Counsel 34
9.7 Limited Partner Approval 34
9.8 Payment of Purchase Price 34
9.9 Assumption of Liabilities 34
9.10 Additional Documents and Acts 34
9.11 Certificate 34
9.12 Fairness Opinion 34
9.13 Indemnity Escrow Agreement 34
9.14 Environmental Remediation 34
ARTICLE X 35
10. Termination 35
10.1 Events of Termination 35
10.2 Manner of Exercise 37
10.3 Effect of Termination 37
10.4 Liquidated Damages 37
ARTICLE XI 38
11. Nature and Survival of Representations, Warranties and
Agreements 38
11.1 Nature of Representations, Warranties and Agreements38
11.2 Survival of Representations and Warranties 38
11.3 Time Limitations 38
11.4 Limitations as to ▇▇▇▇▇▇ ▇▇
▇▇▇▇▇▇▇ ▇▇▇ ▇▇
▇
▇▇. Indemnification 39
12.1 Rights to Indemnification 39
12.2 Procedure for Indemnification. 39
12.3 Indemnity ▇▇▇▇▇▇ ▇▇
▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇
▇▇. Miscellaneous 40
13.1 Parties Obligated and Benefitted 40
13.2 Press Releases 41
13.3 Notices 41
13.4 Waiver 42
13.5 Captions 42
13.6 CHOICE OF LAW 42
13.7 Nonrecourse 42
13.8 Dispute Resolution 42
13.9 Power of Attorney 43
13.10 Terms 43
13.11 Rights Cumulative 43
13.12 Further Actions 43
13.13 Time 43
13.14 Expenses 43
13.15 Specific Performance 43
13.16 Schedules 44
13.17 Counterparts 44
13.18 Entire Agreement 44
13.19 Severability 44
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EXHIBITS
Exhibit A Geographic Areas of Seller's Business
Exhibit B Escrow Agreement
Exhibit C Form of Engagement Letter
Exhibit D Form for Opinion of Seller's Counsel
Exhibit E Form for Opinion of Buyer's Counsel
Exhibit F Form of Indemnity Escrow Agreement
Exhibit G Form of Opinion of Seller's FCC Counsel
Exhibit H Form of Noncompetition Agreement
SCHEDULES
Schedule 1.1 Subscriber Rates
Schedule 1.2 Consents
Schedule 1.3 Equipment
Schedule 1.4 Franchise Areas
Schedule 1.5 Governmental Permits
Schedule 1.6 Permitted Encumbrances
Schedule 1.7 Real Property
Schedule 1.8 Seller Contracts
Schedule 1.9 System
Schedule 4.2 Excluded Assets
Schedule 5.3(b) Violations of Partnership Agreement and
Legal Requirements
Schedule 5.4 Complete Systems
Schedule 5.5 Encumbrances on Seller's Title
Schedule 5.7 Environmental
Schedule 5.8 Compliance with Law
Schedule 5.12 Legal Proceedings
Schedule 5.13(c) Employment Matters
Schedule 5.13(d) Employees
Schedule 5.13(e) Employer Plans
Schedule 5.14 System Information
Schedule 5.16 Taxes
Schedule 6.3(a) Consents to be Obtained or Waived by
Closing Date
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ASSET PURCHASE AGREEMENT
This Asset Purchase Agreement ("Agreement") is made as
of the 29th day of November, 1996, by and between AMERICAN CABLE
TV INVESTORS 5, LTD., a Colorado limited partnership ("Seller"),
and ▇▇▇▇▇▇ ACQUISITION PARTNERS, L.L.L.P., a Colorado limited
liability limited partnership ("Buyer").
R E C I T A L S:
A. Seller is engaged in the business of providing
cable television service to subscribers in and around the
geographic areas set forth on Exhibit A.
B. Buyer desires to purchase and Seller desires to
sell the assets of Seller designated in this Agreement used or
held for use in connection with that business, upon the terms and
subject to the conditions set forth in this Agreement.
Accordingly, the parties agree as follows:
ARTICLE I
1. Definitions.
"Accountants" shall have the meaning set forth in
Section 3.4(d).
"Accounts Receivable" shall mean all accounts
receivable of Seller representing amounts earned by Seller in
connection with its operation of the Business through the
Adjustment Time.
"Adjustment Time" shall have the meaning set forth in
Section 3.2.
"Affiliate" shall mean, with respect to any Person, any
other Person controlling, controlled by or under common control
with such Person, with "control" for such purpose meaning the
possession, directly or indirectly, of the power to direct or
cause the direction of the management and policies of a Person,
whether through the ownership of voting securities or voting
interests, by contract or otherwise.
"Alternative Transaction" shall mean any transaction
which could result in the transfer of control over, or ownership
of, all or substantially all the Assets, including (a) any merger
or consolidation of Seller in which another Person or group of
Persons acquires 50% or more of the partnership interests in
Seller or the equity interests of the surviving entity, as the
case may be, (b) any tender offer or exchange offer for
partnership interests in Seller which, if
consummated, would result in a Person or group of Persons (other
than the existing partners in such entities as of the date of this Agreement)
owning 50% or more of the partnership interests in Seller or (c)
any sale or other disposition of all or substantially all the Assets.
"Assets" shall mean all properties, privileges, rights,
interests and claims, real and personal, tangible and intangible,
of every type and description that are owned, leased, used or
held for use in the Business in which Seller has any right, title
or interest or in which Seller acquires any right, title or inter
est on or before the Closing Date, including Accounts Receivable,
Governmental Permits, Intangibles, Seller Contracts, Equipment
and Real Property but excluding any Excluded Assets and any
Assets disposed of by Seller in the ordinary course of business
prior to the Closing Date.
"Assumed Liabilities" shall have the meaning set forth
in Section 4.1.
"Basic Services" shall mean the lowest tier of cable
television programming sold to subscribers of the System for
which a subscriber served by the System pays a fixed monthly fee
to Seller, excluding Expanded Basic Services, Pay TV and any
charges for additional outlets and installation fees and revenues
derived from the rental of converters, remote control devices and
other like charges for equipment.
"Basic Subscriber Rate" shall mean, for the System, the
predominant monthly fees and charges derived from the provision
of Basic Services to single family households, as of June 30,
1996, as set forth on Schedule 1.1.
"Best of Seller's Knowledge" shall mean the actual
knowledge of ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇ and ▇▇▇▇▇ ▇▇▇▇▇▇.
"Business" shall mean the cable television business conducted
by Seller on the date of this Agreement through the System
in and around the Franchise Areas.
"Business Day" shall mean any day other than Saturday,
Sunday or a day on which banking institutions in Denver, Colorado
or New York, New York are required or authorized to be closed.
"Buyer" shall mean the Person identified as such in the
preamble to this Agreement.
"Buyer Financial Statement" shall have the meaning set
forth in Section 6.5.
"Buyer Interim Financial Statement" shall have the
meaning set forth in Section 6.5.
"Cable Act" shall have the meaning set forth in Section 5.8.
"Closing" shall mean the consummation of the transactions
contemplated by this
2
Agreement, as described in Article II.
"Closing Date" shall mean the date on which the Closing occurs.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Communications Act" shall have the meaning set forth
in Section 5.8(c).
"Consents" shall mean any registration with, consent or
approval of, notice to, or action by any Person or Governmental
Authority required to permit the transfer of the Assets to Buyer
or permit Seller to perform any of its other obligations under
this Agreement, all of which are set forth on Schedule 1.2.
"Copyright Act" shall mean Title 17 of the United
States Code, as amended, and all rules and regulations
thereunder.
"Deposit" shall have the meaning set forth in Section 3.1.
"Employer" shall have the meaning set forth in Section 5.13(a).
"Employer Plans" shall have the meaning set forth in
Section 5.13(e).
"Encumbrance" shall mean any mortgage, lien, security
interest, security agreement, conditional sale or other title
retention agreement, limitation, pledge, option, charge,
assessment, restrictive agreement, restriction, encumbrance,
adverse interest, restriction on transfer or any exception
to or defect in title or other ownership interest (including
reservations, rights of way, possibilities of reverter, encroach
ments, easements, rights of entry, restrictive covenants, leases
and licenses).
"Environmental Law" shall mean any Legal Requirement
relating to pollution or protection of public health, safety
or welfare or the environment, including those relating to
emissions, discharges, releases or threatened releases of
Hazardous Substances into the environment (including ambient
air, surface water, ground water or land), or otherwise relating
to the manufacture, processing, distribution, use, treatment,
storage, disposal, transport or handling of Hazardous Substances.
"Equipment" shall mean all electronic devices, trunk
and distribution coaxial and optical fiber cable, amplifiers,
power supplies, conduit, vaults and pedestals, grounding and pole
hardware, subscriber's devices (including converters, encoders,
transformers behind television sets and fittings), headend
hardware (including origination, earth stations, transmission and
distribution system), test equipment, vehicles and other tangible
personal property owned, leased, used or held for use by Seller
in connection with the Business, including the items described on
Schedule 1.3.
"Equivalent Basic Subscribers" shall mean, with respect
to each Franchise Area, as of any date, the number of active
customers for Basic Services either in a single household, a
3
commercial establishment or a multi-unit dwelling (including a
hotel unit); provided, however, that the number of customers in a
commercial establishment or multi-unit dwelling that obtain
service on a "bulk-rate" basis shall be determined for each
Franchise Area by dividing the gross bulk-rate ▇▇▇▇▇▇▇▇ for Basic
Services and Expanded Basic Services (but excluding ▇▇▇▇▇▇▇▇ from
a la carte tiers or premium services, installation or other non-
recurring charges, converter rental or any outlet or connection
other than the first outlet or connection, pass-through charges
for sales taxes, line-itemized franchise fees, fees charged by
the FCC and the like) attributable to such commercial
establishment or multi-unit dwelling during the most recent
billing period ended prior to the date of calculation (but
excluding ▇▇▇▇▇▇▇▇ in excess of a single month's charge) by the
rate charged at the date of determination to individual
households for the highest level of Basic Services and Expanded
Basic Services offered in the Franchise Area, such rate not to be
less than the rate for such Franchise Area set forth on Schedule
1.1 (excluding ▇▇▇▇▇▇▇▇ from a la carte tiers or premium
services, installation or other non-recurring charges, converter
rental, pass-through charges for sales taxes, line-itemized
franchise fees, fees charged by the FCC and the like). For
purposes of this definition, (i) an "active customer" shall mean,
as of any date, any person, commercial establishment or multi-
unit dwelling that is paying for and receiving Basic Services
from the System in that Franchise Area who has an account that is
not more than 60 days past due (except for past due amounts of
$10.00 or less, provided such account is otherwise current) but
excluding any person, commercial establishment or multi-unit
dwelling that as of the date of calculation has not paid in full
the charges for at least two months of the services ordered and
(ii) the number of days a customer account is past due shall be
calculated from the first day of the period for which the
applicable billing relates.
"ERISA" shall have the meaning set forth in Section 5.13(b).
"Escrow Agent" shall have the meaning set forth in Section 3.1.
"Escrow Agreement" shall have the meaning set forth in
Section 3.1.
"Exchange Act" shall mean the Securities and Exchange
Act of 1934, as amended.
"Excluded Assets" shall have the meaning set forth in
Section 4.2.
"Excluded Liabilities" shall have the meaning set forth
in Section 4.1(b).
"Exhibits" shall mean the exhibits prepared and
delivered pursuant to this Agreement.
"Expanded Basic Services" shall mean any video
programming provided over the System, regardless of service tier,
other than Basic Services, any new product tier and video
programming offered on a per channel or per program basis, for
which a subscriber served by the System pays a fixed monthly fee
to Seller, excluding Pay TV and any charges for additional
outlets and installation fees and revenues derived from the
rental of converters, remote control devices and other like
charges for equipment.
4
"Extension" shall have the meaning set forth in Section 7.4.
"FCC" shall have the meaning set forth in Section 5.8(c).
"Final Adjustments Report" shall have the meaning set
forth in Section 3.4(b).
"Franchise Areas" shall mean those areas in which
Seller is authorized under one or more Governmental Permits
issued by the applicable franchising authorities to provide cable
television service to subscribers located in such areas through
the ownership and operation of the System, as set forth on
Schedule 1.4.
"Franchise Fee" shall mean the percentage of Seller's
gross revenues to be paid to a Governmental Authority as
specified in the applicable franchise agreement.
"GAAP" shall mean generally accepted accounting
principles as in effect in the United States of America on the
date of this Agreement.
"General Partner" shall mean IR-TCI Partners V, L.P.,
the general partner of Seller.
"Governmental Authority" shall mean any of the
following: (a) the United States of America; (b) any state,
commonwealth, territory or possession of the United States of
America and any political subdivision thereof (including
counties, municipalities and the like); or (c) any agency,
authority or instrumentality of any of the foregoing, including
any court, tribunal, department, bureau, commission or board.
"Governmental Permits" shall mean all franchises,
authorizations, permits, licenses, easements, registrations,
leases, variances and similar rights obtained from any
Governmental Authority which authorize or are required in
connection with the operation of the Business, including those
described on Schedule 1.5.
"Hazardous Substances" shall mean any pollutant,
contaminant, chemical, industrial, toxic, hazardous or noxious
substance or waste which is regulated by any Governmental
Authority, including (a) any petroleum or petroleum compounds
(refined or crude), flammable substances, explosives, radioactive
materials or any other materials or pollutants which pose a
hazard or potential hazard to the Real Property or to Persons
in or about the Real Property or cause the Real Property to be
in violation of any laws, regulations or ordinances of federal,
state or applicable local governments, (b) asbestos or any
asbestos-containing material of any kind or character,
(c) polychlorinated biphenyls ("PCBs"), as regulated by the
Toxic Substances Control Act, 15 U.S.C. 2601 et seq.,
(d) any materials or substances designated as "hazardous
substances" pursuant to the Clean Water Act, 33 U.S.C. 1251
et seq., (e) "economic poison," as defined in the Federal
Insecticide, Fungicide and Rodenticide Act, 7 U.S.C. 135
et seq., (f) "chemical substance," "new chemical substance" or
"hazardous chemical substance or mixture" pursuant to the Toxic
Substances Control Act,
5
referred to above, (g) "hazardous substances" pursuant to the Comprehensive
Environmental Response,Compensation, and Liability Act, 42 U.S.C. 9601 et seq.
and (h) "hazardous waste" pursuant to the Resource Conservation and
Recovery Act, 42 U.S.C. 6901 et seq.
"Homes Passed" shall mean, with respect to the System
and as of June 30, 1996, the total of (a) the number of single
family residences capable of being serviced without further line
construction, (b) the number of units in multi-family residential
buildings capable of being serviced without further line
construction and not then governed by bulk-service agreements and
(c) the number of bulk service agreements regardless of the
number of units serviced or the equivalent billing units.
"HSR Act" shall have the meaning set forth in Section 7.6.
"Indemnity Escrow Agent" shall mean The Chase Manhattan Bank.
"Indemnity Escrow Agreement" shall mean the Indemnity
Escrow Agreement to be entered into at Closing among Buyer,
Seller and the Indemnity Escrow Agent, in the form attached as
Exhibit F.
"Intangibles" shall mean all general intangibles,
including subscriber lists, claims (excluding any claims relating
to Excluded Assets), patents, copyrights and goodwill, if any,
owned, used or held for use by Seller in connection with the
Business.
"IRS" shall mean the Internal Revenue Service.
"Legal Requirement" shall mean any statute, ordinance,
code, law, rule, regulation, order or other requirement, standard
or procedure enacted, adopted or applied by any Governmental
Authority, including judicial decisions applying common law or
interpreting any other Legal Requirement.
"Limited Partners" shall mean the Persons who own or
hold units of limited partnership interests in Seller.
"Management Agreement" shall mean the agreement related
to the operation of the System and the other cable systems owned
by Seller between Seller and TCI Cablevision Associates, Inc.
(formerly known as ▇▇▇▇▇▇▇ & Associates, Inc.).
"Must Carry Election" shall mean the exercise by WXMT
of its must carry rights pursuant to Section 4 of the Cable Act.
"1996 Financial Statements" shall have the meaning set
forth in Section 7.2.
"Partnership Agreement" shall mean the Amended and
Restated Limited Partnership Agreement of Seller, dated as of
January 1, 1987, by and between IR-TCI Partners V, L.P. (formerly
known as IR-▇▇▇▇▇▇▇ Partners V, L.P.), as the general partner,
and ▇▇▇▇▇ ▇.
6
Beyth, as the initial limited partner.
"Pay TV" shall mean premium programming services
selected by and sold to subscribers of the System for monthly
fees in addition to the fee for Basic Services.
"Permitted Encumbrances" shall mean the following:
(a) liens for taxes, assessments and governmental charges not yet
due and payable; (b) zoning laws and ordinances and similar Legal
Requirements; (c) rights reserved to any Governmental Authority
to regulate the affected property; (d) as to leased Assets,
interests of lessors and Encumbrances affecting the interests of
the lessors; (e) the Encumbrances described on Schedule 1.6; and
(f) any liens, easements, rights-of-way, servitudes, permits,
leases, restrictions and imperfections or irregularities in title
that do not in any material respect, individually or in the
aggregate, affect or impair the value or use of the affected
Asset as it is currently being used by Seller.
"Person" shall mean any natural person, corporation,
partnership, trust, unincorporated organization, association,
limited liability company, Governmental Authority or other
entity.
"Preliminary Adjustments Report" shall have the meaning
set forth in Section 3.4(a).
"Prime Rate" shall mean the rate of interest quoted
from time to time in The Wall Street Journal as the prime rate.
"Purchase Price" shall have the meaning set forth in
Section 3.1.
"Real Property" shall mean all Assets consisting of
interests in real property (including, to the extent applicable,
improvements, fixtures and appurtenances), including the fee and
leasehold interests described on Schedule 1.7.
"Regulatory Requirement" shall mean any filing required
pursuant to the Securities Act, the Exchange Act, the HSR Act,
state securities laws (including, but not limited to, state "blue
sky" laws) and state corporate laws (including, but not limited
to, takeover statutes).
"Required Consents" shall mean the Consents designated
as such on Schedule 1.2 by an asterisk.
"Retransmission Consent Agreements" shall mean the
retransmission consent agreements with respect to the carriage of
broadcast television signals between TCI Cable Management and
each of WSMV and WTVF.
"Schedules" shall mean the schedules prepared and
delivered pursuant to this Agreement.
7
"SEC" shall mean the Securities and Exchange Commission.
"Securities Act" shall mean the Securities Act of 1933,
as amended.
"Seller" shall mean the Person indicated as such in the
preamble to this Agreement.
"Seller Contracts" shall mean all contracts, agreements
and leases, other than those that are Governmental Permits, to
which Seller is a party and pertain to the ownership, operation
or maintenance of the Assets or the Business, including those
described on Schedule 1.8.
"Seller's Escrow" shall have the meaning set forth in
Section 3.1.
"Seller Financial Statements" shall have the meaning
set forth in Section 5.11.
"System" shall mean a cable television reception and
distribution system operated in the conduct of the Business,
consisting of one or more headends, subscriber drops and
associated electronic and other equipment, and which is, or is
capable of being without modification, operated as an independent
system without interconnections to other systems as set forth on
Schedule 1.9.
"Taking" shall have the meaning set forth in Section 7.7(b).
"Tax Return" shall mean any return, report, information
return or other document (including any related or supporting
information) filed or required to be filed with any taxing
authority in connection with the determination, assessment,
collection, administration or imposition of any Taxes.
"Taxes" shall mean all taxes, charges, fees, liens,
imposts, duties or other assessments including, but not limited
to, income, withholding, excise, employment, property, sales,
franchise, use and gross receipt taxes, imposed by the United
States or any state, county, local or foreign government or any
subdivision thereof. Such term shall also include any interest,
penalties or additions attributable to such assessments.
"TCI" shall mean TCI Communications, Inc., a Delaware
corporation.
"Telecom Act" shall have the meaning set forth in
Section 5.8(e).
"Termination Date" shall mean June 27, 1997; provided,
however, Seller and Buyer shall each have the right, upon five
days notice to the other, to extend the Termination Date to a
date designated in such notice, which date shall in no event be
later than August 26, 1997; provided further, Seller shall have
the right, upon five days notice to Buyer, to further extend the
Termination Date to a date designated in such notice, which date
shall in no event be later than November 24, 1997.
8
"WARN Act" shall mean the Worker Adjustment and
Retraining Notification Act.
ARTICLE II
2. Purchase and Sale of Assets.
2.1 Purchase and Sale of Assets. Subject to the
satisfaction of the conditions to each party's obligations set
forth in Articles VIII and IX (or, with respect to any condition
not satisfied, the waiver thereof by the party or parties for
whose benefit the condition exists), Seller shall sell, assign,
transfer and deliver to Buyer all of Seller's right, title and
interest in, and Buyer shall purchase, acquire, accept and pay
for, the Assets free and clear of and expressly excluding all
debts, liabilities, obligations, taxes, liens and encumbrances
(other than Permitted Encumbrances) of any kind, character or
description, whether accrued, absolute, contingent or otherwise
(and whether or not reflected or reserved against in the balance
sheets, books of account and records of the Seller), except as
otherwise expressly provided in Section 4.1 hereof.
2.2 Time and Place of Closing. Subject to the terms
and conditions of this Agreement, the Closing shall take place at
10:00 a.m. New York City time on a date specified by notice (the
"Closing Notice") from Seller to Buyer (but shall not in any
event be prior to the satisfaction or waiver of the conditions to
Closing as set forth in Articles VIII and IX), in New York, New
York at the offices of ▇▇▇▇, Scholer, Fierman, ▇▇▇▇ & Handler,
LLP, or at such other time or place as the parties may agree;
provided, however, the date specified in the Closing Notice shall
not be less than 10 nor more than 30 days after the date the
Closing Notice is given; provided, further that if the
Termination Date would otherwise occur within such 10-day period,
the Termination Date shall be extended to the date which is 10
days after the date the Closing Notice is given (or the next
Business Day if such date is not a Business Day).
ARTICLE III
3. Consideration.
3.1 Consideration for the Assets. The aggregate
consideration for the Assets shall consist of (i) an amount equal
to $19,750,000, subject to proration as set forth in Section 3.2
and adjustment as set forth in Section 3.3 (the "Purchase Price")
and (ii) the assumption by Buyer of the Assumed Liabilities. The
Purchase Price shall be payable as follows: (a) $493,750 (such
amount, as increased by any earnings thereon and as reduced by
any disbursements or losses on investments, the "Deposit"),
payable concurrently with the execution and delivery of this
Agreement in cash by means of wire or interbank transfer in
immediately available funds to the trust account of ▇▇▇▇,
Scholer, Fierman, ▇▇▇▇ & Handler, LLP (the "Escrow Agent"), to be
held, administered and distributed for the respective benefits of the
9
parties hereto in accordance with the terms of this Agreement
and the Escrow Agreement among Seller, Buyer and the Escrow Agent
dated the date of this Agreement (the "Escrow Agreement") in the
form set forth as Exhibit B attached hereto and (b) $19,750,000
payable by Buyer to Seller, or Seller's designee, at Closing in
cash by means of wire or interbank transfer in immediately
available funds, reduced by the amount, if any, of the Deposit
actually released to Seller, or Seller's designee. At Closing,
Seller and Buyer shall direct the Escrow Agent to release the
Deposit to Seller, or Seller's designee, in accordance with the
terms of the Escrow Agreement. Simultaneously with the payment
of the Purchase Price, Seller shall deposit $493,750 (such
amount, as increased by any earnings thereon and as reduced by
any disbursements or losses on investments, "Seller's Escrow") in
cash by means of wire or interbank transfer of immediately
available funds to the account of the Indemnity Escrow Agent, to
be held, administered, and distributed in accordance with the
terms of this Agreement and the Indemnity Escrow Agreement.
3.2 Purchase Price Prorations. (a) All revenues
(other than Accounts Receivable being purchased by Buyer
hereunder) and all expenses arising from the operations of the
Business up until 12:01 a.m. on the Closing Date (the "Adjustment
Time"), including, but not limited to, pole rental fees, rental
or other charges payable in respect of the Seller Contracts,
sales and use taxes payable with respect to cable television
service and equipment, which shall not include sales or use taxes
arising out of the consummation of the transaction contemplated
hereunder, power and utility charges, real and personal property
taxes and assessments levied against the Assets, applicable
franchise, copyright or other fees, sales and service charges,
wages, payroll taxes and payroll expenses (including accrued
vacation pay except to the extent a Purchase Price adjustment in
Buyer's favor is made under Section 3.3) of employees of Employer
who primarily perform services in connection with the operation
of the Business who are employed by Buyer as of the Closing, and
other prepaid and deferred items shall be prorated between Buyer
and Seller as of the Adjustment Time in accordance with GAAP and
the principle that Seller shall receive all revenues (other than
Accounts Receivable being purchased by Buyer hereunder) and shall
be responsible for all expenses, costs and liabilities allocable
to the period prior to the Adjustment Time and Buyer shall
receive all revenues and shall be responsible for all expenses,
costs and liabilities allocable to the period after the
Adjustment Time.
(b) The amount of each item of revenue prorated
under subsection (a) above, to a party which has not received,
and under the terms of this Agreement will not receive, such
revenue shall be deemed a charge against the other party. The
amount of any item of cost or expense prorated under subsection
(a) above to a party which has not paid, and under the terms of
this Agreement will not pay, such cost or expense shall be deemed
a charge against such party. If the aggregate charges allocated
to Seller as set forth in this Section 3.2(b) exceed the
aggregate charges allocated to Buyer as set forth in this Sec
tion 3.2(b), the Purchase Price shall be decreased by an amount
equal to the difference between the aggregate charges allocated
to Seller and the aggregate charges allocated to Buyer. If the
aggregate charges allocated to Buyer as set forth in this Sec
tion 3.2(b) exceed the aggregate charges allocated to Seller as
set forth in this Section 3.2(b), the Purchase Price shall be
increased by an amount equal to the difference between the
aggregate charges allocated to Buyer and the aggregate charges
allocated to Seller.
3.3 Purchase Price Adjustments. (a) The Purchase
Price shall be
10
increased by an amount equal to the aggregate of the following:
(i) (a) 95% of the face amount of all Accounts
Receivable which, as of the Adjustment Time, are outstanding for
a period of not more than 30 days after their respective invoice
dates and (b) 85% of the face amount of all Accounts Receivable
which, as of the Adjustment Time, are outstanding for a period of
more than 30 days but not more than 60 days after their
respective invoice dates; and
(ii) to the extent not included in the prorations
to the Purchase Price as set forth in Section 3.2, the dollar
amount of all advance payments to, or deposits with, third
parties relating to the Business which, as of the Closing Date,
are for the account of Seller or are security for Seller's
performance of its obligations under any agreement relating to
the Business or any Assets, including, but not limited to,
deposits made with lessors and deposits for utilities.
(b) The Purchase Price shall be decreased by an
amount equal to the aggregate of the following:
(i) the dollar amount of the remaining balance,
as of the Closing Date, of all advance payments to, or monies of
third parties on deposit with, Seller relating to the Business,
including advance payments and deposits by customers served by
the Business for converters, encoders, decoders, cable service
and related sales;
(ii) the dollar amount of accrued vacation
pay of employees of Employer identified on Schedule 5.13(d) who
are employed by Buyer as of the Closing;
(iii) if, as of the Closing Date, the
aggregate number of Equivalent Basic Subscribers served by the
System is less than 11,500, an amount equal to (x) the difference
between 11,500 and the aggregate number of Equivalent Basic
Subscribers served by the System as of the Closing Date times
(y) $1,717; and
(iv) 100% of the dollar amount of any
deductibles paid, or to be paid, under insurance policies for
which insurance proceeds are payable to Buyer pursuant to Section
7.9(a).
(c) If the Purchase Price is decreased pursuant
to Section 3.3(b)(iii), Seller shall deliver to Buyer at Closing
a list of each of the System's subscribers who, as of the Closing
Date, have not qualified as an Equivalent Basic Subscriber
because they have not paid in full at least two months of the
services ordered. The Purchase Price shall be increased by an
amount equal to (x) the number of subscribers on such list who,
as of the date which corresponds to the Closing Date for the
month following the month during which the Closing occurs,
qualify as Equivalent Basic Subscribers, times (y) $1,717;
provided, that, the amount by which the Purchase Price is
increased pursuant to this Section 3.3(c) shall not exceed the
amount by which the Purchase Price is decreased pursuant to
Section 3.3(b)(iii). Any increase to the Purchase Price pursuant
to this Section 3.3(c) shall be reflected as an adjustment to the
Purchase Price on the Final Adjustments Report.
11
3.4 Preliminary and Final Settlements. Preliminary
and final adjustments to the Purchase Price will be determined as
follows:
(a) At least five Business Days prior to the
Closing Date, Seller will deliver to Buyer a report (the
"Preliminary Adjustments Report"), prepared in good faith and on
a reasonable basis, setting forth in reasonable detail a pro
forma determination as of the Closing Date of the prorations set
forth in Section 3.2 and the adjustments set forth in Section 3.3
(other than Section 3.3(c)). The Preliminary Adjustments Report
shall be certified by an authorized officer of the general
partner of the General Partner to have been prepared in good
faith and on a reasonable basis.
(b) Within 60 days after the Closing Date,
Seller will deliver to Buyer a report (the "Final Adjustments
Report"), prepared in good faith and on a reasonable basis,
setting forth in reasonable detail the final determination of the
prorations set forth in Section 3.2 and the adjustments set forth
in Section 3.3 (including Section 3.3(c)). The Final Adjustments
Report shall make such changes to the Preliminary Adjustments
Report as are necessary to cover those prorations or adjustments
which (i) were estimated or were not calculated as of the Closing
Date in the Preliminary Adjustments Report and (ii) were adjusted
in the Preliminary Adjustments Report and which require
subsequent adjustment. The Final Adjustments Report shall be
certified by an authorized officer of the general partner of the
General Partner to be true, complete and correct as of the date
it is delivered.
Buyer shall provide Seller with reasonable access to
all records which Buyer has in its possession and which are
necessary for Seller to prepare the Final Adjustments Report.
(c) Within 30 days after receipt of the Final
Adjustments Report, Buyer shall review the Final Adjustments
Report and notify Seller whether or not Buyer accepts all or any
of the prorations and adjustments set forth on the Final
Adjustments Report. If Buyer accepts the Final Adjustments
Report with respect to all prorations and adjustments contained
therein, Buyer or Seller, as appropriate, shall, within five
Business Days of such acceptance, make the following payments:
(i) if the Purchase Price calculated based on the Final
Adjustments Report is greater than the Purchase Price calculated
based on the Preliminary Adjustments Report, Buyer shall pay such
difference to Seller in cash by wire or interbank transfer in
immediately available funds, or (ii) if the Purchase Price
calculated based on the Final Adjustments Report is less than the
Purchase Price calculated based on the Preliminary Adjustments
Report, Seller shall pay such difference to Buyer in cash by wire
or interbank transfer in immediately available funds, and such
amounts to be paid by Seller shall not be subject to the
limitations of Article XII or reduce the Seller's Escrow;
provided that Buyer may, at its option, seek payment of such
amounts from Seller's Escrow. In the event any payment required
by this Section 3.4(c) is not made when due, Seller or Buyer, as
appropriate, shall make the payment required by this Sec
tion 3.4(c) with interest accruing from the date such payment was
due at the Prime Rate plus 5%.
(d) If Buyer in good faith objects to any
prorations and/or adjustments
12
set forth on the Final Adjustments Report, Buyer shall give notice thereof
to Seller within 30 days after receipt of the Final Adjustments Report,
specifying in reasonable detail the nature and extent of such disagreement
and Buyer and Seller shall have a period of 30 days from Seller's
receipt of such notice in which to resolve such disagreement. If
such notice of objection is not received by Seller within 30 days
after receipt of the Final Adjustments Report, it shall be deemed
that Buyer has accepted the Final Adjustments Report with respect
to all items set forth therein and within three Business Days
after the expiration of such 30-day period Buyer or Seller, as
appropriate, shall make the payments described in Section 3.4(c).
Any disputed amounts which cannot be agreed to by the parties
within 30 days from Seller's receipt of Buyer's notice of
objection to any of the adjustments set forth in the Final
Adjustments Report shall be determined by a nationally recognized
accounting firm selected by Seller and Buyer which has not
regularly rendered accounting or auditing services to Seller or
Buyer or any of their respective Affiliates within two years
prior to the date of this Agreement (the "Accountants") in
accordance with the engagement letter set forth on Exhibit C
attached hereto with such changes as may be requested by the
Accountants and approved by Seller and Buyer. The engagement of
and the determination by the Accountants shall be binding on and
shall be nonappealable by Seller and Buyer. In the event that
(a) the Purchase Price calculated based on the determination by
the Accountants is less than the Purchase Price calculated based
on the Final Adjustments Report, the fees and expenses payable to
the Accountants shall be paid by Seller or (b) the Purchase Price
calculated based on the determination of the Accountants is
greater than or equal to the Purchase Price calculated based on
the Final Adjustments Report, the fees and expenses payable to
the Accountants shall be paid by Buyer. Within five Business
Days after the determination by the Accountants of all disputed
prorations and/or adjustments, Buyer or Seller, as appropriate,
shall make the payments described in Section 3.4(c) as if the
determinations of the Accountants were included in the Final
Adjustments Report. In the event any payment required by this
Section 3.4(d) is not made when due, Seller or Buyer, as
appropriate, shall make the payment required by this Sec
tion 3.4(d) with interest accruing from the date such payment was
due at the Prime Rate plus 5%.
3.5 Disputed Liabilities. If a proration or
adjustment to the Purchase Price is made in Buyer's favor for any
liability assumed by Buyer but is in good faith being contested
by Seller as of the Closing Date, and if Buyer is relieved of
this liability, Buyer shall pay to Seller or its designee in cash
(by means of wire or interbank transfer in immediately available
funds) an amount equal to the unpaid portion of this liability
within five Business Days after the date Buyer is relieved of
this liability. In the event any payment required by this Sec
tion 3.5 is not made by Buyer when due, Buyer shall make the
payment required by this Section 3.5 with interest accruing from
the date such payment was due at the Prime Rate plus 5%.
3.6 Allocation of Purchase Price. The Purchase Price
shall be allocated among the classes of assets set forth in Sec
tion 1060 of the Code and the regulations thereunder in the
manner agreed to by the parties prior to the Closing. After the
Closing, Seller shall cooperate with Buyer in the preparation,
execution and filing with the IRS of all information returns and
supplements thereto required to be filed by the parties under Sec
tion 1060 of the Code relating to the allocation of such
consideration, and Seller and Buyer agree to file Form 8594 (or
any substitute therefor) when required by applicable law.
13
ARTICLE IV
4. Assumed Liabilities and Excluded Assets.
4.1 Assignment and Assumption. (a) Seller will
assign, and Buyer will assume and perform as they become due, for
all periods on or after the Adjustment Time (and prior to the
Adjustment Time with respect to liabilities and obligations for
which a Purchase Price Adjustment is made in Buyer's favor under
Section 3.3), the following liabilities and obligations of Seller
(collectively, the "Assumed Liabilities"): (A) Seller's
obligations to subscribers of the Business for (i) refunds of
subscriber deposits held by Seller as of the Closing Date in
respect of which a Purchase Price adjustment is made in Buyer's
favor under Section 3.3(b), (ii) refunds of subscriber advance
payments held by Seller as of the Closing Date for services to be
rendered by the System after the Closing Date, in respect of
which a Purchase Price adjustment is made in Buyer's favor under
Section 3.3(b) and (iii) the delivery of cable television service
to customers of the System after the Closing Date in a manner
consistent with past practice; (B) obligations and liabilities in
respect of which a Purchase Price adjustment in Buyer's favor is
made under Section 3.3 including, but not limited to, accrued but
unpaid real and personal property taxes related to the Assets
which correspond to a period of time prior to the Adjustment
Time, expenses accrued under Governmental Permits and Seller
Contracts which correspond to a period of time prior to the
Adjustment Time and certain accrued vacation pay; (C) obligations
accruing and relating to periods on or after the Adjustment Time
under Governmental Permits and Seller Contracts; (D) any taxes
accrued on or after the Adjustment Time in connection with the
ownership of the Assets and the ownership of the Assets and the
operation of the Business; and (E) all other liabilities of
Seller arising out of or relating to the conduct of the Business
and incurred in the ordinary course of business.
(b) Except for the Assumed Liabilities, Buyer
will not assume or have any responsibility for any liabilities or
obligations of Seller which arise out of, result from, or relate
to, (i) the Excluded Assets or (ii) the conduct of the Business
prior to the Adjustment Time (except to the extent a Purchase
Price adjustment in Buyer's favor is made under Section 3.3(b))
(collectively, the "Excluded Liabilities"). Seller shall
indemnify Buyer, in accordance with Article XII, against any
claim that Buyer is liable for the Excluded Liabilities.
4.2 Excluded Assets. Excluded from the assets which
will be transferred from Seller to Buyer pursuant to this
Agreement (collectively, the "Excluded Assets") are all Seller's
right, title and interest in, to and under the following:
(a) all programming agreements relating to the Business; (b) all
insurance policies and rights and claims thereunder (except as
otherwise provided in Section 7.7(a)); (c) all bonds, letters of
credit, surety instruments and other similar items and any cash
surrender value thereunder; (d) all cash, cash equivalents and
securities; (e) all trademarks, trade names, service marks,
service names, logos and similar proprietary rights used in the
Business; provided, that Buyer shall have the right to use such
proprietary rights for the period commencing on the Closing Date
and expiring 90 days after the Closing Date; (f) any contracts,
licenses, authorizations, agreements or commitments which are not
assumed by Buyer pursuant to this Agreement; (g) the Management
Agreement; (h) any asset
14
or properties owned by Seller that are not used in the Business; (i) all
subscriber deposits and advance payments held by Seller as of the Closing
Date in connection with the operation of the Business for which a Purchase
Price adjustment is made in Buyer's favor under Section 3.3(b); (j) all
claims, rights and interests in and to any refund for federal,
state or local franchise, income or other taxes or fees
(including, but not limited to, copyright fees) of any nature
relating to the operation of the Business prior to the Closing
Date; (k) the account books of original entry, general ledgers
and financial records used in connection with the Business,
provided that for a period of three years after the Closing Date,
Buyer shall have access to and the right to copy, at its expense,
during usual business hours upon reasonable prior notice to
Seller, portions of such books and records that are relevant to
Buyer's ownership and operation of the System; (l) the
retransmission consent agreements relating to the carriage of
WKRN and WZTV; and (m) those properties, rights and interests set
forth on Schedule 4.2.
ARTICLE V
5. Representations and Warranties of Seller.
Seller represents and warrants to Buyer as follows:
5.1 Organization and Qualification. Seller is a
limited partnership duly organized, validly existing and in good
standing under the laws of the state of Colorado and has all
requisite partnership power and authority to own, lease and use
the Assets as they are currently owned, leased and used and to
conduct the Business as it is currently conducted. Seller is
duly qualified or licensed to do business and is in good standing
under the laws of Tennessee.
5.2 Authority and Validity. Seller has full
partnership power and authority to execute and deliver this
Agreement and to consummate the transactions contemplated hereby.
The execution and delivery of this Agreement and the consummation
of the transactions contemplated hereby by Seller have been duly
and validly authorized by all necessary action on the part of
Seller (other than, with respect to the sale of the Assets, the
approval of such transaction contemplated by this Agreement by
the Limited Partners). The General Partner has taken all
necessary action so that it may recommend that the Limited
Partners approve the transactions contemplated by this Agreement.
This Agreement has been duly and validly executed and delivered
by Seller and constitutes a valid and binding obligation of
Seller enforceable in accordance with its terms. Except for the
approval by the Limited Partners, no further partnership action
on the part of Seller is required in connection with the
consummation of the transactions contemplated by this Agreement.
5.3 Consents and Approvals; No Violation. (a) Ex
cept for (i) the Consents, (ii) the consent of the Limited
Partners with respect to the transactions contemplated by this
Agreement and (iii) the Regulatory Requirements, no consent,
waiver, approval or authorization of, or filing, registration or
qualification with, any Governmental Authority is required to be
made or obtained by Seller in connection with the execution,
delivery and performance of this Agreement by Seller.
15
(b) Except as set forth on Schedule 5.3(b), the
execution, delivery and performance of this Agreement by Seller
do not and will not: (a) violate or conflict with any provision
of the Partnership Agreement; (b) violate any Legal Requirement;
or (c) (i) violate, conflict with or constitute a breach of or
default under (without regard to requirements of notice, passage
of time or elections of any Person), (ii) permit or result in the
termination, suspension or modification of, (iii) result in the
acceleration of (or give any Person the right to accelerate) the
performance of Seller under, or (iv) result in the creation or
imposition of any Encumbrance under, any Seller Contract or any
other instrument evidencing any of the Assets or any instrument
or other agreement to which Seller is a party or by which Seller
or any of its assets is bound or affected, except such ▇▇▇▇▇
tions, conflicts, breaches, defaults, terminations, suspensions,
modifications, and accelerations which would not, individually or
in the aggregate, have a material adverse effect on the System,
the Business, or Seller's ability to perform its obligations
under this Agreement or Buyer's ability to conduct the Business
after the Closing in substantially the same manner in which it is
currently conducted by Seller.
5.4 Complete Systems. Except as set forth on
Schedule 5.4, the Assets represent all assets, properties,
franchises, licenses, permits, consents, certificates,
authorities, operating rights, leases, contracts, (with the
exception of programming contracts and retransmission consents
which Buyer acknowledges may need to be replaced in order for
Buyer to continue to operate the Business), agreements,
commitments and arrangements reasonably necessary for the conduct
of the Business in the ordinary course in the same manner as that
in which such business is currently conducted by Seller.
5.5 Title. Except as set forth on Schedule 5.5 and
for the Permitted Encumbrances, Seller has, and on the Closing
Date will have, good and marketable title to the Assets. The
Assets on the Closing Date will be free and clear of all
Encumbrances of any kind or nature, other than Permitted
Encumbrances.
5.6 Real Property. (a) All the Assets consisting of
interests in Real Property that are material to the conduct of
the Business are described on Schedule 1.7. Seller has valid
leasehold interests in Real Property leased by Seller under
written leases or subleases, correct and complete copies of which
have been made available to Buyer.
(b) All material easements, rights-of-way and
other rights which are necessary in any material respect for
Seller's current use of any Real Property are valid and in full
force and effect, and, to the Best of Seller's Knowledge, Seller
has not received any notice with respect to the termination or
breach of any of those rights.
5.7 Environmental Matters. (a) Except as set forth
on Schedule 5.7, to the Best of Seller's Knowledge, Seller's use
of the Real Property complies in all material respects with all
Environmental Laws. Seller has not received written notice or,
to the Best of Seller's Knowledge, oral notice of any claim or
investigation based on Environmental Laws which relates to any
Real Property or any operations conducted by Seller on such Real
Property.
16
(b) Seller has provided, or prior to Closing
will provide, Buyer with complete and correct copies of (i) all
studies, reports, surveys or other materials in Seller's
possession relating to the presence or alleged presence of
Hazardous Substances at, on or affecting the Real Property,
(ii) all notices or other materials in Seller's possession that
were received from any Governmental Authority having the power to
administer or enforce any Environmental Laws relating to current
or past ownership, use or operation of the Real Property or
activities at the Real Property and (iii) all materials in
Seller's possession relating to any claim, allegation or action
by any private third party under any Environmental Law.
5.8 Compliance with Law; Governmental Permits. (a)
Except as set forth on Schedule 5.8, the ownership, leasing and
use of the Assets as they are currently owned, leased and used by
Seller and the conduct of the Business as it is currently
conducted by Seller, do not violate any Legal Requirement, which
violation(s), individually or in the aggregate, reasonably could
be expected to have a material adverse effect on the Business.
Seller has not received any notice claiming a violation by Seller
or the Business of any Legal Requirement applicable to Seller or
the Business as it is currently conducted and, to the Best of
Seller's Knowledge, no basis exists for any person to claim that
such a violation exists.
(b) Schedule 1.5 lists all Governmental Permits
that are material to the conduct of the Business as it
is currently conducted by Seller, together with the expiration
date of each Governmental Permit and any Franchise Fee charged,
as of June 30, 1996, by the applicable Governmental Authority.
Complete and correct copies of all such Governmental Permits as
currently in effect have been, or prior to the Closing will be,
made available to Buyer. All such Governmental Permits are
currently in full force and effect. There is no action,
proceeding or investigation pending or, to the Best of Seller's
Knowledge, threatened, relating to the termination, suspension or
modification of any such Governmental Permit and Seller is in
compliance in all material respects with the terms and conditions
of all Governmental Permits.
(c) The operation of the System has been, and is,
in compliance in all material respects with the Communications
Act of 1934, as amended (as so amended, the "Communications
Act"), and the rules and regulations of the Federal Communi
cations Commission (the "FCC"), except that, as to any rate
regulation thereunder the foregoing is limited to the Best of
Seller's Knowledge. Seller has delivered, or prior to Closing
will deliver, to Buyer complete and correct copies of all reports
and filings for the past three years made or filed pursuant to
the Communications Act or FCC rules and regulations with respect
to the Business.
(d) To the Best of Seller's Knowledge, the
operation of the System has been, and is, in compliance in all
material respects with the Cable Television Consumer Protection
and Competition Act of 1992 (the "Cable Act"), and the rules and
regulations of the FCC promulgated thereunder. All broadcast
television signals carried by the System pursuant to the
Retransmission Consent Agreements and Must Carry Election are
being carried in compliance in all material respects with the
Communications Act and the Cable Act. Copies of the
Retransmission Consent Agreements and Must Carry Election have
been provided to Buyer by Seller.
17
(e) To the Best of Seller's Knowledge, the
operation of the System has been, and is, in compliance in all
material respects with the Telecommunications Act of 1996 (the
"Telecom Act"), and the rules and regulations of the FCC
promulgated thereunder.
5.9 Seller Contracts. Schedule 1.8 lists all Seller
Contracts that are material to the conduct of the Business as it
is now conducted. Complete and correct copies of the Seller
Contracts as currently in effect have been, or prior to the
Closing will be, made available to Buyer. Neither Seller nor, to
the Best of Seller's Knowledge, any other party to any Seller
Contract is in any material respect in breach of the performance
of its obligations under any Seller Contract.
5.10 Copyright Compliance. Seller has deposited with
the United States Copyright Office all statements of account and
other documents and instruments, and paid all royalties,
supplemental royalties, fees and other sums to the United States
Copyright Office, required under the Copyright Act with respect
to the Business and operations of the System as are required to
obtain, hold and maintain the compulsory copyright license for
cable television systems prescribed in Section 111 of the
Copyright Act. Seller and the System are in material compliance
with the Copyright Act. Seller and the System are entitled to
hold and do now hold the compulsory copyright license described
in Section 111 of the Copyright Act, which compulsory copyright
license is in full force and effect and has not been revoked,
canceled, encumbered or materially adversely affected in any
manner. Seller has made available to Buyer complete and correct
copies of all reports and filings, and all reports and filings
for the past three years, made or filed pursuant to the Copyright
Act with respect to the Business. Seller has not received any
notice to the effect that the conduct of the Business as
currently conducted infringes on the rights of any Person in any
copyright or other intellectual property right, except as to
potential copyright liability arising from the performance,
exhibition or carriage of any music on the System.
5.11 Financial Statements. (a) Seller has delivered
to Buyer correct and complete copies of certain financial
information for the System for the years ended December 31, 1995
and December 31, 1994 and the six-month period ended June 30,
1996 (collectively, the "Seller Financial Statements"). Except
for the absence of footnote disclosures, cash flow statements and
statements of equity and except for estimated, annualized or
projected financial information, the Seller Financial Statements
fairly present, in all material respects, the results of
operations of the System for the respective periods ended on such
dates, all in conformity with GAAP consistently applied, and with
respect to the Seller Financial Statements for the six-month
period ended June 30, 1996, subject to normal year-end
adjustments (none of which are expected to be material in
amount).
(b) Since the latest date of the Seller
Financial Statements (i) the Business has been operated only in
the ordinary course and (ii) there has been no material adverse
change in, and no event has occurred which, so far as reasonably
can be foreseen, is likely, individually or in the aggregate, to
result in any material adverse change in the results of
operations of the Business, other than any change arising out of
matters of a general economic
18
nature or matters (including, but not limited to, competition caused by or
arising from direct broadcast satellite, the Multichannel Multipoint
Distribution Service, legislation, rule making and regulation) affecting the
cable television industry (national or regional) in general.
5.12 Legal Proceedings. Except as set forth on
Schedule 5.12, and except for any judgments, orders, actions,
suits, proceedings or investigations as may affect the cable
television industry (national or regional) generally, there is no
judgment or order outstanding, or any action, suit, proceeding or
investigation by or before any Governmental Authority or any
arbitrator pending or, to the Best of Seller's Knowledge,
threatened, involving or affecting any of the Assets or the
Business which, if adversely determined, would have a material
adverse effect on the Assets or the Business or would materially
impair the ability of Seller to perform its obligations under
this Agreement.
5.13 Employment Matters. (a) Seller does not employ
any individuals in connection with the operation of the Business
and does not, and is not obligated to, maintain or contribute to
any employee benefit plan, as defined in Section 3(3) of ERISA.
All individuals managing the operations of the Business are
employees of TCI or its Affiliates (other than Seller) (the
"Employer"). The Employer is reimbursed for employee-related
expenses relating to the operations of the Business by Seller
under the Management Agreement or the Partnership Agreement.
(b) To the Best of Seller's Knowledge after
inquiry of Employer, Employer has complied in all material
respects with all Legal Requirements relating to the employment
of labor and those relating to wages, hours, collective
bargaining, unemployment compensation, worker's compensation,
equal employment opportunity, age and disability discrimination,
immigration control and the payment and withholding of taxes with
respect to employees of Employer who primarily perform services
in connection with the operation of the Business.
(c) Employer is not a party to any contract with
any labor organization, and Employer has not recognized or agreed
to recognize any union or other collective bargaining unit with
respect to employees of Employer who primarily perform services
in connection with the operation of the Business. Except as set
forth on Schedule 5.13(c), no union or other collective
bargaining unit has been certified as representing any of the
employees engaged in the operation of the Business, and, to the
Best of Seller's Knowledge, Employer has not received any request
from any party for recognition as a representative of employees
engaged in the operation of the Business for collective
bargaining purposes. Neither Seller nor Employer is party to any
agreement, oral or written, express or implied, that would
require Buyer to employ any individual after the Closing Date.
(d) Schedule 5.13(d) sets forth a true and
complete list of all individuals employed by Employer who
primarily perform services with respect to the operation of the
Business together with the employees' salaries or wages as of
June 30, 1996. Except as provided on Schedule 5.13(d), neither
Seller nor Employer is a party to any written employment
contract, agreement, commitment or arrangement with any
individual identified on Schedule 5.13(d).
19
(e) Except for those plans described on Schedule
5.13(e) and in the TCI Employee Handbook dated February, 1995
(the "Employer Plans"), which are sponsored by the Employer, or
to which the Employer contributes or is obligated to contribute,
the employees of Employer who primarily perform services with
respect to the operation of the Business do not receive benefits
under any bonus, deferred compensation, pension, profit-sharing,
retirement, severance pay, insurance, stock purchase, stock
option, or other fringe benefit plan, arrangement or practice, or
any other employee benefit plan, as defined in Section 3(3) of
ERISA.
(f) Seller has not incurred or taken any action,
and to the Best of Seller's Knowledge, no action or event has
occurred, that could cause Seller to incur any material liability
(i) under Section 412 of the Code or Title IV of ERISA with
respect to any Employer Plan that is a single-employer plan,
within the meaning of Section 4001(a)(15) of ERISA, (ii) on
account of a partial or complete withdrawal from any Employer
Plan that is a multiemployer plan, within the meaning of Sec
tion 3(37) of ERISA, or on account of any unpaid contributions to
any such multiemployer plan, or (iii) for any tax or penalty
under Section 4975 of the Code or Section 502(i) of ERISA on
account of any prohibited transaction, within the meaning of Sec
tion 4975 of the Code or Section 406 of ERISA, with respect to
any Employer Plan.
5.14 System Information. (i) The number of Equivalent
Basic Subscribers served by the System, the number of subscribers
served by the System taking Expanded Basic Services, the
bandwidth of the System and channel line up of the System and
(ii) to the Best of Seller's Knowledge, the number of Homes
Passed by the System and the approximate number of miles of plant
included in the Assets, each as of June 30, 1996, are as set
forth on Schedule 5.14. The Basic Subscriber Rate and rate for
Expanded Basic Services, each as of June 30, 1996, are as set
forth on Schedule 1.1.
5.15 Finders and Brokers. Except for its engagement
of ▇▇▇▇▇▇▇ & Associates, L.P. to assist Seller in the
solicitation of offers to purchase the Assets and except for a
disposition fee payable by Seller to an Affiliate pursuant to its
Partnership Agreement, Seller has not employed any financial
advisor, broker or finder or incurred any liability for any
financial advisory, brokerage, finder's or similar fee or
commission in connection with the transactions contemplated by
this Agreement.
5.16 Tax Matters. Except as set forth on Schedule
5.16, (a) all Tax Returns required to be filed by Seller before
the Closing with respect to the Business or the Assets have been
or will be filed on or before the Closing and (b) all Taxes shown
as due or payable before the Closing on such Tax Returns have
been or will be paid when required by law.
5.17 Condition of Assets. The tangible Assets, taken
as a whole, are in generally good working condition and repair,
normal wear and tear excepted, and are capable of being used to
deliver CATV services to the present subscriber base in a manner
consistent with past practices of Seller.
5.18 Regulation of Rates. As of the date hereof, none
of the political entities
20
or authorities which have granted a Governmental Permit have been, or have
applied to be, certified to regulate CATV rates charged by the Seller
pursuant to the Cable Act and the rules and regulations of the FCC.
Solely as of the date hereof, Seller has not received any notice of receipt
by the FCC of any complaints on Form 329 of tier rates. Seller has
not received any notice that it has any obligation or liability
to refund any portion of the revenue received by Seller from the
subscribers of the System as of the date hereof. There has been
no correspondence sent by or delivered to Seller within the past
year or, to the Best of Seller's Knowledge, within the past three
years, in any way relating to the regulation of CATV rates (other
than transmittal of rules themselves, regulations and rulemakings
and general announcements that are not specifically related to
the regulation of rates of the System), from the FCC or any other
Governmental Authority.
5.19 Insurance. Seller has maintained insurance
policies in the ordinary course of business which when taken
together provide insurance coverage for the Assets and the
operations of the Business as is customary for similar businesses
similarly situated.
5.20 No Other Commitment to Sell. No material part of
the System or the Assets is directly or indirectly subject in any
manner to any written or oral commitment or any arrangement for
the sale, transfer, assignment, or disposition thereof, in whole
or in part, except pursuant to this Agreement.
ARTICLE VI
6. Buyer's Representations and Warranties.
Buyer represents and warrants to Seller as follows:
6.1 Organization and Qualification. Buyer is a
limited liability limited partnership duly organized, validly
existing and in good standing under the laws of its state of
formation and has all requisite partnership power and authority
to carry on its business as currently conducted and to own,
lease, use and operate its assets. Buyer is duly qualified or
licensed to do business and is in good standing under the laws of
each jurisdiction in which the character of the properties owned,
leased or operated by it or the nature of the activities
conducted by it makes such qualification necessary, except where
the failure to be so qualified or licensed and in good standing
would not have a material adverse effect on the validity, binding
effect or enforceability of this Agreement or the ability of
Buyer to perform its respective obligations under this Agreement.
6.2 Authority and Validity. Buyer has all requisite
partnership power and authority to execute, deliver and perform
its obligations under this Agreement. The execution and delivery
by Buyer of, the performance by Buyer of its obligations under,
and the consummation by Buyer of the transactions contemplated
by, this Agreement have been duly authorized by all requisite
partnership action of Buyer and no other partnership proceedings
on the part of Buyer are necessary to authorize the execution and
delivery of this Agreement or the performance of Buyer's
obligations hereunder. This Agreement has been duly and validly
21
executed and delivered by Buyer and constitutes a valid and
binding agreement of Buyer enforceable in accordance with its terms.
6.3 No Breach or Violation. (a) Except for (i) any
consents that will be obtained by Buyer or waived on or prior to
the Closing Date and are identified on Schedule 6.3(a),
(ii) filings and consents which, if not made or obtained, would
not have a material adverse effect on Buyer's ability to perform
its obligations under this Agreement and (iii) the Regulatory
Requirements, no consent, waiver, approval or authorization of,
or filing, registration or qualification with, any Governmental
Authority is required to be made or obtained by Buyer in
connection with the execution, delivery and performance of this
Agreement by Buyer.
(b) The execution, delivery and performance of
this Agreement by Buyer do not and will not: (a) violate or
conflict with any provision of Buyer's Certificate of
Incorporation or By-Laws or partnership agreement, as the case
may be, (b) violate any Legal Requirement; or (c) (i) violate,
conflict with or constitute a breach of or default under (without
regard to requirements of notice, passage of time or elections of
any Person), (ii) permit or result in the termination, suspension
or modification of, (iii) result in the acceleration of (or give
any Person the right to accelerate) the performance of Buyer
under, or (iv) result in the creation or imposition of any
Encumbrance under, any material contract, agreement, arrangement,
commitment or plan to which Buyer is a party or by which Buyer or
any of its assets is bound or affected, except such violations,
conflicts, breaches, defaults, terminations, suspensions,
modifications and accelerations as would not, individually or in
the aggregate, have a material adverse effect on Buyer's ability
to perform its obligations under this Agreement.
6.4 Litigation. (a) There are no claims, actions,
suits, proceedings or investigations pending or, to the best of
Buyer's knowledge, threatened, in any court or before any
governmental agency or instrumentality, or before any arbitrator,
by or against or affecting or relating to Buyer or any of its
Affiliates which, if adversely determined, would restrain or
enjoin the consummation of the transactions contemplated by this
Agreement or declare unlawful the transactions or events
contemplated by this Agreement or cause any of such transactions
to be rescinded.
(b) There are no judgments, injunctions, orders
or other judicial or administrative mandates outstanding against
or affecting Buyer or any of its Affiliates which would
materially hinder or delay the consummation of the transactions
contemplated by this Agreement.
6.5 Financial Statements. Buyer has delivered to
Seller copies of its audited financial statements for its last
fiscal year ("Buyer Financial Statement"). The Buyer Financial
Statement and the notes thereto fairly present the assets,
liabilities and financial condition of Buyer as of the date
thereof and the results of operations and cash flows or changes
in financial position, as applicable, of Buyer for the period
ended on such date, all in conformity with GAAP consistently
applied, except as may be noted therein. Buyer has delivered to
Seller copies of its unaudited financial statements for its last
fiscal quarter ("Buyer Interim Financial Statement"). Except as
noted therein, the Buyer Interim Financial Statement was prepared on a
22
basis consistent with the Buyer Financial Statement and
fairly presents, in conformity with GAAP consistently applied,
the financial position of Buyer as of such date and the results
of operations and cash flows or changes in financial position, as
applicable, for such period, subject to normal year-end
adjustments (none of which are expected to be material in
amount), other adjustments noted therein and the absence of
footnotes.
6.6 Adequate Financing. Buyer is able to obtain,
through borrowings under existing lines of credit, all funds
necessary to satisfy all its obligations under this Agreement and
with respect to the transactions contemplated by this Agreement,
including its obligations to purchase the Assets and to pay the
Purchase Price to Seller.
6.7 Finders and Brokers. Buyer has not employed any
financial advisor, broker or finder or incurred any liability for
any financial advisory, brokerage, finder's or similar fee or
commission in connection with the transactions contemplated by
this Agreement for which Seller will in any way have any
liability.
6.8 Qualification of Buyer. Buyer knows of no reason
why it cannot obtain the licenses and permits necessary for it to
own and operate the Business in the manner in which it is
currently conducted by Seller.
ARTICLE VII
7. Additional Covenants.
7.1 Access to Premises and Records. Between the date
of execution and delivery of this Agreement and the Closing Date,
Seller will give Buyer and its representatives, during normal
business hours and with reasonable prior notice, access to the
books and records of the Business and to the Assets and will
furnish to Buyer and its representatives such information
regarding the Business and the Assets as Buyer may from time to
time reasonably request.
7.2 Continuity and Maintenance of Operations;
Financial Statements; Correspondence Relating to CATV Rates.
Except as to actions which Buyer has been advised and to which it
has consented in writing and except as specifically permitted or
required by this Agreement or required by any Legal Requirement,
Seller shall:
(a) Operate the Business in the ordinary course
consistent with past practices and will use commercially
reasonable efforts to cause Employer to keep available the
services of the employees of the Employer who are primarily
involved in the operation of the Business and to preserve any
beneficial business relationships with customers, suppliers and
others having business dealings with Seller relating to the
Business;
(b) Maintain the Assets in operating condition;
23
(c) Maintain adequate inventories of spare
Equipment consistent with past practice;
(d) Maintain insurance as in effect on the date
of this Agreement;
(e) Keep all of its business books, records and
files in the ordinary course of business in accordance with past
practices;
(f) Continue to implement its procedures for
connection of service and disconnection and discontinuance of
service to subscribers whose accounts are delinquent in
accordance with those in effect on the date of this Agreement;
(g) Not sell, transfer or assign any Assets
other than in the ordinary course of business;
(h) Use commercially reasonable efforts not to
permit any material amendment to, or cancellation of, any of the
Governmental Permits or Seller Contracts;
(i) Not enter into any contract or commitment
for the acquisition of goods or services relating to the System
or the Business involving an expenditure in excess of $50,000
other than in the ordinary course of business;
(j) Not take or omit to take any action that
would cause Seller to be in breach of any of its representations
or warranties in this Agreement in any material respect,
provided, however, that the foregoing shall not preclude Seller
from engaging a financial advisor to render an opinion as to the
fairness, from a financial point of view, of the transactions
contemplated by this Agreement; or
(k) Not extend either of two leases for the Real
Property located at ▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇
or ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ for a period
beyond one year from its current date of expiration or extension,
as applicable, without Buyer's written consent, which consent may
not be unreasonably withheld; provided, that Buyer shall be
deemed to have consented thereto if Buyer has not given Seller
written notice of its refusal to give consent, setting forth the
reason for such refusal, within three Business Days of Buyer's
receipt of Seller's written request for consent; provided,
further, that Buyer's refusal to give consent to an increase in
rental rate to reflect current market conditions at the time of
extension of such lease shall be deemed to be unreasonable.
Seller shall deliver to Buyer, promptly after such
statements and reports become available to Seller, correct and
complete copies of the unaudited income statement and operating
reports for the Business for the year ended December 31, 1996
(the "1996 Financial Statements") and unaudited monthly income
statements and operating reports (the "Monthly Financial
Statements") and unaudited quarterly income statements and
operating reports (the "Quarterly Financial Statements") for the
Business that are prepared by or for Seller at any time between
the date of this Agreement and the Closing. Except for the
absence of footnote
24
disclosures, cash flow statements and statements of equity and except for
estimated, annualized or projected financial information, the 1996 Financial
Statements and Quarterly Financial Statements shall fairly present, in all
material respects, the results of operations of the System for
the respective periods ended on such dates, all in conformity
with GAAP consistently applied, and with respect to the Quarterly
Financial Statements, subject to normal year-end adjustments
(none of which are expected to be material in amount); provided,
that, Seller shall not be required to make and shall not be
deemed to make any representation or warranty concerning the
accuracy of the contents of the Quarterly Financial Statements
for the nine months ended September 30, 1996 or the Monthly
Financial Statements.
Seller shall deliver to Buyer any correspondence
received by Seller between the date of this Agreement and the
Closing Date, in any way relating to the regulation of CATV rates
(other than transmittal of rules themselves, regulations and
rulemakings and general announcements that are not specifically
related to the regulation of rates of the System), from the FCC
or any other Governmental Authority.
7.3 Employee Matters. (a) Buyer may offer
employment to the employees of Employer listed on Schedule
5.13(d) who primarily perform services with respect to the
operation of the Business as of the Closing Date. Not later than
February 27, 1997, Buyer shall deliver to Seller a notice
containing the names of employees of the Business whom Buyer
intends to hire on the Closing Date; provided, that if the
Termination Date is extended by Seller or Buyer, Buyer may
deliver to Seller a notice no later than 60 Business Days prior
to the extended Termination Date updating the lists of employees
which Buyer intends to hire on the Closing Date. Seller shall
undertake to provide to all affected employees and any other
necessary persons any notice that may be required under the WARN
Act. Except as provided herein, Employer shall retain all
liabilities arising prior to the Adjustment Time relating to the
employees of Employer, including severance.
(b) Nothing in this Section 7.3 or elsewhere in
this Agreement is intended to confer upon any employee of
Employer or his or her legal representative or heirs any rights
as a third party beneficiary or otherwise or any remedies of any
nature or kind whatsoever under or by reason of this Agreement,
or the transactions contemplated hereby, including, but not
limited to, any rights of employment or continued employment.
All rights and obligations created by this Agreement are solely
between the parties hereto.
7.4 Franchise Extension. Seller covenants and agrees
that, as soon as practicable following the execution of this
Agreement, it will apply to the applicable Governmental Authority
for an extension (the "Extension") of the franchise described on
Schedule 1.5 with an expiration date prior to June 30, 2000.
Seller shall use commercially reasonable efforts to obtain the
Extension for such franchise to an expiration date of March 10,
2005, but in no event shall the Extension have an expiration date
earlier than June 30, 2000. The Extension may include
modifications customarily imposed by Governmental Authorities
issuing cable television franchises as a condition to obtaining
the Extension but in any event such modifications shall not
impose any conditions or obligations which are materially more
burdensome than contained in the current franchise.
25
7.5 Environmental Report. Buyer may cause to be
prepared and delivered at its expense, within 30 days after the
date of this Agreement, a Phase I environmental report and,
within 60 days after the date of this Agreement, a Phase II
environmental report for the Real Property described on
Schedule 1.7. Seller shall cooperate with Buyer and permit
access to such Real Property during normal business hours in
order for Buyer or its representatives to inspect such property
and the related environmental records in the possession of
Seller, as necessary for the preparation of the Phase I
environmental report or Phase II environmental report. Buyer
shall deliver to Seller a copy of each environmental report
within three Business Days of receipt of such report by Buyer.
Subject to Section 10.1(b)(vi), if such environmental reports
disclose one or more adverse environmental conditions, Seller
shall assume full responsibility for remediation of each such
environmental condition and shall bear all expenses incurred in
connection therewith; provided, that Seller concludes, in its
reasonable judgment, that the cost of all such remediation shall
not exceed $200,000 in which case Seller shall have the sole
right to direct such remediation; provided, further, that if
Buyer agrees to bear any costs of remediation in excess of
$200,000, Buyer shall assume responsibility for overseeing the
remediation of each such environmental condition in consultation
with Seller.
7.6 Consents. Seller will use commercially
reasonable efforts to obtain, as soon as practicable and at its
expense, (i) all the Required Consents, in form and substance
reasonably satisfactory to Buyer; provided, that "commercially
reasonable efforts" for purposes of this Section 7.6 and for
purposes of Section 7.4 shall not require Seller to undertake
extraordinary or unreasonable measures to obtain such approvals
and consents, including, but not limited to, the initiation or
prosecution of legal proceedings or the payment of fees in excess
of normal and usual filing and processing fees (other than any
costs that may be incurred to remedy any noncompliance with the
terms of any Governmental Permit). Buyer will use commercially
reasonable efforts to assist Seller in its efforts to obtain all
the Required Consents and the Extensions, and in connection
therewith will consent to such modifications to any Governmental
Permit that a Governmental Authority may request as a condition
to (i) the transfer of such permit to Buyer and/or (ii) obtaining
extension of the term of such Governmental Permit, provided,
however, that Buyer will not be required to agree to any
modifications to a Governmental Permit unless they are
customarily imposed by Governmental Authorities issuing cable
television franchises as a condition to obtaining the consent to
the transfer of such franchises and do not impose upon Buyer any
conditions or obligations which are materially more burdensome
than are contained in any such Governmental Permit. If Buyer
gives Seller notice that Buyer desires to grant a security
interest in Buyer's rights under any agreement or instrument that
is the subject of a Required Consent, Seller will use
commercially reasonable efforts to obtain, and Buyer will use
commercially reasonable efforts to assist Seller in its effort to
obtain, the consent required to grant a security interest,
provided, that Buyer shall be responsible for the payment of any
fees in connection therewith, and provided further that no such
consent shall be a condition to the obligations of Buyer under
this Agreement.
7.7 HSR Notification. As soon as practicable after
the execution of this Agreement and if required by applicable
Legal Requirements, Seller and Buyer will each complete and file,
or cause to be completed and filed, any notification and report
required to be
26
filed under the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act of 1976,
as amended (the "HSR Act"). Each of the parties will take any additional
action that may be necessary, proper or advisable, will cooperate to prevent
inconsistencies between their respective filings and will furnish
to each other such necessary information and reasonable
assistance as the other may reasonably request in connection with
its preparation of necessary filings or submissions under the HSR
Act. Buyer and Seller shall use commercially reasonable efforts
(including the filing of a request for early termination) to
obtain the early termination of the waiting period under the HSR
Act. Buyer and Seller shall each bear one-half of any required
filing fee under the HSR Act.
7.8 Notification of Certain Matters. Each party will
promptly notify the other of any fact, event, circumstance or
action the existence or occurrence of which would cause any of
such party's representations or warranties under this Agreement
not to be true in any material respect.
7.9 Risk of Loss; Condemnation. (a) Seller will
bear the risk of any loss or damage to the Assets resulting from
fire, theft or other casualty (except reasonable wear and tear)
at all times prior to the Closing. If any such loss or damage is
so substantial as to prevent normal operation of any material
portion of the System, Seller shall promptly notify Buyer of that
fact and Buyer, at any time within 10 days after receipt of such
notice, may elect by written notice to Seller either (i) to waive
such defect and proceed toward consummation of the acquisition of
the Assets in accordance with this Agreement or (ii) to terminate
this Agreement pursuant to Section 10.1(c)(v). If Buyer elects
to consummate the acquisition of the Assets notwithstanding such
loss or damage and does so, there will be no adjustment in the
Purchase Price on account of such loss or damage (other than a
Purchase Price adjustment under Section 3.3(b)(iv)) but all
insurance proceeds payable as a result of the occurrence of the
event resulting in such loss or damage (to the extent not
previously applied by Seller with respect to such loss or damage)
will be delivered by Seller to Buyer or the rights to such
proceeds will be assigned by Seller to Buyer if not yet paid over
to Seller. In the event that any Assets are damaged or destroyed
prior to the Closing Date but such loss or damage is not so
substantial as to prevent normal operation of any material
portion of the System, Seller shall use commercially reasonable
efforts to repair or replace, prior to the Closing Date, any such
Assets with items of like value and quality.
(b) If, prior to the Closing, any part of a
material Asset or an interest in a material Asset is taken or
condemned as a result of the exercise of the power of eminent
domain, or if a Governmental Authority having such power informs
Seller or Buyer that it intends to condemn all or any part of a
material Asset (such event being referred to, in either case, as
a "Taking"), then Buyer may terminate this Agreement pursuant to
Section 10.1(c)(vi). If Buyer does not elect to terminate this
Agreement then (a) if the Closing occurs, Buyer shall have the
sole right, in the name of Seller, if Buyer so elects, to
negotiate for, claim, contest and receive all damages with
respect to the Taking, (b) Seller shall be relieved of its
obligation to convey to Buyer the Asset or interests that are the
subject of the Taking and (c) at the Closing Seller shall assign
to Buyer all of Seller's rights (including the right to receive
payment of damage) with respect to such Taking and shall pay to
Buyer all damages previously paid to Seller
27
with respect to the Taking.
7.10 Adverse Changes. Seller shall promptly notify
Buyer in writing of any materially adverse developments affecting
the Assets, the System or the Business which become known to
Seller, including, but not limited to, (i) any damage,
destruction or loss (whether or not covered by insurance)
materially and adversely affecting any of the Assets, the System
or the Business, (ii) any material notice of violation,
forfeiture or complaint under any material Governmental Permits
or (iii) anything which, if not corrected prior to the Closing
Date, will prevent Seller from fulfilling any condition to
Closing described in Article VIII.
7.11 Action By Limited Partners. (a) If required by
applicable Legal Requirements and the Partnership Agreement to
consummate the transactions contemplated by this Agreement, or if
the Seller otherwise elects to do so, the Seller, acting through
the General Partner, shall in accordance with the applicable
Legal Requirements and the Partnership Agreement: (i) within a
reasonable period of time (as determined by the General Partner)
after the execution and delivery of this Agreement, duly call,
give notice of, convene and hold a special meeting (the "Special
Meeting") of the Limited Partners for the purpose of approving
the transactions contemplated by this Agreement; and (ii) subject
to its fiduciary duties (as determined by the General Partner
after consultation with independent counsel), include in any
proxy statement the determination and recommendation of the
General Partner to the effect that the General Partner, having
determined that this Agreement and the transactions contemplated
hereby are in the best interests of Seller and the Limited
Partners, has approved this Agreement and such transactions and
recommends that the Limited Partners vote in favor of the sale of
the Assets to Buyer pursuant to this Agreement.
(b) As soon as practicable after the execution
and delivery of this Agreement, Seller shall file with the SEC
under the Exchange Act, and shall use commercially reasonable
efforts to clear with the SEC and mail to the Limited Partners no
later than February 15, 1997, a proxy statement with respect to
the Special Meeting (the "Proxy Statement"). Seller and Buyer
shall cooperate in the preparation of any Proxy Statement;
without limiting the generality of the foregoing, Buyer shall
furnish to Seller the information relating to Buyer required by
the Exchange Act to be set forth in the Proxy Statement. Seller
agrees that the Proxy Statement shall comply in all material
respects with the Exchange Act and the rules and regulations
thereunder; provided, however, that no agreement is made by
Seller with respect to information supplied by Buyer expressly
for inclusion in the Proxy Statement. Buyer and its counsel
shall be given a reasonable opportunity to review the Proxy
Statement prior to the filing thereof with the SEC.
7.12 No Solicitation. (a) Seller shall not, and
shall cause the General Partner, employees, agents and
representatives (including, but not limited to, any investment
banker, attorney or accountant retained by Seller) not to,
initiate, solicit or encourage, directly or indirectly, any
inquiries or the making of any proposal with respect to any
Alternative Transaction, engage in any negotiations concerning,
or provide to any other Person any information or data relating
to, the Business, the System, the Assets or Seller for the
purposes of, or have any discussions with any Person relating to,
or otherwise cooperate in any way with or assist or participate
in, facilitate or encourage, any inquiries or the making of any
proposal which
28
constitutes, or may reasonably be expected to lead
to, any effort or attempt by any other Person to seek or to
effect an Alternative Transaction, or agree to or endorse any
Alternative Transaction; provided, however, that nothing
contained in this Section 7.12 shall prohibit Seller or the
General Partner from making any disclosure to the Limited
Partners that, in the judgment of the General Partner based upon
the advice of independent counsel, is required under applicable
Legal Requirements; and provided, further, that (i) Seller or the
General Partner may, upon the unsolicited request of a third
party, furnish information or data (including, but not limited
to, confidential information or data) relating to the Business,
the System, the Assets or Seller for the purposes of facilitating
an Alternative Transaction and participate in negotiations with a
Person making (or who may reasonably be expected to make) an
unsolicited proposal regarding an Alternative Transaction and
(ii) following receipt of a proposal for an Alternative
Transaction, Seller or the General Partner may terminate this
Agreement pursuant to Section 10.1(b)(ii).
(b) Each of TCI and Tele-Communications, Inc.
shall not, and shall cause its Affiliates which it controls not
to, make a proposal to Seller regarding an Alternative
Transaction. The restriction set forth in this Section 7.12(b)
shall terminate on the earlier of (i) the Closing or (ii)
termination of this Agreement.
7.13 Sales and Transfer Taxes and Fees. Buyer and
Seller shall each pay one-half of any state or local sales, use,
transfer, excise, documentary or license taxes or fees or any
other charge (including filing fees) imposed by any Governmental
Authority as a consequence of the transfer of any Assets pursuant
to this Agreement. Seller shall timely file any sales tax
returns required to be filed with any Governmental Authority as a
consequence of the transfer of any Assets pursuant to this
Agreement. Buyer shall cooperate in the preparation and filing
of any submission or application necessary to obtain any
clearance relating to, or, if available, exemption from, any
Taxes or fees described in this Section 7.13.
7.14 Commercially Reasonable Efforts. (a) Seller
shall use commercially reasonable efforts to take all steps
within its power, and will cooperate with Buyer, to cause to be
fulfilled those of the conditions to Buyer's obligations to
consummate the transactions contemplated by this Agreement that
are dependent upon its actions, and to execute and deliver such
instruments and take such other reasonable actions as may be
necessary or appropriate in order to carry out the intent of this
Agreement and consummate the transactions contemplated hereby.
(b) Buyer shall use commercially reasonable
efforts to take all steps within its power, and will cooperate
with Seller, to cause to be fulfilled those of the conditions to
Seller's obligations to consummate the transactions contemplated
by this Agreement that are dependent upon its actions and to
execute and deliver such instruments and take such other
reasonable actions as may be necessary or appropriate in order to
carry out the intent of this Agreement and consummate the
transactions contemplated hereby.
7.15 Title Insurance. Seller shall cooperate with
Buyer if Buyer elects to obtain title insurance policies on any
Real Property owned in fee or leased. Buyer shall have the
29
sole responsibility for obtaining and paying for such policies. The
parties agree that the obtaining of title insurance on any Real
Property shall not be a condition to the obligation of Buyer to
consummate the transactions contemplated hereby. Seller shall
deliver to Buyer, prior to Closing, complete and correct copies
of all deeds, surveys and title insurance policies, in Seller's
possession, on any Real Property
7.16 FCC Form 626. Seller shall file on a timely
basis a Form 626 with the applicable Governmental Authority for
each franchise with an expiration date earlier than the third
anniversary of the Closing Date.
7.17 Forms 394. At Seller's option, Buyer shall
prepare, in form and substance reasonably satisfactory to Seller,
within 15 Business Days after receipt of Seller's written
request, and Seller shall file, Forms 394 with the applicable
Governmental Authorities.
ARTICLE VIII
8. Conditions Precedent to Obligations of Buyer.
The obligations of Buyer under this Agreement are
subject to the satisfaction at or prior to the Closing of each of
the following conditions, any one or more of which may be waived
by Buyer, in its sole discretion.
8.1 HSR Act. If required under applicable Legal
Requirements, all filings required under the HSR Act shall have
been made and the applicable waiting period shall have expired or
been earlier terminated without the receipt of any objection or
the commencement or threat of any litigation by a Governmental
Authority of competent jurisdiction to restrain the consummation
of the transactions contemplated by this Agreement.
8.2 Governmental or Legal Action. No action, suit or
proceeding shall be pending or threatened by any Governmental
Authority and no Legal Requirement shall have been enacted,
promulgated or issued or deemed applicable to any of the
transactions contemplated by this Agreement by any Governmental
Authority that would (a) prohibit Buyer's ownership or operation
of all or a material portion of the System, the Business or the
Assets or (b) prevent or make illegal the consummation of the
transactions contemplated by this Agreement.
8.3 Accuracy of Representations and Warranties. The
representations and warranties of Seller contained in this
Agreement shall be true and correct in all material respects as
of the date of this Agreement and as of the Closing Date, with
the same effect as though made on and as of the Closing Date,
except for such changes permitted or contemplated by the terms of
this Agreement and except insofar as any of such representations
and warranties relate solely to a particular date or period, in
which case they shall be true and correct in all material
respects on such Closing Date with respect to such date and
period.
30
8.4 Performance of Agreements. Seller shall have
performed in all material respects all obligations and agreements
and complied, or caused to be complied with, all covenants and
conditions required by this Agreement to be performed or complied
with by Seller at or prior to the Closing Date.
8.5 No Material Adverse Change. During the period
from the date of this Agreement through and including the Closing
Date, there shall not have occurred any material adverse change
in the business, financial condition or operations of the
Business, taken as a whole, other than any change arising out of
matters of a general economic nature or matters (including, but
not limited to, competition caused by or arising from the
Multichannel Multipoint Distribution Service, direct broadcast
satellite, legislation, rule making and regulation) affecting the
cable television industry (national or regional) generally, and
Seller shall not have sustained any material loss or damage to
the Assets or the System, whether or not insured, that materially
affects the ability of Seller to conduct the Business in a manner
consistent with past practice.
8.6 Consents and Extensions. Seller shall have
delivered to Buyer evidence, in form and substance reasonably
satisfactory to Buyer, that all the Required Consents and
Extensions have been obtained, and no Required Consent shall
impose upon Buyer any conditions or obligations which are
materially more burdensome than are contained in the underlying
document for which consent has been obtained, provided, that the
Required Consents for the leases for the Real Property located at
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ and ▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ may provide for an increased
rental rate to reflect current market conditions.
8.7 Transfer Documents. Seller shall have delivered
to Buyer customary bills of sale, deeds, assignments and other
instruments of transfer sufficient to convey good and marketable
title to the Assets in accordance with the terms of this
Agreement.
8.8 Opinions of Seller's Counsel. Buyer shall have
received the opinion or opinions of ▇▇▇▇, Scholer, Fierman, ▇▇▇▇
& Handler, LLP, counsel for Seller, dated the Closing Date,
substantially in the form of Exhibit D.
8.9 Opinion of Seller's FCC Counsel. Buyer shall
have received the opinion of ▇▇▇▇, Raywid & ▇▇▇▇▇▇▇▇▇, FCC
counsel for Seller, dated the Closing Date, substantially in the
form of Exhibit G.
8.10 Discharge of Liens. Seller shall have secured
the termination of all Encumbrances of any nature on the Assets,
other than Permitted Encumbrances.
8.11 Noncompete Agreement. Each of TCI, Tele-
Communications, Inc., Seller and the General Partner shall have
executed and delivered to Buyer a noncompetition agreement,
substantially in the form attached as Exhibit H.
8.12 Additional Documents and Acts. Seller shall have
delivered or caused to be delivered to Buyer all other documents
required to be delivered pursuant to this Agreement
31
and done or caused to be done all other acts or things reasonably requested
by Buyer to evidence compliance with the conditions set forth in
this Article VIII.
8.13 Indemnity Escrow Agreement. Seller shall have
executed and delivered the Indemnity Escrow Agreement.
8.14 1996 Financial Statements. Seller shall have
delivered to Buyer correct and complete copies of the 1996
Financial Statements.
8.15 Certificates. Seller shall have furnished Buyer
with such other certificates of Seller and others, dated as of
the Closing Date, to evidence compliance with the conditions set
forth in this Article VIII, as may be reasonably requested by
Buyer.
ARTICLE IX
9. Conditions Precedent to Obligations of Seller.
The obligations of Seller under the Agreement are
subject to the satisfaction, at or prior to the Closing Date, of
each of the following conditions, any one or more of which may be
waived by Seller in its sole discretion.
9.1 HSR Act. If required under applicable Legal
Requirements, all filings required under the HSR Act shall have
been made and the applicable waiting period shall have expired or
been earlier terminated without the receipt of any objection or
the commencement or threat of any litigation by a Governmental
Authority of competent jurisdiction to restrain the consummation
of the transactions contemplated by this Agreement.
9.2 Governmental or Legal Actions. No action, suit
or proceeding shall be pending or threatened by any Governmental
Authority and no Legal Requirement shall have been enacted,
promulgated or issued or deemed applicable to any of the
transactions contemplated by this Agreement by any Governmental
Authority that would (a) prohibit Buyer's ownership or operation
of all or any material portion of the System, the Business or the
Assets or (b) prevent or make illegal the consummation of the
transactions contemplated by this Agreement.
9.3 Accuracy of Representations and Warranties. The
representations and warranties of Buyer contained in this
Agreement shall be true and correct in all material respects as
of the date of this Agreement and as of the Closing Date, with
the same effect as though made on and as of the Closing Date,
except for such changes permitted or contemplated by the terms of
this Agreement and except insofar as any of such representations
and warranties relate solely to a particular date or period, in
which case they shall be true and correct in all material
respects on such Closing Date with respect to such date and
period.
9.4 Performance of Agreements. Buyer shall have performed in all
32
material respects all obligations and agreements and complied, or caused
to be complied with, all covenants and conditions required by this Agreement
to be performed or complied with by Buyer at or prior to the Closing Date.
9.5 Consents. All Required Consents shall have been
obtained or given.
9.6 Opinions of Buyer's Counsel. Seller shall have
received the opinion or opinions of ▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇, outside
counsel for Buyer, dated the Closing Date, substantially in the
form of Exhibit E.
9.7 Limited Partner Approval. The transactions
contemplated by this Agreement shall have been approved by the
affirmative vote of or consent by the Limited Partners to the
extent required by the Partnership Agreement or if Seller
otherwise elects as permitted by Section 7.9.
9.8 Payment of Purchase Price. Buyer shall have paid
to Seller the Purchase Price as set forth in Section 3.1.
9.9 Assumption of Liabilities. Buyer shall have
delivered to Seller a customary assumption of liabilities
agreement which is sufficient to cover Buyer's obligations as set
forth in Section 4.1.
9.10 Additional Documents and Acts. Buyer shall have
delivered or caused to be delivered to Seller all other documents
required to be delivered pursuant to this Agreement and done all
other acts or things reasonably requested by Seller to evidence
compliance with the conditions set forth in this Article IX.
9.11 Certificate. Buyer shall have furnished Seller
with such other certificates of Buyer and others, dated as of the
Closing Date, to evidence compliance with the conditions set
forth in this Article IX, as may be reasonably requested by
Seller.
9.12 Fairness Opinion. On or before February 1, 1997,
Seller shall have received an opinion, in form and substance
reasonably satisfactory to Seller, from its financial advisors as
to the fairness, from a financial point of view, of the
transactions contemplated by this Agreement.
9.13 Indemnity Escrow Agreement. Buyer shall have
executed and delivered to Seller the Indemnity Escrow Agreement.
9.14 Environmental Remediation. In the event that
any Phase I environmental report or Phase II environmental report
prepared at Buyer's request pursuant to Section 7.5 discloses one
or more adverse environmental conditions which Seller shall have
concluded, in its reasonable judgment, that the cost of such
remediation shall not exceed $200,000, Seller and Buyer shall
have agreed that remediation of such condition(s) has been
completed and Seller has no further obligation with respect
thereto.
33
ARTICLE X
10. Termination.
10.1 Events of Termination. This Agreement and the
transactions contemplated by this Agreement may be terminated at
any time prior to the Closing:
(a) by the mutual written consent of Buyer and
Seller;
(b) by Seller:
(i) if the consummation of the transactions
contemplated by this Agreement by Seller would
violate any nonappealable final order, decree or
judgment of any Governmental Authority having
competent jurisdiction;
(ii) following receipt by Seller or the General
Partner of an unsolicited proposal for an
Alternative Transaction with a proposed purchase
price greater than or equal to $21,725,000 to the
extent that the General Partner determines in
good faith on the basis of advice of independent
counsel that such action is necessary or
appropriate in order for the General Partner to
act in a manner that is consistent with its
fiduciary obligations under applicable law;
provided, however, that Seller may not terminate
this Agreement pursuant to this clause (ii) with
respect to an unsolicited proposal for an
Alternative Transaction submitted by a Person, or
a Person known by the General Partner in its
reasonable business judgment to be an Affiliate
of such Person, who submitted a written proposal
on October 7, 1996 to purchase the System
pursuant to the competitive auction conducted by
▇▇▇▇▇▇▇ & Associates;
(iii) if any representation or warranty of Buyer
made herein is untrue in any material respect
(other than a change permitted or contemplated by
this Agreement) and such breach is not cured
within 10 days of Buyer's receipt of a notice
from Seller that such breach exists or has
occurred;
(iv) if Buyer shall have defaulted in any
material respect in the performance of any
material obligation under this Agreement and such
breach is not cured within 30 days of Buyer's
receipt of a notice from Seller that such default
exists or has occurred;
(v) if the conditions to Seller's obligations
to consummate the Closing as set forth in Article
IX cannot reasonably be satisfied on or before
the Termination Date; or
34
(vi) if any Phase I environmental report or
Phase II environmental report for the Real
Property prepared at Buyer's request pursuant to
Section 7.5 discloses one or more adverse
environmental conditions and Seller concludes, in
its reasonable judgment, that the cost of
remediation of such condition(s) will exceed
$200,000; provided that termination pursuant to
this Section 10.1(b)(vi) shall not be effective,
and shall be void ab initio, in the event that
within three Business Days after receipt of
Seller's notice of termination pursuant to
Section 10.2 Buyer delivers notice to Seller that
Buyer will bear all costs in connection with such
remediation in excess of $200,000.
(c) by Buyer:
(i) if the consummation of the transactions
contemplated by this Agreement by Buyer would
violate any nonappealable final order, decree or
judgment of any Governmental Authority having
competent jurisdiction;
(ii) if any representation or warranty of Seller
made herein is untrue in any material respect
(other than due to a change permitted or
contemplated by this Agreement) and such breach
is not cured within 10 days of Seller's receipt
of a notice from Buyer that such breach exists or
has occurred;
(iii) if Seller shall have defaulted in any
material respect in the performance of any
material obligation under this Agreement and such
breach is not cured within 30 days of Seller's
receipt of a notice from Buyer that such default
exists or has occurred;
(iv) if the conditions to Buyer's obligations to
consummate the Closing as set forth in Article
VIII cannot reasonably be satisfied on or before
the Termination Date;
(v) within 10 days after receipt by Buyer of a
notice from Seller that the loss or damage to the
Assets resulting from fire, theft or other
casualty is so substantial as to prevent normal
operation of any material portion of the System,
as contemplated by Section 7.9(a); or
(vi) following a Taking, as contemplated by the
first sentence of Section 7.9(b).
(d) Unless the Closing shall have theretofore
taken place, by either party after the Termination Date, provided
that the terminating party is not otherwise in default or breach
of this Agreement.
35
10.2 Manner of Exercise. In the event of the
termination of this Agreement by either Buyer or Seller, pursuant
to Section 10.1, notice thereof shall forthwith be given to the
other party and this Agreement shall terminate and the
transactions contemplated hereunder shall be abandoned without
further action by Buyer or Seller.
10.3 Effect of Termination. (a) Subject to
paragraph (b) of this Section 10.3, in the event of the
termination of this Agreement pursuant to Section 10.1 and prior
to the Closing, all obligations of the parties hereunder shall
terminate, except for the respective obligations of the parties
under Section 13.14; provided, however, that no termination of
this Agreement shall (i) except as set forth in Section 10.3(b)
and Section 10.4, relieve a defaulting or breaching party from
any liability to the other party or parties hereto for or in
respect of such default or (ii) result in the rescission of any
transaction theretofore consummated hereunder.
(b) If this Agreement is terminated by Seller
pursuant to Section 10.1(b)(ii), Seller shall promptly pay to
Buyer a termination fee of $493,750 (the "Termination Fee"). If
(i) the Termination Date is extended by Seller or Buyer to a date
later than August 26, 1997, (ii) this Agreement is terminated by
Seller pursuant to Section 10.1(d) prior to the date which is 360
days from the date of this Agreement, and (iii) Buyer is not in
default or breach of this Agreement, Seller shall promptly pay
Buyer a Termination Fee in the event Seller accepts a proposal
for an Alternative Transaction on or before November 24, 1997.
The Termination Fee shall be liquidated damages and not a
penalty, and upon receipt thereof Buyer shall be precluded from
exercising any other right or remedy available under this
Agreement or applicable law.
10.4 Liquidated Damages. Provided Seller is not in
default of this Agreement, in the event of (i) the breach or
default by Buyer of its obligations under this Agreement and (ii)
the termination of this Agreement prior to the Closing, Seller
shall have the option, upon notice from Seller to Buyer given as
provided in the Escrow Agreement, to receive as liquidated
damages, and not as a penalty, the Deposit. In the event Seller
elects to receive the Deposit as liquidated damages as set forth
in this Section 10.4, Buyer shall promptly (but in no event more
than two Business Days after receipt of such notice) take all
action required under the Escrow Agreement to cause the Deposit
to be released to Seller. If Seller elects to receive the
Deposit as liquidated damages as set forth in this Section 10.4,
Seller shall, upon receipt of the Deposit, be precluded from
exercising any other right or remedy available under this
Agreement or applicable law.
ARTICLE XI
11. Nature and Survival of Representations,
Warranties and Agreements.
11.1 Nature of Representations, Warranties and
Agreements. Neither party will be deemed to have made any
representation, warranty, covenant or agreement except as set
forth in this Agreement or in any certificate or other
instruments to be delivered by Seller or Buyer pursuant to this
Agreement. Without limiting the generality of the foregoing, neither
36
party will be liable or bound in any manner by any
express or implied representation, warranty, covenant or
agreement that is made by any employee, agent or other Person
representing or purporting to represent such party.
11.2 Survival of Representations and Warranties. The
representations and warranties of Seller and Buyer in this
Agreement and in the documents and instruments to be delivered by
Seller and Buyer pursuant to this Agreement shall survive the
Closing only as and to the extent set forth in this Article XI.
11.3 Time Limitations. If the Closing occurs, except
as set forth below, Seller shall have no liability to Buyer with
respect to any representation or warranty or any covenant,
agreement or obligation to the extent required to be performed or
complied with prior to the Closing Date, unless on or before the
first anniversary of the Closing Date Seller is given written
notice by Buyer asserting a claim with respect thereto and
specifying the factual basis of that claim in reasonable detail
to the extent then known by Buyer. If the Closing occurs, Buyer
shall have no liability to Seller with respect to any
representation or warranty or any covenant, agreement or
obligation to the extent required to be performed or complied
with prior to the Closing Date, unless on or before the first
anniversary of the Closing Date Buyer is given written notice by
Seller of a claim with respect thereto and specifying the factual
basis of that claim in reasonable detail to the extent then known
by Seller. A claim with respect to any covenants to be performed
or complied with by Buyer or Seller after the Closing Date may be
asserted at any time. Notwithstanding the foregoing,
indemnification claims for the breach of the representations in
Sections 5.5 and 5.16 and indemnification claims arising from any
third party claim asserted against Buyer arising from the
Excluded Liabilities may be made by Buyer at any time.
11.4 Limitations as to Amount. (a) If the Closing
occurs, Seller shall have no liability (for indemnification or
otherwise) with respect to any failure or breach of any
representation or warranty or any covenant, agreement or
obligation to the extent required to be performed on or prior to
the Closing Date until the total of all damages with respect to
such failure or breach exceeds $50,000 but then for the entire
amount of such damages, including those not in excess of $50,000.
(b) If the Closing occurs, Buyer shall have no
liability (for indemnification or otherwise) with respect to any
failure or breach of any representation or warranty or any
covenant, agreement, or obligation to the extent required to be
performed on or before the Closing Date until the total of all
damages with respect to such failure or breach exceeds $50,000
but then for the entire amount of such damages, including those
not in excess of $50,000.
(c) If the Closing occurs, Seller's aggregate
liability (for indemnification or otherwise) with respect to any
failure or breach of any representation or warranty or any
covenant, agreement or obligation to the extent required to be
performed on or prior to the Closing Date shall be limited to
Buyer's right to make an indemnification claim against Seller
under Article XII and shall be further limited as set forth in
Section 12.3.
37
ARTICLE XII
12. Indemnification.
12.1 Rights to Indemnification. Subject to the
limitations set forth in Sections 11.3 and 11.4, Seller agrees to
indemnify and hold harmless Buyer against any loss, liability,
claim, damage or expense (including, but not limited to,
reasonable attorneys' fees and disbursements) arising from (a)
any claim for brokerage or agent's or finder's commissions or
compensation in respect of the transactions contemplated by this
Agreement by any Person purporting to act on behalf of Seller,
(b) any claim that Buyer is liable for the Excluded Liabilities
and (c) Seller's failure or breach of any representation,
warranty, covenant, agreement or obligation made or required to
be performed by Seller under this Agreement or any document,
certificate or agreement delivered pursuant to this Agreement.
Subject to the limitations set forth in Sections 11.3 and 11.4,
Buyer agrees to indemnify and hold harmless Seller against any
loss, liability, claim, damage or expense (including, but not
limited to, reasonable attorneys' fees and disbursements) arising
from (a) any claim for brokerage or agent's or finder's
commissions or compensation in respect of the transactions
contemplated by this Agreement by any Person purporting to act on
behalf of Buyer, (b) the failure to perform the obligations of
the Assumed Liabilities or (c) Buyer's failure or breach of any
representation, warranty, covenant, agreement or obligation made
or required to be performed by Buyer under this Agreement or any
document, certificate or agreement delivered pursuant to this
Agreement.
12.2 Procedure for Indemnification. Promptly after
receipt by an indemnified party under Section 12.1 of notice of
the commencement of any action, such indemnified party shall, if
a claim in respect thereof is to be made against an indemnifying
party under such section, give notice to the indemnifying party
of the commencement thereof, but the failure so to notify the
indemnifying party shall not relieve it of any liability that it
may have to any indemnified party except to the extent the
indemnifying party demonstrates that the defense of such action
is prejudiced thereby. In case any such action shall be brought
against an indemnified party and it shall promptly give notice to
the indemnifying party of the commencement thereof, the
indemnifying party shall be entitled to participate therein and,
to the extent that it shall wish, within ten Business Days of
receipt of such notice, to assume the defense thereof with
counsel satisfactory to such indemnified party and, after notice
from the indemnifying party to such indemnified party of its
election so to assume the defense thereof, the indemnifying party
shall not be liable to such indemnified party under such section
for any fees of other counsel or any other expenses, in each case
subsequently incurred by such indemnified party in connection
with the defense thereof, other than reasonable costs of
investigation. If an indemnifying party assumes the defense of
such action, (a) no compromise or settlement thereof may be
effected by the indemnifying party without the indemnified
party's consent unless (i) there is no finding or admission of
any violation of law or any violation of the rights of the
indemnified party and no effect on any other claims that may be
made against the indemnified party and (ii) the sole relief
provided is monetary damages that are paid in full by the
indemnifying party and (b) the indemnifying party shall have no
liability with respect to any
38
compromise or settlement thereof effected without its consent (which shall
not be unreasonably withheld). If notice is given to an indemnifying party
of the commencement of any action and it does not, within ten days after
the indemnified party's notice is given, give notice to the
indemnified party of its election to assume the defense thereof,
the indemnifying party shall be bound by any determination made
in such action or any compromise or settlement thereof effected
by the indemnified party. Notwithstanding the foregoing, if an
indemnified party determines in good faith that there is a
reasonable probability that an action may adversely affect it or
its Affiliates other than as a result of monetary damages, such
indemnified party may, by notice to the indemnifying party,
assume the exclusive right to defend, compromise or settle such
action, but the indemnifying party shall not be bound by any
determination of an action so defended or any compromise or
settlement thereof effected without its consent (which shall not
be unreasonably withheld).
12.3 Indemnity Escrow. Buyer acknowledges and agrees
that recourse against the Seller's Escrow is its sole and
exclusive remedy in the event of a claim against Seller with
respect to any representation or warranty or any covenant,
agreement or obligation, whether for indemnification pursuant to
Article XI or this Article XII or otherwise; provided, however,
that this limitation shall not apply to claims by Buyer for
(i) breaches of covenants to be performed or complied with by
Seller after the Closing Date, (ii) breaches of representations
or warranties set forth in Sections 5.5 and 5.16 and (iii) third
party claims asserted against Buyer arising from the Excluded
Liabilities for which Buyer acknowledges and agrees that its
first recourse shall be against the Seller's Escrow, to the
extent there are funds available.
ARTICLE XIII
13. Miscellaneous.
13.1 Parties Obligated and Benefitted. (a) Subject
to the limitations set forth in clauses (b) and (c) below, this
Agreement will be binding upon the parties and their respective
assigns and successors in interest and will inure solely to the
benefit of the parties and their respective assigns and
successors in interest, and no other Person will be entitled to
any of the benefits conferred by this Agreement.
(b) Employer shall be deemed a third party
beneficiary of Buyer's obligations as set forth in Sec
tion 7.3(b).
(c) Without the prior written consent of the
other parties, no party will assign any of its rights under this
Agreement or delegate any of its duties under this Agreement;
provided, that Buyer may assign this Agreement to any Affiliate
or subsidiary of Buyer without Seller's consent; provided,
further, that notwithstanding any such assignment Buyer shall
remain obligated to Seller pursuant to the terms and conditions
of this Agreement.
13.2 Press Releases. Except as required by applicable
law based on the advice of independent counsel, neither party
shall make any public announcement, press release or Form 8-K
filing under the Exchange Act with the SEC or any other filing
with any other
39
regulatory agency with respect to the transactions contemplated by this
Agreement, without the prior written approval of the other party.
13.3 Notices. All notices, consents, approvals,
demands, requests and other communications required or desired to
be given hereunder must be given in writing, shall refer to this
Agreement, and shall be sent by registered or certified mail,
return receipt requested, by hand delivery, by facsimile or by
overnight courier service, addressed to the parties hereto at
their addresses set forth below, or such other addresses as they
may designate by like notice:
To Seller:
American Cable TV Investors 5, Ltd.
▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
With copies to:
▇▇▇▇, Scholer, Fierman,
▇▇▇▇ & Handler, LLP
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, Esq.
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
To Buyer at:
▇▇▇▇▇▇ Acquisition Partners, L.L.L.P.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to:
▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
Any notice from a party hereto may be given by such
party's respective attorneys. Any notice or other communications
made hereunder shall be deemed to have been given (i) if
delivered personally, by overnight courier service or by
facsimile, on the date received, or (ii) if
40
by registered or certified mail, return receipt requested, five business
days after mailing.
13.4 Waiver. This Agreement or any of its provisions
may not be waived except in writing. The failure of any party to
enforce any right arising under this Agreement on one or more
occasions will not operate as a waiver of that or any other right
on that or any other occasion.
13.5 Captions. The article and section captions of
this Agreement are for convenience only and do not constitute a
part of this Agreement.
13.6 CHOICE OF LAW. THIS AGREEMENT AND THE LEGAL
RELATIONS BETWEEN THE PARTIES HERETO SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK
APPLICABLE TO CONTRACTS MADE AND TO THE PERFORMED IN THAT STATE,
WITHOUT REGARD TO CONFLICT OF LAWS PRINCIPLES.
13.7 Nonrecourse. Notwithstanding anything in this
Agreement to the contrary, subject only to the proviso of Section
12.3, no judgment shall be sought or obtained against any of the
general or limited partners of Seller or enforced against any of
such partners or any of their assets in any action brought by
reason of this Agreement or the transactions contemplated hereby.
13.8 Dispute Resolution. Any dispute relating to
this Agreement, or the breach thereof, shall in the first
instance be the subject of a meeting between Seller and Buyer
within 30 days following written notice of the dispute. The
meeting shall be attended by individuals with decision-making
authority regarding the matter in question. If the parties
cannot agree upon a resolution of the dispute within the 30-day
period referenced above, the dispute may be submitted by Seller
or Buyer to arbitration. Such arbitration shall be conducted in
Denver, Colorado before a single arbitrator appointed by the
American Arbitration Association then in effect. The award of
such arbitrator shall be final and may be entered by Seller or
Buyer in any court of competent jurisdiction. The arbitration
award may grant a reimbursement to the prevailing party of all of
its fees and expenses, including reasonable attorneys' fees.
13.9 Power of Attorney. Seller agrees that,
effective as of the Closing Date, it hereby constitutes and
appoints Buyer, its successors and assigns, the true and lawful
attorney of Seller in the name of Buyer or in the name of Seller,
to endorse, collect and deposit any checks, drafts or other
instruments payable to Seller which relate to payments for goods
and/or services provided by Seller or Buyer in connection with
the System.
13.10 Terms. Terms used with initial capital letters
will have the meanings specified, applicable to both singular and
plural forms, for all purposes of this Agreement. The word
"include" and derivatives of that word are used in this Agreement
in an illustrative sense rather than a limiting sense.
13.11 Rights Cumulative. Except as set forth in Section
10.4, all rights and
41
remedies of each of the parties under this Agreement will be cumulative, and
the exercise of one or more rights or remedies will not preclude the
exercise of any other right or remedy available under this Agreement or
applicable law.
13.12 Further Actions. Seller and Buyer will execute
and deliver to the other, from time to time at or after the
Closing, for no additional consideration and at no additional
cost to the requesting party, such further assignments,
certificates, instruments, records, or other documents,
assurances or things as may be reasonably necessary to give full
effect to this Agreement and to allow each party fully to enjoy
and exercise the rights accorded and acquired by it under this
Agreement.
13.13 Time. If the last day permitted for the giving
of any notice or the performance of any act required or permitted
under this Agreement falls on a day which is not a Business Day,
the time for the giving of such notice or the performance of such
act will be extended to the next succeeding Business Day.
13.14 Expenses. Except as otherwise expressly provided
in this Agreement, each party will pay all of its expenses,
including attorneys' and accountants' fees, in connection with
the negotiation of this Agreement, the performance of its
obligations and the consummation of the transactions contemplated
by this Agreement.
13.15 Specific Performance. The parties agree that
irreparable damages would occur if any of the provisions of this
Agreement were not performed in accordance with their specific
terms or were otherwise breached by Seller. It is accordingly
agreed that Buyer shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce
specifically the terms and provisions hereof in any court of the
United States or any state having jurisdiction, in addition to
any other remedy to which they are entitled at law or in equity.
13.16 Schedules. Any disclosure made on a Schedule to
this Agreement will be deemed included on any other Schedule to
which such disclosure may be pertinent.
13.17 Counterparts. This Agreement may be executed in
one or more counterparts, each of which will be deemed an
original.
13.18 Entire Agreement. This Agreement (including the
Schedules and Exhibits referred to in this Agreement, which are
incorporated in and constitute a part of this Agreement) contains
the entire agreement of the parties and supersedes all prior oral
or written agreements and understandings with respect to the
subject matter. This Agreement may not be amended or modified
except by a writing signed by the parties.
13.19 Severability. Any term or provision of this
Agreement which is invalid or unenforceable will be ineffective
to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining rights of the
Person intended to be benefitted by such provision or any other
provisions of this Agreement.
42
IN WITNESS WHEREOF the parties hereto have executed
this Agreement as of the day and year first above written.
SELLER: AMERICAN CABLE TV INVESTORS 5, LTD.
By: IR-TCI Partners V, L.P.,
its general partner
By: TCI Ventures Five, Inc.,
its general partner
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇
Name: ▇▇▇▇▇▇ ▇▇▇▇▇
Title: President
BUYER: ▇▇▇▇▇▇ ACQUISITION PARTNERS,
L.L.L.P.
By: ▇▇▇▇▇▇ Acquisition
Management, L.P.,
its General Partner
By: RT Investments Corp.,
its General Partner
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: Vice President
With respect to Section 7.12(b) only:
TELE-COMMUNICATIONS, INC.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: Executive Vice President
With respect to Section 7.12(b) only:
TCI COMMUNICATIONS, INC.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
Title: Senior Vice President
