EXHIBIT 2.1
ASSET PURCHASE AGREEMENT
Dated September 15, 1998
Between
AVALON CABLE OF NEW ENGLAND LLC,
as Buyer
and
TACONIC TECHNOLOGY CORP.,
as Seller
TABLE OF CONTENTS
Page
----
ARTICLE I.................................................. 1
ARTICLE II................................................. 8
2.01 Purchase and Sale of Assets.................. 8
2.02 Consideration................................ 8
2.03 Adjustment of Purchase Price................. 8
2.04 The Closing.................................. 11
2.05 No Assumed Liabilities....................... 11
2.06 Further Assurances........................... 12
ARTICLE III................................................ 13
3.01 Access....................................... 13
3.02 Financial Statements of Businesses Acquired.. 13
3.03 Fiber Construction........................... 14
3.04 Bulk Sales................................... 14
ARTICLE IV................................................. 15
4.01 Corporate Organization....................... 15
4.02 Authorization................................ 15
4.03 No Violation................................. 15
4.04 Financial Statements......................... 15
4.05 Interim Operations........................... 16
4.06 Title to Properties, Encumbrances............ 16
4.07 Contracts.................................... 16
4.08 Material Sale Assets......................... 17
4.09 Characteristics of the CATV System........... 17
4.10 Taxes........................................ 18
4.11 Affiliate Transactions....................... 18
4.12 Overbuild.................................... 18
4.13 Litigation................................... 19
4.14 Consents and Approvals....................... 19
4.15 Compliance with Law.......................... 19
4.16 FCC and Copyright Compliance................. 19
4.16.1 Compliance................................... 20
4.16.2 Copyright Office............................. 20
4.16.3 FAA Approvals................................ 20
4.16.4 Franchises................................... 20
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4.17 Employee Agreements and Plans................ 21
4.18 Environmental................................ 21
4.19 Brokers and Finders.......................... 22
4.20 Programming, Rates and Charges............... 22
4.21 Bonds, Insurance and Letters of Credit....... 22
4.22 Full Disclosure.............................. 22
ARTICLE V.................................................. 23
5.01 Corporate Organization....................... 23
5.02 Authorization................................ 23
5.03 No Violation................................. 23
5.04 Brokers and Finders.......................... 23
5.05 Qualification................................ 23
5.06 Financing.................................... 24
ARTICLE VI................................................. 24
6.01 Transfer Consents and Franchise Renewals..... 24
6.02 Supplements to Schedules..................... 24
6.03 Antitrust Laws............................... 25
6.04 No-Shop Covenant............................. 25
6.05 Removal of Equipment......................... 25
6.06 Covenant to Satisfy Conditions............... 25
ARTICLE VII................................................ 26
7.01 Antitrust Laws............................... 26
7.02 Cooperation.................................. 26
7.03 Covenant to Satisfy Conditions............... 26
ARTICLE VIII............................................... 26
8.01 Performance.................................. 26
8.02 Representations and Warranties True.......... 26
8.03 No Governmental Proceeding or Litigation..... 27
8.04 No Injunction................................ 27
8.05 HSR Act Waiting Periods...................... 27
8.06 Consents and Renewals Obtained............... 27
8.07 Purchase Price............................... 27
8.08 Assumption Agreement......................... 28
8.09 Officer's Certificate........................ 28
8.10 Opinion of Buyer's Counsel................... 28
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ARTICLE IX................................................. 28
9.01 Performance.................................. 28
9.02 Representations and Warranties True.......... 28
9.03 No Governmental Proceeding or Litigation..... 28
9.04 No Injunction................................ 29
9.05 HSR Act Waiting Periods...................... 29
9.06 Consents and Renewals Obtained............... 29
9.07 ▇▇▇▇ of Sale................................. 29
9.08 Secretary's Certificate...................... 29
9.09 Closing Date Subscribers..................... 29
9.10 Opinion of Seller's Counsel.................. 30
9.11 Headend Lease................................ 30
ARTICLE X.................................................. 31
10.01 Ordinary Course of Business.................. 31
10.02 Organization................................. 31
10.03 Certain Changes.............................. 31
10.04 Contracts.................................... 31
ARTICLE XI................................................. 32
11.01 Survival of Undertakings..................... 32
11.02 Agreement to Indemnify by Seller............. 32
11.03 Procedure.................................... 33
11.04 Agreement to Indemnify by Buyer.............. 34
ARTICLE XII................................................ 34
12.01 Methods of Termination....................... 34
12.02 Procedure upon Termination................... 35
12.03 Limitation of Liability Upon Termination..... 35
12.04 Specific Performance......................... 35
ARTICLE XIII............................................... 36
13.01 Amendment and Modification................... 36
13.02 Waiver of Compliance......................... 36
13.03 Expenses, Transfer Taxes, Etc................ 36
13.04 Notices...................................... 36
13.05 Assignment................................... 37
13.06 Third Parties................................ 37
13.07 Confidentiality.............................. 37
13.08 Publicity.................................... 38
13.09 Interpretation............................... 38
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13.10 Entire Agreement............................. 38
13.11 Counterparts................................. 38
13.12 Governing Law................................ 39
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INDEX TO SCHEDULES
Schedule/Section Reference Subject
-------------------------- -------
Schedule 1.01 CATV System/Region and Franchises
Schedule 4.03 Violations/Defaults
Schedule 4.04 Financial Statements
Schedule 4.04A Expenses Allocable to CATV Operations not reflected
on Financial Statements
Schedule 4.06 Title Matters
Schedule 4.07 Contracts
Schedule 4.08 Material Sale Assets
Schedule 4.09 Characteristic of the CATV System
Schedule 4.10 Tax Audits, Agreements, Waivers
Schedule 4.11 Affiliate Transactions
Schedule 4.13 Litigation
Schedule 4.14 Consents and Approvals
Schedule 4.15 Compliance with Law
Schedule 4.16 FCC and Copyright Compliance
Schedule 4.16.4 Franchises
Schedule 4.17(i) Employee Agreements and Plans
Schedule 4.17(ii) Employee Information
Schedule 4.17(iii) Collective Bargaining/Union Information
Schedule 4.18 Environmental
Schedule 4.20 Programming, Rates and Charges
Schedule 4.21 Bonds, Insurance and Letters of Credit
Schedule 10.03 Certain Changes
INDEX TO EXHIBITS
Exhibit Description
------- -----------
Exhibit A Assumption Agreement
Exhibit B ▇▇▇▇ of Sale
Exhibit C Escrow Agreement
Exhibit D Intentionally Deleted
Exhibit E Headend Lease
Exhibit F Intentionally Deleted
Exhibit G Opinion of Counsel for Buyer
Exhibit H-1 Opinion of Counsel for Seller
Exhibit H-2 Opinion of FCC Counsel for Seller
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ASSET PURCHASE AGREEMENT
This AGREEMENT dated as of September 15, 1998, by and between TACONIC
TECHNOLOGY CORP., a New York corporation ("Seller") and AVALON CABLE OF NEW
ENGLAND LLC, a Delaware limited liability company ("Buyer"), sets forth the
terms and conditions upon which Seller shall sell and convey to Buyer, and Buyer
shall purchase and acquire from Seller, substantially all of the property,
assets, goodwill and business as a going concern related to the Seller's cable
television systems serving a portion of Columbia County, New York.
WHEREAS, Seller wishes to sell, transfer, convey and assign to Buyer, and
Buyer wishes to purchase, acquire, receive and accept from Seller, all of the
Sale Assets, in accordance with the terms and conditions of this Agreement;
NOW, THEREFORE, in consideration of the mutual covenants and agreements
contained herein, and intending to be legally bound hereby, Buyer and Seller
hereby covenant and agree as follows:
ARTICLE I.
DEFINITIONS
For all purposes of this Agreement, except as otherwise expressly provided
or unless the context otherwise requires:
"Accounts Receivable" means all amounts due from or on behalf of any
person with respect to any goods or services (including, without
limitation, any CATV programming services, advertising services, antenna
tower space rentals, etc.) provided by the CATV System to such person prior
to the Closing.
"Affiliate" has the meaning prescribed by Rule 12b-2 of the
regulations promulgated pursuant to the Securities Exchange Act of 1934, as
amended.
"Assumption Agreement" means the instrument of assumption delivered by
Buyer to Seller pursuant to Section 2.02(c) hereof, in substantially the
form of Exhibit A hereto.
"▇▇▇▇ of Sale" means the ▇▇▇▇ of sale delivered by Seller pursuant to
Section 9.07 hereof, in substantially the form of Exhibit B hereto.
"Bulk Subscriber" means any commercial establishment (e.g., any hotel
or motel) or multiple dwelling unit establishment (e.g., any apartment
building, college dormitory, hospital, etc.) connected for services by the
CATV System that pays a bulk rate for the CATV System's Standard Basic
Service or that has been served by the CATV System within the past 12
months and that has provided Seller with written notice of resubscription;
provided, that such establishment has rendered payment in full for 30 days
of such service
and is not more than 60 days past due in any payment or any part thereof
for any such service, and further provided that such establishment's status
as a Bulk Subscriber is not the result of a credit to its account, other
than a credit which is the subject or result of a bona fide dispute with
such establishment and which would normally have been granted by Seller in
the ordinary course of its business consistent with past practice.
"Business Day" means any day on which the New York Stock Exchange (or
any successor securities exchange) and Citibank (or any successor bank) are
officially open for business in New York City.
"Buyer Damages" has the meaning set forth in Section 11.02(a) hereof.
"Cable Act" means, collectively, Title VI of the Communications Act of
1934, as amended, 47 U.S.C. (S) 151 et. seq., and all other provisions of
the Cable Communications Policy Act of 1984, the Cable Television Consumer
Protection and Competition Act of 1992 and the Telecommunications Act of
1996, as such statutes may be amended from time to time, and the rules and
regulations promulgated thereunder.
"CATV" means cable television.
"CATV Franchises" or "Franchises" means, at any date, any CATV
franchise instruments described on Schedule 4.16.4 reasonably necessary for
the construction, operation and maintenance of the CATV System identified
on Schedule 1.01 hereto as constructed, operated and maintained at such
date.
"CATV Operations" means all of the business and operations relating to
the CATV System, as presently conducted, involving the use and operation of
the Sale Assets.
"CATV System" means the CATV system as operated and maintained by
Seller (including, without limitation, one or more headends, distribution
cables, Subscriber drops and associated electronic equipment) which serves
the Region.
"Closing" means the closing of the transactions contemplated by this
Agreement.
"Closing Date" means the date on which the Closing occurs.
"Closing Date Subscribers" means the number of Qualified Subscribers
as of the Closing Date.
"Code" means the Internal Revenue Code of 1986, as amended.
"Contracts" has the meaning ascribed to it in Section 4.07(a).
"Contract Transfer Consent" means, with respect to any Contract listed
in
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Schedule 4.07, any consent (or waiver) that Seller or Buyer is required by
the terms of such Contract to obtain from any applicable party thereto for
Seller's assignment or transfer of such Contract to Buyer.
"Copyright Office" means the United States Copyright Office.
"Dispute Resolution Person" means an accountant who is independent of
Buyer and Seller and is experienced in matters involving the cable
television industry, selected by Buyer and Seller in accordance with the
rules of the American Arbitration Association ("AAA") from a panel
submitted by the AAA.
"Environmental Law" means any applicable federal, state or local law,
ordinance, rule, order, decree or regulation in effect as of the date
hereof which relates to pollution or the protection of human health, worker
safety, ambient or indoor air, ground or surface water, land, the
environment or any other natural resource including, but not limited to,
the use, storage, recycling, treatment, generation, processing, handling,
production, release, discharge, emission or disposal of any Hazardous
Substance.
"Equivalent Basic Subscribers" means the number of individual
subscribers represented by the Bulk Subscribers, which number shall be
calculated by dividing (x) the monthly ▇▇▇▇▇▇▇▇, before nonrecurring
charges or credits but after deducting taxes, attributable to Bulk
Subscribers for Standard Basic Service for the calendar month preceding the
date on which such calculation is made, by (y) the cost of Seller's
Standard Basic Service as of the Closing Date.
"Escrow Agent" means First Union National Bank, 230 South ▇▇▇▇▇
Street, 9th Fl, ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, or any successor thereto,
in its capacity as the escrow agent under the Escrow Agreement.
"Escrow Agreement" means the escrow agreement entered into by and
among Buyer, Seller and the Escrow Agent in substantially the form of
Exhibit C hereto, with such changes as Escrow Agent may reasonably request.
"Excluded Assets" means (i) Seller's cash-equivalents as of the
Closing Date; (ii) any and all insurance policies, bonds, letters of
credit, or other similar items, and any cash surrender value in regard
thereto; (iii) all books and records of Seller (including, without
limitation, correspondence, memoranda, books of account, tax reports and
returns and the like) other than those solely related to the CATV
Operations and other than those described in subpart (viii) of the
definition of Sale Assets; provided, that Buyer shall be entitled to the
rights set forth in Section 3.02 hereof with respect to the foregoing
excluded books and records; (iv) any and all claims, rights and interests
in and to any refunds for federal, state or local franchise, income or
other taxes or fees of any nature whatsoever for any period prior to the
Closing Date (including, without limitation, fees paid to the U.S.
Copyright Office); (v) all rights, by contract or otherwise, to receive
management or other services from any
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Affiliate of Seller except the office lease in Ghent, New York which is
included in the Sale Assets and the Headend Lease; (vi) the name "Taconic
Technology" and any related trade names, trademarks, service marks or logos
used by Seller in conjunction with the CATV System; (vii) any rights with
respect to any and all employee benefit plans covering any of the employees
of Seller; (vii) all rights accruing to Seller under this Agreement; and
(ix) those assets listed in Exhibit D hereto, if any.
"Extended Walkaway Date" has the meaning set forth within the
definition of "Walkaway Date" in this Article I.
"FAA" means the United States Federal Aviation Administration.
"FCC" means the United States Federal Communications Commission.
"Franchise Transfer Consent" means, with respect to any CATV
Franchise, including those listed in Schedule 4.16.4, any consent (or
waiver) that Seller or Buyer is legally required (whether by general
statute, specific ordinance, or the terms of the respective Franchise) to
obtain from any applicable municipal authority for Seller's assignment or
transfer of such Franchise to Buyer.
"FTC" means the United States Federal Trade Commission.
"Fund" means the Indemnification Fund.
"Hazardous Substance" means any substance, waste, pollutant,
contaminant or material, the use, transport, disposal, storage, treatment,
recycling, handling, discharge, release or emission of which is, as of the
date hereof, regulated or governed by any Environmental Law.
"Headend Lease" shall mean the lease substantially in the form of
Exhibit E, subject to modification only to comply with the decision of the
NYPSC with respect to the pricing thereof.
"HSR Act" means the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act of
1976, as amended.
"Indemnification Fund" means, at any date, the sum of the
Indemnification Escrow Deposit and all interest accrued thereon and any and
all other proceeds from the investment thereof as of such date, less any
and all disbursements made therefrom pursuant to the Indemnification Escrow
Agreement as of such date.
"Indemnification Escrow Deposit" means the aggregate amount of
$250,000, deposited by Buyer on the date hereof pursuant to the terms and
provisions of the Escrow Agreement.
4
"Licenses" means any FCC licenses and all other licenses issued by any
federal, state or local governmental authority (other than the CATV
Franchises) relating to and required to conduct the CATV Operations.
"Material Adverse Effect" means any material adverse effect upon (i)
Seller's financial condition, the CATV Operations, the Sale Assets taken as
a whole or the CATV Franchises and the Contracts taken as a whole, except
insofar as any such effect is attributable to any events or developments
affecting the CATV industry generally, including, but not limited to, state
and federal regulatory requirements (ii) the ability of Seller to fulfill
its obligations under this Agreement or (iii) the validity, performance or
enforceability of Seller's obligations under this Agreement.
"MDU" means a multiple-dwelling unit building.
"NYPSC" means the New York Public Service Commission.
"Person" or "person" means any corporation, general partnership,
limited partnership, limited liability company, limited liability
partnership, joint venture, association, individual or other entity.
"Personal Property" has the meaning set forth within the definition of
"Sale Assets."
"Post-Closing Certificate" has the meaning set forth in Section
2.03(b)(ii) hereof, and refers to the certificate to be delivered by Seller
to Buyer after the Closing Date, setting forth Seller's final determination
of the prorations and adjustments to be made to the Purchase Price as of
the Closing Date pursuant to Section 2.03(a) hereof.
"Pre-Closing Certificate" has the meaning set forth in Section
2.03(b)(i) hereof, and refers to the certificate to be delivered by Seller
to Buyer prior to the Closing Date, setting forth Seller's estimate of the
prorations and adjustments to be made to the Purchase Price on the Closing
Date pursuant to Section 2.03(a) hereof.
"Purchase Price" means the monetary sum specified in Section 2.02(b)
hereof, without reference to any adjustment thereto effected (or to be
effected) pursuant to Section 2.03(a) hereof or any reduction thereto
effected (or to be effected) pursuant to Section 2.03(b) hereof.
"Qualified Subscribers" means, at any date, the aggregate number of
Standard Basic Subscribers and Equivalent Basic Subscribers calculated as
of that date.
"Region" means the portions of Columbia County, New York served by the
CATV System, including those areas covered by the CATV Franchises referred
to on Schedule 4.16.4 hereto.
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"Sale Assets" means all properties, privileges, rights, interests and
claims, real and personal, tangible and intangible, of every type and
description, including goodwill, owned and used by Seller, as the case may
be, within the Region in the operation of the CATV System, including (i)
all of the CATV Franchises, Contracts and Licenses and intangibles relating
directly to the CATV Operations, including, but not limited to, all claims
and goodwill, if any, with respect to the CATV Operations; (ii) all
tangible personalty, electronic devices, trunk and distribution cable,
amplifiers, power supplies, conduit, vaults and pedestals, grounding and
pole hardware, Subscriber devices (including, without limitation,
converters, traps, decoders, switches, and fittings), "headend"
(origination, signal processing and transmission) equipment, facilities,
vehicles, office equipment, furniture, supplies, inventory and goods and
other personal property used exclusively by Seller in the CATV Operations
("Personal Property") as more particularly set forth on Schedule 4.08
hereto; (iii) all Seller's Accounts Receivable, Subscriber credit
information and Subscriber lists; (iv) all realty, towers, fixtures, fee,
leasehold and other interests in real property owned and used by Seller, as
the case may be, and all Seller's improvements and fixtures relating
thereto; (v) the tower and all equipment located at the headend sites which
are the subjects of the Headend Lease, regardless whether such equipment is
Personal Property or fixtures; (vi) all Seller's rights to all streets,
roads and public or private places, open or proposed, and all easements,
licenses, access and rights of way, whether public or private; (vii) all
engineering specifications, maps, plans, diagrams and blue prints; and
(viii) all books, records and computer files relating to the foregoing, all
personnel records of any employees hired by Buyer, all files and records
for any federal, state or local governmental authority relating to any of
the Sale Assets or the CATV Operations including without limitation
correspondence, filings and payment of fees if applicable, to the FCC or
the Copyright Office, provided, that the Sale Assets shall not include, and
Buyer shall not acquire any interest in, any of the Excluded Assets.V
"Schedules" means the Schedules hereto as the same may be amended or
supplemented from time to time by Seller pursuant to Section 6.03 hereof.
"Seller Damages" has the meaning set forth in Section 11.04(a) hereof.
"Standard Basic Service" means basic CATV service provided by the CATV
System and referred to on Schedule 4.20.
"Standard Basic Subscriber" means any person who has been connected
for Standard Basic Service at the CATV System's Standard Basic Rate
referred to on Schedule 4.20 for a single household subscriber (subject to
any applicable senior citizen or other standard, non-bulk discounts),
provided that such person has rendered payment in full for 30 days of such
service and is not more than 60 days past due in any payment for such
service, or any part thereof and further provided that such person's status
as a Standard Basic Subscriber is not the result of a credit to such
person's account, other than a credit that is the subject or result of a
bona fide dispute with such person and which would normally have
6
been granted by Seller in the ordinary course of its business consistent
with its past business practices.
"Subscriber" means each Standard Basic Subscriber and Equivalent Basic
Subscriber.
"Subscription Agreement" means any agreement, whether oral or in
writing, for the provision of CATV Service to a Standard Basic Subscriber
or a Bulk Subscriber.
"Third Party Claim" has the meaning set forth in Section 11.03(b).
"Transfer Consents" means the Franchise Transfer Consents, Contract
Transfer Consents and any consent of the NYPSC that Seller or Buyer is
legally required (whether by general statute, specific ordinance, FCC rule
or regulation, or the terms of the respective Franchise or Contract) to
obtain (a) for Seller's sale or transfer of the Sale Assets to Buyer or (b)
to permit Buyer to operate the CATV System after the Closing. For purposes
of this definition of Transfer Consents, the consent of the NYPSC will not
be deemed to have been obtained until the NYPSC has issued a written order
and at least 30 days have elapsed from the date of that order with no third
party having filed with the NYPSC any written objections to such order
(provided, however, that nothing herein shall be deemed or used to extend
the time period in which a closing shall occur under Section 2.04 hereof).
"Walkaway Date" means July 31, 1999; provided, that if the Closing has
not occurred by such date solely because one or more of the Transfer
Consents have not been obtained as provided herein, and provided, further,
that if each of Seller's or Buyer's respective obligations (other than with
respect to the Transfer Consents) set forth in Article VIII or IX are (or
could be) satisfied as of such date, then upon not less than 10 days prior
written notice given by either Buyer or Seller to the other, as the case
may be, the Walkaway Date shall mean October 31, 1999 (and shall be
referred to herein as the "Extended Walkaway Date").
The plural of any term defined in the singular, and the singular of any
term defined in the plural, shall have the meaning correlative to such defined
term.
ARTICLE II.
PURCHASE AND SALE OF ASSETS
AND ASSUMPTION OF LIABILITIES
2.01 Purchase and Sale of Assets. Subject to the terms and conditions of
this Agreement, at the Closing, Seller shall sell, transfer, convey, assign and
deliver to Buyer, and Buyer shall purchase, acquire and accept from Seller, all
of Seller's right, title and interest in and to the Sale Assets, free and clear
of all liens, security interests, mortgages, encumbrances and other
restrictions, other than those permitted under Section 4.06 hereof.
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2.02 Consideration. Subject to the terms and conditions of this Agreement:
(a) At the Closing, Buyer shall deliver to Seller (or to such
person(s) as Seller shall designate), by wire transfer of immediately available
funds, the sum of $8,525,000 (the "Purchase Price") in cash for the Sale Assets,
which sum shall be (i) reduced on the Closing Date by the amount of the
Indemnification Fund delivered to the Escrow Agent by Buyer on the date hereof,
pursuant to Section 11.02(e) hereof, and (ii) subject to adjustment on and after
the Closing Date pursuant to Section 2.03(a) hereof.
(b) Buyer and Seller agree that the allocation of the Purchase Price
among the Sale Assets shall be agreed to at Closing. Buyer shall provide Seller
with its suggested allocation prior to Closing which Seller will then review;
Buyer and Seller shall proceed in good faith to resolve any objections. Such
allocation shall be used by both Buyer and Seller for purposes of the reporting
requirements of Section 1060 of the Code and any applicable regulations
thereunder. Any adjustments to the Purchase Price required pursuant to Section
2.03(a) hereof shall also be allocated and reported in accordance with said
Section 1060. Seller shall promptly notify Buyer, and Buyer shall promptly
notify Seller, of any adjustment that comes to its attention which is proposed
to be made by any federal, state or local taxing authority with respect to the
allocation of the Purchase Price.
2.03 Adjustment of Purchase Price.
(a) The Purchase Price shall be subject to adjustment, as of 12:01
a.m. (New York City time) on the Closing Date, to reflect, in accordance with
generally accepted accounting principles, the principle that all revenues and
refunds, and all costs, expenses and liabilities, attributable to the CATV
Operations for any period prior to such time on the Closing Date are for the
account of Seller and all revenues and refunds, and all costs, expenses and
liabilities (other than liabilities and obligations under contracts or other
obligations of Seller that Buyer does not assume) attributable to the CATV
Operations on or after the Closing Date are for the account of Buyer. The
adjustments to be made to the Purchase Price pursuant to this Section 2.03(a)
shall consist of the following:
(i) an increase in the Purchase Price by an amount equal to the
sum of:
(A) all prepaid items relating to the ownership or operation
of any of the Sale Assets and for which Buyer will receive
benefits after the Closing, which prepaid items shall be prorated
between Seller and Buyer as of the Closing Date on the basis of
the period covered by the respective prepayment, and shall be
deemed to include, without limitation, all such prepaid items
attributable to the following: real and personal property taxes
and assessments levied against the Sale Assets; real and personal
property rentals; pole rentals; any expenses relating to pole
rearrangement and make-ready work relating to the CATV System
that is performed prior to Closing,
8
to the extent that such work relates solely to Subscribers to be
added to the System on or after the Closing Date; power and
utility charges; access charges; and similar items; and
(B) an amount equal to 50% of the cost of relocating certain
of the equipment included in the Sale Assets in accordance with
Section 6.05 hereof, if such amount has not been previously paid
or reimbursed by Buyer, up to a maximum aggregate increase of
$5,000.
(ii) a decrease in the Purchase Price by an amount equal to the
sum of:
(A) all Subscriber prepayments, credit balances and deposits
held by Seller as of the Closing Date and retained by Seller;
(B) all accrued and unpaid real and personal property taxes
in respect of any of the Sale Assets (which taxes shall be
prorated between Seller and Buyer as of the Closing Date on the
basis of the respective period covered by any such taxes);
(C) all accrued and unpaid expenses relating to the
ownership or operation of any of the Sale Assets, including
accrued and unpaid franchise fees (which accrued and unpaid
expenses shall be prorated between Seller and Buyer as of the
Closing Date on the basis of the period to which the respective
expense relates, and shall be deemed to include, without
limitation, accrued and unpaid expenses of the kind itemized in
Section 2.03(a)(i) above);
(D) all expenses relating to pole rearrangement and make-
ready work relating to the CATV System of which Seller has
received a notice of violation from the relevant pole company
prior to the Closing Date and which has not been cured as of such
date, or which Seller would normally perform, in the ordinary
course of business, prior to the Closing Date and which has not
been performed;
(E) in the event the number of Closing Date Subscribers is
less than the requisite number pursuant to Section 9.09, the
product of (x) $1,740 and (y) the difference between such
requisite number and the number of Closing Date Subscribers, up
to a maximum aggregate decrease of $350,000;
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(F) the adjustment contemplated by Section 9.06, if any;
(G) the unearned portion of any programming incentive
payments paid to Seller prior to Closing with respect to which
the Buyer is assuming the obligation to carry such programming on
or after the Closing; and
(H) the amount by which the PSC increases the rent to be
paid by Buyer under the Headend Lease, adjusted to reflect a
present value discount rate of 15%.
(b) For purposes of determining the prorations and adjustments to the
Purchase Price to be made as of the Closing Date pursuant to Section 2.03(a)
above, Seller and Buyer shall proceed as follows:
(i) Seller shall, not less than five days prior to the Closing
Date, deliver to Buyer a certificate (the "Pre-Closing Certificate") which
shall set forth Seller's good faith preliminary estimate of the prorations
and adjustments to the Purchase Price to be made as of the Closing Date
pursuant to Section 2.03(a) above, together with such documentation as may
reasonably support Seller's preliminary estimate set forth therein, and the
Purchase Price shall be adjusted on the Closing Date in accordance with
such estimate. Seller hereby agrees that the total copyright payments owing
with respect to the CATV System for the period in which the Closing occurs
shall be calculated in accordance with applicable law and Seller shall pay
its pro rata portion of such aggregate fees as provided in this Section
2.03(b).
(ii) Within 60 days after the Closing Date, Seller shall deliver
to Buyer a certificate (the "Post-Closing Certificate"), which shall set
forth Seller's final determination of the prorations and adjustments to the
Purchase Price to be made as of the Closing Date pursuant to Section
2.03(a) above, together with such documentation as may support Seller's
determination thereof and such other documentation relating to such Post-
Closing Certificate as Buyer may reasonably request.
(iii) If Buyer shall in good faith conclude that the Post-Closing
Certificate does not accurately reflect the final prorations and
adjustments to the Purchase Price to be made as of the Closing Date
pursuant Section 2.03(a) above, then Buyer shall, within 15 days after its
receipt of the Post-Closing Certificate, provide to Seller its written
statement of any discrepancies believed in good faith to exist, together
with such documentation as may support Buyer's determination thereof and
such other documentation relating to such statement as Seller may
reasonably request. In connection with Buyer's review of the Post-Closing
Certificate, Seller shall provide Buyer and Buyer's advisors with access to
all documents and records in its possession or under its control which
relate to the prorations and adjustments to the Purchase Price set forth in
the Post-Closing Certificate.
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(iv) If Buyer and Seller cannot resolve any dispute to their
mutual satisfaction within 30 days after Seller's receipt of Buyer's above-
specified discrepancy statement, Buyer and Seller shall, within the 10 day
period following the expiration of such 30-day period, designate a Dispute
Resolution Person to review the Post-Closing Certificate, Buyer's
discrepancy statement and any other relevant documents and to rule upon the
differences between Buyer and Seller with respect thereto. The cost of
retaining the Dispute Resolution Person shall be borne one-half by Buyer
and one-half by Seller. The Dispute Resolution Person shall report its
conclusions and ruling in writing to Buyer and Seller and such conclusions
and ruling as to any adjustments to be made pursuant to this Section 2.03
shall be conclusive and binding on all parties to this Agreement and not
subject to further dispute or review.
(v) If as a result of any resolution reached by Buyer and
Seller, or any ruling made by the Dispute Resolution Person, pursuant to
clause (iv) above, Buyer is finally determined to owe any amount to Seller,
or Seller is finally determined to owe any amount to Buyer, the obligor
shall pay such amount to the other party hereto within three Business Days
after such final determination.
2.04 The Closing. The Closing shall take place at the offices of Buyer's
counsel, ▇▇▇▇ Marks & ▇▇▇▇▇ LLP, at ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇,
at 10:00 a.m. local time or at the offices of Buyer's lender or its counsel on
the first day of the month that falls at least 30 days after the first date upon
which all of the Transfer Consents shall have been obtained, unless otherwise
extended by Buyer; provided, that the Closing shall not occur later than the
Walkaway Date (or the Extended Walkaway Date, if applicable). If the Closing
shall not have occurred on or prior to the Walkaway Date (or the Extended
Walkaway Date, if applicable), and such failure to Close is attributable solely
to the breach by one party of any of its covenants, obligations, representations
or warranties hereunder, then the non-breaching party shall be entitled to
obtain specific performance of the sale transaction contemplated by this
Agreement on the terms set forth herein; provided, that such non-breaching party
shall not thereafter, in connection therewith or otherwise, be entitled to make
any claim for any breach which is known by the non-breaching party on the
Closing Date against the breaching party pursuant to Article XI hereof or
otherwise, and that any such claim or right to bring such claim for any such
known breach shall be deemed waived. Nothing contained herein shall be deemed to
limit, restrict or waive a non-breaching party's right to bring a claim for any
breach unknown to the non-breaching party as of the Closing Date; provided, such
claim is permitted under Article XI hereof.
2.05 No Assumed Liabilities. (a) At Closing, Buyer shall assume only the
following liabilities of Seller: (i) liabilities arising out of the conduct of
the CATV Operations and the ownership of the Sale Assets from and after the
Closing Date; (ii) liabilities arising pursuant to any of the CATV Franchises or
the Contracts with respect to the period from and after the Closing Date; and
(iii) liabilities for Subscriber prepayments, credit balances and deposits for
which Buyer received a credit against the Purchase Price pursuant to Section
2.03(a)(ii)(A) hereof.
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(b) Buyer is not assuming any liability, obligation or debt of Seller
or the CATV Operations except as set forth in 2.05(a) above. Without limiting
the generality of the foregoing, Buyer is not assuming any obligations or
liability (i) to any of Seller's employees for sick or vacation pay or other
benefits, (ii) under any employee benefit plan, (iii) with respect to any
pending or threatened litigations or claims or (iv) for rate refunds, rollbacks
or credits with respect to the CATV Operations prior to the Closing.
(c) Seller acknowledges that Buyer has no obligation to hire any of
Seller's employees at or after the Closing but that Buyer may, in its
discretion, determine to offer employment to any of Seller's employees or any
employees of any Affiliate of Seller who primarily perform services relating to
the CATV Operations. Should Buyer hire any such employees, Seller or its
Affiliate shall be responsible for all compensation and benefits (including
without limitation salary, bonus, accrued vacation time or sick pay) prior to
the Closing Date. Seller and Buyer (to the extent Buyer is so required) shall
comply with notification requirements, if any, under the Federal Worker
Adjustment and Retraining Notification Act.
2.06 Further Assurances. From and after the Closing Date:
(a) Seller shall from time to time, at the request of Buyer and
without further cost or expense to Buyer, execute and deliver or cause to be
executed and delivered such other instruments of conveyance and transfer as
Buyer may reasonably request, in order to more effectively convey, transfer and
assign to Buyer the Sale Assets.
(b) Buyer shall from time to time, at the request of Seller and
without further cost or expense to Seller, execute and deliver or cause to be
executed and delivered such other instruments of assumption and performance as
Seller may reasonably request, in order to more effectively evidence and carry
out Buyer's assumption of the liabilities and obligations of Seller pursuant to
the Assumption Agreement.
(c) Buyer and Seller shall cooperate in the removal promptly, but in
no event more than 30 days, after the Closing of Seller's name and logo to the
extent incorporated in or on any of the Sale Assets.
(d) Seller hereby appoints Buyer and its employees and
representatives as its attorney in fact, with full power of substitution, to
endorse Seller's name on any checks payable to Seller or its order with respect
to any of the Accounts Receivable or any other Sale Assets. Said appointment,
being coupled with an interest, is irrevocable.
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ARTICLE III.
RELATED MATTERS
---------------
3.01 Access.
(a) Subject to the provisions of Section 13.07 hereof, Seller agrees
that on and after the date hereof, during normal business hours and on
reasonable notice to Seller, it shall permit Buyer and its auditors, attorneys,
financing sources and other advisors through their authorized representatives,
to have access to any properties of Seller reasonably related to the CATV
Operations, to examine all books and records of Seller reasonably related to the
CATV Operations and to have access to any employees, advisors, consultants and
other personnel of Seller related to the CATV Operations.
(b) Buyer agrees that on and after the Closing Date, during normal
business hours, it shall permit Seller and Seller's auditors and attorneys,
through their authorized representatives, to have access to and to examine all
books and records provided by Seller to Buyer in connection with the
transactions contemplated by this Agreement and reasonably related to events
occurring prior to the Closing.
(c) Each party shall direct its representatives to render any
assistance which the other party may reasonably request in examining or
utilizing records referred to in this Section 3.01. Each party agrees to
preserve all files and records which are subject to this Section 3.01 for a
period of six (6) years after the Closing Date; provided, that each party may
destroy or otherwise dispose of any such records during such six-year period
after first giving 30 days' notice thereof to the other party, and within 30
days of receipt of such notice, such other party may cause to be delivered to it
the records intended to be destroyed, at such other party's expense.
(d) Seller further agrees that on and after the date hereof, during
normal business hours, it will permit Buyer and its authorized representatives
access to all real property owned or used by Seller in connection with the CATV
Operations (including without limitation headend sites) for the purposes of
conducting environmental assessments including without limitation a Phase I
environmental audit and to conduct any additional testing or procedures that are
reasonably appropriate based on the results of any preliminary report or such
Phase I.
3.02 Financial Statements of Businesses Acquired. Seller acknowledges that
Buyer's parent, Avalon Cable Holdings LLC, is currently planning an offering
under Rule 144A promulgated under the Securities Act of 1933, as amended (the
"Rule 144A Offering") and subsequent public debt offering under applicable
federal and state securities laws and that, in connection therewith, Avalon
Cable Holdings LLC will need current and historical financial information about
the CATV Operations to comply with Rule S-X and other applicable securities
laws. Accordingly, Seller will deliver to Buyer on or prior to the date hereof:
(a) an audited balance sheet of Seller with respect to the CATV
Operations for
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the fiscal years ending December 31, 1996 and 1997, respectively, and related
statements of income, retained earnings and cash flows for such periods setting
forth in each case in comparative form the figures for the previous fiscal year,
all reported on by independent public accountants. Such financial statements
shall each be prepared pursuant to Regulation S-X promulgated by the Securities
and Exchange Commission and accompanied by manually signed reports thereon by
independent public accountants pursuant to Rule 2-02 of Regulation S-X;
(b) an unaudited balance sheet of Seller with respect to the CATV
Operations for the fiscal year ended December 31, 1995 prepared pursuant to
Regulation S-X; and
(c) an unaudited consolidated balance sheet of Seller with respect to
the CATV Operations as of June 30, 1998 and related statements of income and
cash flows from the beginning of the current fiscal year to June 30, 1998
together with comparative data for the comparable period in Seller's fiscal year
ended December 31, 1997, all to the extent and in the form required by the rules
and regulations of the Securities and Exchange Commission and prepared pursuant
to Regulation S-X.
Unless otherwise provided herein, the cost of having KPMG Peat Marwick LLP
prepare the financial statements required by Buyer pursuant to this Section 3.02
shall be borne by Buyer, regardless of whether the transactions contemplated by
this Agreement are consummated.
3.03 Fiber Construction. Buyer acknowledges that Seller currently uses two
strands of the existing fiber of its parent, Taconic Telephone Corp. to conduct
its CATV Operations. Taconic Telephone Corp. shall permit Buyer to continue to
use such fiber on substantially the same basis as Seller currently uses such
fiber but without fees or charges of any kind for a period of six months
commencing the Closing Date (the "Use Period"). During such Use Period, Buyer
shall use reasonable efforts to construct its own fiber system at its own cost
and expense (including all make ready and ride charges). Seller acknowledges
that in connection with Buyer's construction of its own fiber system, Buyer may
require pole attachment agreements with Taconic Telephone Corp.; Seller and
Taconic Telephone Corp. agree to cause such pole attachment agreements to be in
Taconic Telephone Corp.'s standard form, at customary rates and on other
customary terms and conditions.
3.04 Bulk Sales. The parties waive compliance with the bulk sales
provisions of the New York Uniform Commercial Code or similar laws that may be
applicable to the transactions contemplated hereby.
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ARTICLE IV.
REPRESENTATIONS AND WARRANTIES OF SELLER
----------------------------------------
Seller hereby represents and warrants to Buyer that each of the statements
contained in this Article IV is true and correct as of the date of this
Agreement:
4.01 Corporate Organization. (a) Seller is a corporation duly incorporated
and validly existing under the laws of the State of New York and has all
requisite power and authority to carry on the CATV Operations as they are now
being conducted and to own the Sale Assets. Seller is duly qualified to conduct
business in the State of New York and each other state where the failure to be
so qualified would have a Material Adverse Effect.
4.02 Authorization. Seller has all requisite corporate power and authority
to enter into this Agreement and to carry out the transactions contemplated
hereby. The execution and delivery of this Agreement and consummation of the
transactions contemplated hereby has been duly authorized in accordance with its
Articles of Incorporation, as amended, and By-Laws. This Agreement is a valid
and binding agreement of Seller enforceable in accordance with its terms,
subject to all of the limitations imposed by applicable bankruptcy, insolvency,
reorganization, moratorium and similar laws of general application relating to
or affecting creditors rights generally and to general principles of equity.
4.03 No Violation. Neither the execution and delivery of this Agreement nor
the consummation of the transactions contemplated hereby will violate any
provision of the Articles of Incorporation or By-Laws of Seller, or, except as
specified in Schedule 4.03 or on Schedule 4.14, violate, constitute a material
default under, result in the termination of, accelerate the performance required
by, any agreement or commitment to which Seller is a party or by which Seller is
bound the violation of which, the termination of which or the acceleration of
which would have a Material Adverse Effect, or materially violate any statute or
law or any judgment, decree, order, regulation or rule of any court or
governmental authority to which Seller is a party or by which Seller is bound.
4.04 Financial Statements. Schedule 4.04 contains audited financial
statements of Seller with respect to the CATV Operations for each of the years
ended December 31, 1996 and 1997, an unaudited balance sheet for the year ended
December 31, 1995 and unaudited financial statements for the six month periods
ended June 30, 1998 and June 30, 1997 (collectively, the "Financial
Statements"). The Financial Statements fairly present the results of operation
of the CATV Operations for the periods set forth therein and were prepared in
accordance with generally accepted accounting principles consistently applied,
subject, in the case of interim Financial Statements, to customary year-end
adjustments and accruals and the absence of footnotes. Except as indicated on
Schedule 4.04A, the Financial Statements include all expenses (other than
depreciation, amortization, taxes and management fees) allocable to the CATV
Operations as if operated on a stand-alone basis. Schedule 4.04 also contains
the amount of all capital expenditures in respect of the CATV Operations for the
same periods covered by the Financial Statements.
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4.05 Interim Operations. Since June 30, 1998, (i) the CATV Operations have
been conducted in the ordinary and usual course consistent with past practice in
all material respects, (ii) except as otherwise provided in this Agreement,
Seller has not entered into or otherwise become a party to any agreement to take
any action which would, if taken prior to the Closing, materially breach any
obligation contained in Article X hereof; and (iii) there has been no Material
Adverse Effect in respect of the Sale Assets or the CATV Operations.
4.06 Title to Properties, Encumbrances. (a) Seller has and shall transfer
to Buyer, good title to the Sale Assets free and clear of all defects or
objections, liens, claims, charges, security interests or other encumbrances of
any nature, except (i) such matters, if any, as are specified in Schedule
4.06(a) (all of which shall be removed on or prior to the Closing Date); (ii)
imperfections of title, easements, encumbrances or restrictions, if any, which
do not and will not materially impair the present use of the respective Sale
Assets subject thereto or the CATV Operations and have not had and would not
reasonably be expected to have a Material Adverse Effect; (iii) materialmen's,
mechanics', carriers', workmen's, warehousemen's, repairmen's or other like
liens arising in the ordinary course of business, or deposits to obtain the
release of such liens (all of which shall be removed on or prior to the Closing
Date); and (iv) liens for current taxes not yet due.
(b) Except as noted on Schedule 4.06(a), the Sale Assets constitute
all assets that are used exclusively in the CATV Operations and that are deemed
reasonably necessary by Seller to operate the CATV System and conduct the CATV
Operations as currently conducted. Schedule 4.06(b) sets forth (i) all material
assets that are being used in the CATV Operations on a non-exclusive basis and
that are deemed reasonably necessary by Seller to operate the CATV System and
conduct the CATV Operations as currently conducted; and (ii) all other material
assets used in the operation of the CATV System and to conduct the CATV
Operations as currently conducted, but are not included in the Sale Assets.
4.07 Contracts.
(a) Schedule 4.07 sets forth a complete and accurate list, as of the
date of this Agreement, of all of the following (whether written or unwritten),
other than the retransmission consents and must-carry elections referred to in
Section 4.16 and the CATV Franchises:
(i) contracts relating to the CATV Operations or Sale Assets
involving post-Closing Date monetary obligations of more than $5,000
individually (i.e., in the case of any single contract), contingent or
otherwise, or which may extend for a term of more than one year after the
Closing Date; for purposes hereof, as of the date of this Agreement, the
parties have agreed to use July 1, 1999 as the Closing Date;
(ii) contracts relating to the CATV Operations or Sale Assets
under which the amount payable is dependent on the revenue, income or
similar measure of any person or entity;
16
(iii) licenses, leases, contracts and other arrangements with
respect to any of the material Sale Assets, including, without limitation,
material sales, distribution and supply contracts, headend and office
leases, vehicle leases, equipment leases, and the lease of the CATV
Systems's signal fiber to Berkshire Cable;
(iv) contracts which place any material limitation on the method
of conducting or scope of the CATV Operations or the Sale Assets including,
without limitation, non-compete agreements;
(v) all programming agreements and pole attachment agreements;
(vi) all easements, rights-of-way and rights-of-entry which are
material to the CATV Operations and, to Seller's knowledge, all other
easements, rights-of-way and rights-of-entry that exist in connection with
the CATV Operations; and
(vii) other contracts, instruments, commitments, plans and
arrangements which materially involve or relate to the CATV Operations or
the Sale Assets, excluding employee related contracts described on Schedule
4.17.
All of the foregoing listed or required to be listed in Schedule 4.07 are
referred to herein as the "Contracts." Schedule 4.07 identifies each Contract
that is material to the CATV Operations.
(b) Except as otherwise indicated on Schedule 4.07, Seller is in
compliance, in all material respects, with the terms and conditions of all
Contracts and to Seller's knowledge, there is no default or event of default or
event which, with the passage of time or giving of notice or both, would
constitute a default or event of default under any such Contracts. Schedule 4.07
indicates with an asterisk which of the Contracts requires the consent of a
third party for the assignment of such Contract to Buyer. True, complete and
correct copies of each of the written Contracts have been delivered to Buyer.
4.08 Material Sale Assets. Schedule 4.08 contains a list of the tangible
Sale Assets having an individual cost or replacement value equal to or greater
than $5,000. Except as indicated in Schedule 4.08, the Sale Assets listed on
Schedule 4.08 are in good operating condition.
4.09 Characteristics of the CATV System. (a) Schedule 4.09 sets forth a
materially true and accurate description of the following information, with
respect to the CATV System:
(i) the approximate number of miles of energized cable plant and
homes passed as of the date hereof;
(ii) the approximate number of the CATV System's converters in
service, the approximate number of additional outlets, the approximate
number of pay units and the approximate number of the CATV System's
Qualified Subscribers, as of June 30,
17
1998; and
(iii) the MHz capacity of the CATV System and the CATV System's
channel capacity.
(b) To Seller's knowledge, as of the date of this Agreement, and
subject to MDU's which terminate services and resubscribe in the ordinary course
of business based on seasonality, the CATV System has not lost access to any MDU
within the past 24 months, and continues to provide cable services to all of the
MDU's to which it provided services as of December 31, 1996.
(c) No franchising authority currently regulates or has regulated the
CATV System's basic rates pursuant to the 1992 Cable Act. The CATV System does
not offer a cable programming services tier except as set forth on Schedule
4.20.
(d) Annexed hereto as part of Schedule 4.09 are the most recent proof
of performance tests for the CATV System. Seller warrants and agrees that as of
the Closing Date, except as set forth on Schedule 4.15, the CATV System shall
meet or exceed the performance standards required by applicable law.
4.10 Taxes. All income, unemployment, social security, sales, franchise,
property and other material taxes levied, assessed or imposed upon Seller or the
CATV System by the United States or any state, or any governmental subdivision
of either, to the extent due and payable as of the date hereof, have been timely
and properly paid, and no liability exists for deficiencies, except where
nonpayment of any such taxes has not had, and would not reasonably be expected
to have, a Material Adverse Effect and except for taxes being contested by
appropriate proceedings and for which adequate reserves have been established on
Seller's Financial Statements. Except as set forth in Schedule 4.10, there are
no tax audits pending or any outstanding agreements or waivers extending the
statutory period of limitations applicable to any federal, state or local income
tax return of Seller. To Seller's knowledge, no tax deficiency has been
determined, nor proposed tax assessment charged, against Seller. Seller has made
or caused to be made all withholdings of taxes required to be made, and such
withholdings have either been paid to the appropriate governmental agency or set
aside, in appropriate accounts for such purpose.
4.11 Affiliate Transactions. Other than as set forth in Schedule 4.11,
there are no Contracts or other agreements or arrangements relating to the CATV
Operations between Seller, on the one hand, and any Affiliate thereof, on the
other hand.
4.12 Overbuild. As of the date hereof, to Seller's knowledge, there is (i)
no franchise issued or other application therefor pending with franchising
authorities which relate to the operation of a CATV system within the Region by
a party other than Seller, (ii) no party providing CATV service within the
Region under a franchise granted by any local franchising authority and (iii) no
party providing CATV service within the Region who has not obtained a franchise
which permits the construction, operation and maintenance of a CATV system
within the Region or any
18
part thereof. To Seller's knowledge, within the past five years no operator of a
CATV system has built, updated or otherwise constructed or operated any part of
any CATV system within the area of the Region served by the CATV System operated
by Seller.
4.13 Litigation. Except as set forth in Schedule 4.13 or with respect to
matters affecting the CATV industry in general, there is no action, suit or
proceeding by or before any court or governmental or other regulatory or
administrative agency or commission pending, or to Seller's knowledge,
threatened, with respect to the CATV Operations, except any action, suit, or
proceeding that has not had and would not reasonably be expected to have a
Material Adverse Effect. Seller is not subject to any judgment or order entered
in any lawsuit or proceeding to which Seller is a party with respect to the CATV
Operations.
4.14 Consents and Approvals. Except as set forth in Schedules 4.07, 4.14,
4.16 and 4.16.4, and subject to the requirements of the HSR Act, if applicable,
and the approval of the NYPSC, no consent or approval of any governmental
authority is required by Seller in connection with the execution, delivery and
performance of this Agreement or the consummation of the transactions
contemplated hereby. Except as set forth in the preceding sentence or in
Schedule 4.14, no consent, approval or authorization of any other person is
necessary for the consummation of the transactions contemplated hereby.
4.15 Compliance with Law. Except as set forth in Schedules 4.15, 4.16, and
4.18, the CATV Operations have been conducted and the Sale Assets have been
maintained and operated in compliance with all applicable laws, regulations and
other requirements of all national governmental authorities, federal, state,
local and municipal that have jurisdiction over Seller with respect to the CATV
Operations, except where the failure to comply with such laws, regulations and
requirements have not had and would not reasonably be expected to have a
Material Adverse Effect.
4.16 FCC and Copyright Compliance. Except as provided in Schedule 4.16, the
operation of the CATV System has been and is in compliance with the Cable Act
and the rules and regulations of the FCC, except for such noncompliance as has
not had and would not reasonably be expected to have a Material Adverse Effect.
Seller has made all material filings required to be made with the FCC (including
cable television registration statements, annual reports and aeronautical
frequency usage orders) has paid all required fees to be paid to the FCC for the
CATV System, and has provided all material notices to customers required under
the Cable Act and the FCC's rules and regulations. For the past three years,
Seller has been certified for purposes of compliance with the FCC's equal
employment opportunity rules, and Seller is in material compliance with all
signal leakage criteria prescribed by the FCC. Seller makes available to
customers of the CATV System and third parties all equipment and facilities
required under any applicable federal, state and local laws, rules and
regulations and ordinances, and as of the date of this Agreement Seller is not a
party to any leased access agreement with respect to the CATV System. Except as
described in Schedule 4.16.4, none of the CATV Franchises shall expire by its
terms within thirty-six (36) months of the date of this Agreement. Seller does
not hold any FCC License related to the CATV Operations and none is required to
operate the CATV Operations as they are operated as of the date of this
Agreement.
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4.16.1 Compliance. Except as set forth in Schedule 4.16, Seller has
complied in all material respects with the must-carry and retransmission consent
provisions of the Cable Act and the FCC rules and regulations promulgated
thereunder as such provisions relate to the CATV Operations. Schedule 4.16 lists
all retransmission consent agreements and must-carry elections of stations
carried by the CATV System. Except as set forth in Schedule 4.16, since January
1, 1996, no written notices or demands have been received from the FCC, any
television station or any other Person, station, governmental authority or unit
challenging the right of the CATV System to carry any signal or deliver the
same.
4.16.2 Copyright Office. Seller has deposited with the Copyright Office all
statements of account and other documents and instruments, and paid to the
Copyright Office all royalties, supplemental royalties, fees and other sums, as
are required under the Copyright Act of 1976, as amended (the "Copyright Act")
to obtain, hold and maintain the compulsory license for cable television systems
prescribed in Section 111 of the Copyright Act. Seller and the CATV Operations
are in compliance with the Copyright Act and the rules and regulations of the
Copyright Office, except for such noncompliance which has not had and would not
reasonably be expected to have a Material Adverse Effect. To Seller's knowledge,
there is no inquiry, claim, action or demand pending before the Copyright Office
or from any other party which questions the copyright filings or payments made
by Seller with respect to the CATV System. Seller has provided Buyer with copies
of all statements of account filed with the Copyright Office from January 1,
1996 to the present.
4.16.3 FAA Approvals. All necessary FAA approvals have been obtained with
respect to the height and location of any tower used in connection with the CATV
Operations and are listed in Schedule 4.16. Any such tower is being operated in
compliance in all material respects with applicable FCC and FAA rules.
4.16.4 Franchises. Schedule 4.16.4 includes a true and complete list of all
Franchises that are held for use in connection with the CATV Operations. To
Seller's knowledge, no other franchises, franchise applications, licenses,
registrations, authorizations or permits are necessary in connection with the
operation of the CATV System in the ordinary course of business. True and
complete copies of the Franchises (together with any and all amendments thereto)
have been delivered to Buyer. Each of the Franchises is in full force and effect
in accordance with its terms. No proceeding is pending or, to Seller's
knowledge, threatened, to revoke, terminate or cancel any Franchise. Seller and
the CATV Operations are in compliance with the terms and conditions of the CATV
Franchises and are not in default thereunder, except as listed in Schedule 4.15,
and except any noncompliance or default as has not had and would not reasonably
be expected to have a Material Adverse Effect. Seller has enjoyed and continues
to enjoy good relations with each franchising authority with which it does
business.
4.17 Employee Agreements and Plans. (a) Schedule 4.17(i) contains a
complete list of all written and unwritten plans, policies and agreements,
including employment agreements, non-competition agreements, severance
agreements and indemnification agreements and arrangements,
20
to which Seller is a party at the date of this Agreement and under which Seller
or any Affiliate provides benefits to current employees of Seller, engaged in
the CATV Operations (the "Plans"). Copies of all of the Plans have been
delivered or made available to Buyer. Except as disclosed in Schedule 4.17(i),
there are no commitments to amend any of those Plans. Schedule 4.17(i) also
contains a summary of the plans and policies regarding vacation and holidays
which Seller maintains for employees of the CATV System. Schedule 4.17(ii) lists
all employees of Seller employed by the CATV System, together with each such
employee's respective date of initial employment, present title and work
assignment, present annual salary, the date and percentage of his or her most
recent salary increase and, for employees whose employment relates solely to the
CATV Operations, the amount of any bonus such employees are presently eligible
to receive.
(b) As of the date of this Agreement, except as listed on Schedule
4.17(iii), (i) Seller is not a party to any collective bargaining agreement with
respect to any of the CATV Operations, (ii) none of the employees engaged in the
CATV Operations is presently a member of any collective bargaining unit related
to his or her employment in the CATV Operations, and (iii) to Seller's
knowledge, no collective bargaining unit has filed a petition for representation
of any of the employees engaged in the CATV Operations with respect to any such
employee's employment therein.
4.18 Environmental. Except as set forth in Schedule 4.18: (a) to Seller's
knowledge, Seller is in compliance in all material respects with all
Environmental Laws; (b) to Seller's knowledge, Seller has not generated,
released, stored, used, treated, handled, discharged or disposed of any
Hazardous Substance at, on, under, in or about any property leased or owned by
Seller that is to be leased to Buyer under the Headend Lease (the "Leased
Property"), discharged any Hazardous Substance to or from any Leased Property or
discharged any Hazardous Substance from any Leased Property into any ground or
surface of water, directly or indirectly; (c) to Seller's knowledge, no release
of Hazardous Substances outside any Leased Property threatens to migrate into,
onto or under such property; (d) to Seller's knowledge, no underground storage
tank is located on any Leased Property or has been removed from such property,
and the Leased Property has not and is not being used as a gasoline service
station or any other facility for storing, pumping, dispensing or producing
gasoline or any other petroleum products or wastes; (e) all wastes generated on
any Leased Property are and have been discharged by Seller, in all material
respects, in accordance with all Environmental Laws; (f) Seller has provided or
has caused to be provided to Buyer copies of any and all (i) assessments,
studies, reports or surveys relating to the environmental conditions, including
but not limited to, the presence or alleged presence of Hazardous Substances at
or on any Leased Property, which are in the possession or under the control of
Seller, (ii) notices or other written materials that were received by Seller or
any Affiliate from any governmental authority having power to administer or
enforce any Environmental Law relating to any violations of Environmental Laws
in respect of any Leased Property, and (iii) notices that were received by
Seller or any Affiliate of any claim by any person based on or alleging a
violation of any Environmental Law with respect to any Leased Property; (g)
there are no current or, to Seller's knowledge, pending, claims, administrative
proceedings, judgments, declarations or orders relating to violation of
Environmental Laws involving any Leased Property or to the presence of Hazardous
Substances at, on, in or under any Leased Property; (h) to Seller's knowledge,
no friable asbestos is present at any
21
real Leased Property.
4.19 Brokers and Finders. Except for Communications Equity Associates, and
the brokerage fee due said firm in connection with the transactions contemplated
by this Agreement (which brokerage fee will be paid by Seller), Seller has not
employed any broker or finder or incurred any liability for any brokerage fees,
commissions or finders' fees in connection with the transactions contemplated by
this Agreement.
4.20 Programming, Rates and Charges. Schedule 4.20 lists all programming,
stations, signals and channels offered in the CATV Operations, the channel
position of each such signal, and the channel capacity of the CATV Systems and
all of the CATV System's standard, non-discounted, non-bulk CATV rates and
charges for the Region as of the date of this Agreement including, without
limitation, a description of basic and optional or tier services available.
Schedule 4.20 also lists all discounts of every kind (whether or not standard or
offered in the ordinary course of business) from the standard rates and charges
for the Region as of the date of this Agreement and lists each courtesy and
discount account existing as of the date of this Agreement. Schedule 4.20 also
reflects all principal marketing, advertising and promotional programs currently
in effect and any such programs that were in effect since January 1, 1997.
Seller has not credited the account of any customer unless such credit was
granted in the ordinary course of business consistent with the Seller's past
business practice. Schedule 4.20 also lists all rate changes since January 1,
1996 and the dollar amounts thereof and all channels added since January 1,
1996.
4.21 Bonds, Insurance and Letters of Credit. Each insurance policy,
performance bond and letter of credit required to be maintained or which is
maintained covering the property comprising the Sale Assets is set forth in
Schedule 4.21, and a copy of each such policy, letter of credit or bond will be
delivered to Buyer by Seller within 30 days of the execution of this Agreement.
Each such policy, letter of credit and bond is current and in full force and
effect. Seller will continue to maintain in effect through the Closing Date
those bonds, letters of credit and insurance policies in connection with the
CATV System as may be required. During such period, Seller will not take any
action or refrain from taking any action with respect to such bonds, letters of
credit or insurance policies which would adversely affect the insurability of
the Sale Assets or the CATV System.
4.22 Full Disclosure. Seller has disclosed in this Agreement and the
related Schedules all information material to operation and ownership of the
Sale Assets and the CATV Operations and has not omitted any information which
would cause any of the information which has been disclosed to be misleading or
incorrect in any material respect.
22
ARTICLE V.
REPRESENTATIONS AND WARRANTIES OF BUYER
---------------------------------------
Buyer hereby represents to Seller that each of the statements contained in
this Article V is true and correct as of the date of this Agreement:
5.01 Corporate Organization. Buyer is a limited liability company duly
formed and validly existing under the laws of the State of Delaware and has all
requisite power and authority to carry on its business as it is now being
conducted and to own the properties and assets it now owns, and is duly
qualified or licensed to do business as a limited liability company where the
failure to be so qualified would have a Material Adverse Effect.
5.02 Authorization. Buyer has all requisite power and authority to enter
into this Agreement and to carry out the transactions contemplated hereby. The
execution and delivery of this Agreement and consummation of the transactions
contemplated hereby has been duly authorized in accordance with Buyer's
operating agreement. This Agreement is a valid and binding agreement of Buyer
enforceable in accordance with its terms, subject to all of the limitations
imposed by applicable bankruptcy, insolvency, reorganization, moratorium and
similar laws of general application relating to or affecting creditors rights
generally and to general principles of equity.
5.03 No Violation. Neither the execution and delivery of this Agreement nor
the consummation of the transactions contemplated hereby will violate any
provisions of Buyer's Certificate of Formation or Operating Agreement, or
violate, be in conflict with, constitute a default under, result in the
termination of, accelerate the performance required by or cause the acceleration
of the maturity of any debt or obligation pursuant to any agreement or
commitment to which Buyer is a party or by which Buyer is bound, or violate any
statute or law or any judgment, decree, order, regulation or rule of any court
or governmental authority to which Buyer is bound.
5.04 Brokers and Finders. Buyer has not employed any broker or finder or
incurred any liability for any brokerage fees, commissions or finders' fees in
connection with the transactions contemplated by this Agreement, except as will
be paid by Buyer.
5.05 Qualification. There are no facts which would, under present federal
or state law, or under the present rules, regulations and policies of the FCC,
or under any CATV Instrument, disqualify Buyer from acquiring any of the Sale
Assets. In the event that Buyer becomes aware of any such facts, it shall
promptly notify Seller in writing thereof and use reasonable efforts to prevent
any such disqualification.
5.06 Financing. Buyer has sufficient funds available to satisfy its
obligations to pay the Purchase Price at Closing and will not require any
further additional outside financing to close the transactions contemplated by
this Agreement.
23
ARTICLE VI.
COVENANTS OF SELLER
-------------------
Seller hereby covenants and agrees with Buyer as follows with respect to
the period from the date hereof through the Closing Date:
6.01 Transfer Consents and Franchise Renewals. (a) Seller shall use its
reasonable efforts to obtain at the earliest practicable date (and in any event
prior to the Closing), and at its sole cost and expense, the Transfer Consents
which consents shall be in form and substance reasonably satisfactory to Buyer
and shall not impose any obligation or liability on Buyer greater than that
which exists under the related contract or franchise, as applicable, as in
effect on the date hereof.
(b) Seller shall use its reasonable efforts and shall fully cooperate
with Buyer in obtaining the renewals of the CATV Franchises for the towns of
Ancram, Austerlitz, Canaan, Copake and Hillsdale on terms reasonably
satisfactory to Buyer.
(c) Seller and Buyer agree to use reasonable efforts to submit all
CATV Franchise transfer and renewal requests to the appropriate authorities
within 30 days from the date hereof and to submit a petition to the NYPSC for
approval of the transactions contemplated by this Agreement within 30 days from
the date hereof.
(d) With respect to any CATV Franchise which does not expire within
thirty-six (36) months from the date of this Agreement but will expire within
thirty-six (36) months from any date after the date hereof and prior to the
Closing Date, Seller will timely and properly file a Form 394 in accordance with
applicable law and a notice pursuant to Section 626 of the Cable Act and shall
promptly (and in any event prior to the Closing) provide Buyer with a true and
complete copy thereof together with evidence of the filing thereof.
6.02 Supplements to Schedules. From time to time prior to the Closing,
Seller may (i) supplement or amend any Schedule with respect to any matter
hereafter arising which, if existing or occurring at or prior to the date of
this Agreement, would have been required to be set forth or described in that
Schedule, or (ii) correct any Schedule with respect to any matter which is
required to be set forth or described therein; provided, however, that no such
supplement, amendment or correction of any Schedule made pursuant to this
Section 6.02 shall be deemed to be accepted by Buyer or to cure any breach of
any representation, warranty or covenant made in this Agreement unless Buyer
specifically agrees thereto in writing.
6.03 Antitrust Laws. As soon as practicable, and in any event within 15
days after the date hereof, Seller shall make any and all filings Seller is
required to make under the HSR Act, if any. Seller shall furnish to Buyer such
necessary information and reasonable assistance as Buyer may request in
connection with its preparation of necessary filings or submissions to any
governmental agency, including, without limitation, any filings necessary under
the provisions of the HSR Act. Seller shall supply Buyer with copies of all
correspondence, filings or
24
communications (or memoranda setting forth the substance thereof) between Seller
or its representatives, on the one hand, and the FTC, the Antitrust Division of
the U.S. Department of Justice or any other governmental agency or authority or
members of their respective staffs, on the other hand, with respect to this
Agreement or the transactions contemplated hereby.
6.04 No-Shop Covenant. From the date of this Agreement until the earlier of
the Closing or the termination of this Agreement in accordance with its terms,
(a) Seller and its Affiliates shall not, directly or indirectly, (i) solicit any
offer from any other person for any form of business combination or acquisition
or disposition of all or any of the Sale Assets or the CATV System or initiate
or enter into any negotiations or provide confidential information with respect
to any such business combination or acquisition, (ii) solicit any offer from any
other person for any transaction involving Seller that would preclude or in any
way interfere with the consummation of the transactions contemplated by this
Agreement, or initiate or enter into any negotiations or provide confidential
information with respect to any such transaction, or (iii) authorize any
representative, agent, officer, director or principal stockholder to take any of
the actions prohibited in this paragraph, and (b) Seller and its Affiliates
shall use all reasonable efforts to prevent any such person or entity from
taking any of the actions prohibited in this paragraph. Nothing contained in
this Section 6.04 shall prohibit Seller from responding to any unsolicited
proposal or inquiry by advising the person or entity making such proposal or
inquiry of the terms of this Section 6.04. Seller agrees to advise Buyer
promptly after receipt of any such proposal or inquiry.
6.05 Removal of Equipment. Prior to the Closing, Seller shall have moved
into secure office space used exclusively by the CATV Operations, which space
will be the subject of the Headend Lease: (i) a certain rack of equipment at the
end of the fiber located in the Copake facility in the offices utilized by
Taconic Telephone Corp.; (ii) fiber nodes located at various offices utilized by
Taconic Telephone Corp.; and (iii) any other similar Sale Assets located in a
space which is not used exclusively in the CATV Operations. Buyer and Seller
shall share equally the cost of moving the above-mentioned items, provided that
in no event shall Buyer be required to pay more than $5,000.
6.06 Covenant to Satisfy Conditions. Seller shall use all reasonable
efforts to ensure that each of the conditions set forth in Article IX hereof to
be satisfied by Seller is satisfied, insofar as such matters are within the
control of Seller.
25
ARTICLE VII.
COVENANTS OF BUYER
------------------
Buyer hereby covenants and agrees with Seller as follows with respect to
the period from the date of hereof through the Closing Date:
7.01 Antitrust Laws. As soon as practicable, and in any event within 15
days after the date hereof, Buyer shall make any and all filings it is required
to make under the HSR Act, if any. Buyer shall furnish to Seller such necessary
information and reasonable assistance as Seller may request in connection with
Seller's preparation of necessary filings or submissions to any governmental
agency, including, without limitation, any filings necessary under the
provisions of the HSR Act. Buyer shall supply Seller copies of all
correspondence, filings or communications (or memoranda setting forth the
substance thereof) between Buyer or its representatives, on the one hand, and
the FTC, the Antitrust Division of the U.S. Department of Justice or any other
governmental agency or authority or members of their respective staffs, on the
other hand, with respect to this Agreement or the transactions contemplated
hereby.
7.02 Cooperation. Whenever requested by Seller, with reasonable prior
notice, Buyer shall assist and cooperate fully with Seller in Seller's efforts
to obtain the Transfer Consents, which assistance and cooperation shall include
Buyer's attending meetings with Seller and local franchising authorities within
the Region at Seller's request.
7.03 Covenant to Satisfy Conditions. Buyer shall use all reasonable
efforts to ensure that the conditions set forth in Article VIII hereof to be
satisfied by Buyer are satisfied, insofar as such matters are within the control
of Buyer.
ARTICLE VIII.
CONDITIONS TO OBLIGATIONS OF SELLER
Each and every obligation of Seller under this Agreement to be performed at
the Closing shall be subject to the satisfaction, at or before the Closing, of
each of the following conditions, unless waived in writing by Seller:
8.01 Performance. Buyer shall have performed and complied in all material
respects with all agreements, obligations and conditions required by this
Agreement to be performed or complied with by Buyer at or prior to the Closing.
8.02 Representations and Warranties True. The representations and
warranties of Buyer contained herein shall be true and accurate in all material
respects on and as of the date of this Agreement and on and as of the Closing
Date as though such representations and warranties were made on and as of the
Closing Date, and Buyer shall have delivered to Seller a certificate, dated the
Closing Date, to such effect.
26
8.03 No Governmental Proceeding or Litigation. No suit or action by any
governmental body or other person or legal or administrative proceeding which
questions the validity or legality of the transactions contemplated hereby shall
have been instituted and shall continue undismissed; provided, that in the case
of any such proceeding(s) brought by any person or entity other than a
governmental body, the condition set forth in this Section 8.03 shall be deemed
to have been satisfied if Seller shall have been provided with a written opinion
of counsel to the effect that it is unlikely that the relief sought in such
proceeding shall be granted.
8.04 No Injunction. On the Closing Date there shall be no effective
injunction, writ, preliminary restraining order or any other order of any nature
issued by a court of competent jurisdiction directing that all or any of the
transactions provided for herein not be consummated as provided in this
Agreement, or imposing any conditions on the consummation of any of the
transactions contemplated hereby which Seller, in its sole discretion, shall
deem unacceptable.
8.05 HSR Act Waiting Periods. All waiting periods, if any, applicable to
this Agreement and the transactions contemplated hereby under the HSR Act shall
have expired or terminated without objection by the FTC or the U.S. Department
of Justice.
8.06 Consents and Renewals Obtained. All of the Transfer Consents shall
have been obtained, and the CATV Franchises described in Section 6.01(b) shall
have been extended or renewed on terms reasonably satisfactory to Buyer, and no
Transfer Consent shall contain a material term or condition unduly burdensome to
Seller, Taconic Telephone Corp. or their Affiliates as determined in the
Seller's reasonable judgment. The NYPSC shall not have imposed in connection
with the Transfer Consent any term or condition (other than terms or conditions
not unduly burdensome) on Seller, Taconic Telephone Corp. or their Affiliates
via any NYPSC consent or order issued contemporaneously with the NYPSC Transfer
Consent; provided, however, that if Seller terminates this Agreement based on
the NYPSC's imposition of any such term or condition, Seller shall promptly
remit to Buyer all costs incurred by Buyer in connection with this Agreement and
the transactions contemplated hereby (including all legal and all accounting
fees incurred or payable by Buyer) upon receipt of a request from Buyer for such
payment, together with evidence of such expenses, up to an aggregate of $65,000.
8.07 Purchase Price. Buyer shall have delivered to Seller (or to such
other person or persons as Seller shall designate in writing), by wire transfer
of funds immediately available in New York, New York, the Purchase Price (i) as
adjusted pursuant to the Pre-Closing Certificate, and (ii) as reduced by the
amount of the Indemnification Escrow Deposit delivered to the Escrow Agent by
Buyer on the date of this Agreement pursuant to Section 11.02(e) hereof.
8.08 Assumption Agreement. Buyer shall have delivered to Seller the
Assumption Agreement, duly executed by Buyer.
8.09 Officer's Certificate. Buyer shall have delivered to Seller a
certificate of an officer or other duly authorized representative, certifying
that Buyer's company minutes annexed thereto
27
(which minutes shall evidence Buyer's authorization and approval of Buyer's
execution, delivery and performance of this Agreement) are in full force and
effect on the Closing Date and have not been amended or otherwise modified in
any relevant respect on or subsequent to the date thereof, and further
certifying that annexed thereto is a true, complete and correct copy of Buyer's
Certificate of Formation and Operating Agreement as then in effect and providing
a complete list of Buyer's officers and members and a sample signature of any
officer signing any documents relating to the transactions contemplated hereby.
8.10 Opinion of Buyer's Counsel. Buyer shall have delivered to Seller an
opinion of ▇▇▇▇ Marks & ▇▇▇▇▇ LLP, counsel to Buyer, dated the Closing Date, in
substantially the form of Exhibit G hereto.
8.11 Headend Lease. The Headend Lease shall have been executed and
delivered by Buyer concurrently with the Closing.
ARTICLE IX.
CONDITIONS TO OBLIGATIONS OF BUYER
----------------------------------
Each and every obligation of Buyer under this Agreement to be performed at
the Closing shall be subject to the satisfaction, at or before the Closing, of
each of the following conditions, unless waived in writing by Buyer:
9.01 Performance. Seller shall have performed and complied in all material
respects with all agreements, obligations and conditions required by this
Agreement to be performed or complied with by Seller at or prior to the Closing.
9.02 Representations and Warranties True. The representations and
warranties of Seller contained herein shall be true and accurate in all material
respects on and as of the date of this Agreement and on and as of the Closing
Date as though such representations and warranties were made on and as of the
Closing Date, and Seller shall have delivered to Buyer a certificate, dated the
Closing Date, to such effect.
9.03 No Governmental Proceeding or Litigation. No suit or action by any
governmental body or other person or legal or administrative proceeding which
questions the validity or legality of the transactions contemplated hereby shall
have been instituted and continue undismissed; provided, in the case of any such
proceeding(s) brought by any person or entity other than a governmental body,
the condition set forth in this Section 9.03 shall be deemed to have been
satisfied if Buyer shall have been provided with a written opinion of counsel
addressed to and reasonably acceptable to Buyer to the effect that it is highly
unlikely that the relief sought in such proceeding shall be granted.
9.04 No Injunction. On the Closing Date there shall be no effective
injunction, writ, preliminary restraining order or any order of any nature
issued by a court of competent jurisdiction
28
directing that the transactions provided for herein or any of them not be
consummated as so provided, or imposing any conditions on the consummation of
the transactions contemplated hereby which Buyer shall, in its sole discretion,
deem unacceptable.
9.05 HSR Act Waiting Periods. All waiting periods, if any, applicable to
this Agreement and the transactions contemplated hereby under the HSR Act shall
have expired or terminated without objection by the FTC or the U.S. Department
of Justice.
9.06 Consents and Renewals Obtained. All of the Transfer Consents shall
have been obtained, and the CATV Franchises described in Section 6.01 shall have
been extended or renewed on terms reasonably satisfactory to Buyer and no
Transfer Consent shall contain a material term or condition unduly burdensome to
Buyer or its Affiliates as determined in Buyer's reasonable judgment (including,
but not limited to, restrictions on Buyer's use of Taconic Telephone Corp.'s
existing fiber). This condition shall be satisfied as to any Contract if the
Buyer enters into a new written contract with the same party on terms which are
the same or better than the applicable Seller's Contract. If a Transfer Consent
or a new contract satisfying the foregoing description is not provided at or
before Closing, for any Contract that reasonably is material to the CATV
Operations (including those designated as material on Schedule 4.07), in
addition to any other remedies available to Buyer, Seller and Buyer shall
negotiate in good faith for an appropriate adjustment to the Purchase Price.
9.07 ▇▇▇▇ of Sale. Seller shall have delivered to Buyer the ▇▇▇▇ of Sale,
duly executed by Seller.
9.08 Secretary's Certificate. Seller shall have delivered to Buyer a
certificate of the Secretary or any other duly authorized officer, certifying
that Seller's Articles of Incorporation, By-Laws and corporate minutes annexed
thereto (which corporate minutes shall evidence the authorization and approval
of the execution, delivery and performance of this Agreement) are in full force
and effect on the Closing Date and (except as may otherwise be specified in such
certificate) have not been amended or otherwise modified in any relevant respect
on or subsequent to the date of this Agreement thereof, and further providing a
complete list of their respective directors, officers and shareholders together
with a sample signature of those officers signing any documents relating to the
transactions contemplated hereby.
9.09 Closing Date Subscribers. The number of Closing Date Subscribers
shall be no fewer than the applicable requisite number set forth in the chart
below.
29
Month In Which Required Number of
Closing Date Occurs Closing Date Subscribers
------------------- ------------------------
November, 1998 4,900
December, 1998 4,900
January, 1999 4,850
February, 1999 4,800
▇▇▇▇▇, ▇▇▇▇ 4,850
April, 1999 4,900
May, 1999 4,900
June, 1999 4,900
July, 1999 4,900
August, 1999 4,900
September, 1999 4,900
October, 1999 4,900
If the number of Closing Date Subscribers is less than the applicable requisite
number by 200 Subscribers or more, Buyer at its option, may elect to terminate
this Agreement or proceed with the closing, provided that the Purchase Price
shall be adjusted as set forth in Section 2.03(a)(ii)(E).
9.10 Opinion of Seller's Counsel. Seller shall have delivered to Buyer and
its financing sources (or shall have permitted Buyer's financing sources to rely
upon) an opinion of ▇▇▇▇▇▇, ▇▇▇▇▇▇▇ & ▇▇▇▇▇ LLP, counsel to Seller, dated the
Closing Date, in substantially the form of Exhibit H-1 hereto, and an opinion of
FCC counsel to Seller, dated the Closing Date, in substantially the form of
Exhibit H-2 hereto.
9.11 Headend Lease. The Headend Lease shall have been executed and
delivered by Taconic Telephone Corp. concurrently with the Closing.
30
ARTICLE X.
CONDUCT OF CATV OPERATIONS PENDING THE CLOSING
----------------------------------------------
Pending the Closing, and except as otherwise expressly consented to or
approved by Buyer in writing:
10.01 Ordinary Course of Business. Seller shall conduct the CATV
Operations in the ordinary course of business, consistent with past practices.
With respect to the CATV Operations, Seller shall conduct only those promotions
that are in the ordinary course of business, consistent with past practices and
which are identified on Schedule 4.20. Seller shall not provide a credit to any
person if the effect of such credit would be to change the status of such person
from non-Qualified Subscriber to a Qualified Subscriber, other than any such
credit that is the subject of a bona fide dispute with such person and which
would normally have been granted by Seller in the ordinary course of its
business consistent with its past business practices.
10.02 Organization. Seller shall (a) use reasonable efforts to preserve
its corporate existence and business organization intact; (b) preserve for Buyer
the existing relationships of the CATV System with franchisors, licensors,
suppliers, distributors, customers and others having business relations with it;
and (c) not otherwise materially change its method of management or operations
with respect to the CATV Operations.
10.03 Certain Changes. Except as set forth in Schedule 10.03 or as
otherwise contemplated by this Agreement, Seller shall not, with respect to the
CATV Operations, (a) permit or allow any of the Sale Assets to be subjected to
any mortgage, pledge, lien or encumbrance, except for those of a kind permitted
under Section 4.06 hereof and except in the ordinary course of business, all of
which under Section 4.06(a) subparagraphs (i) and (iii) are to be removed prior
to Closing, (b) transfer, convey, sell or otherwise dispose of any of the Sale
Assets, except in the ordinary course of business, (c) acquire any material
assets or properties, other than in the ordinary course of business, all of
which under Section 4.06(a) subparagraphs (i) and (iii) are to be removed prior
to Closing, (d) grant any general increase in the compensation of officers or
employees (including any such increase pursuant to any bonus, pension, profit
sharing or other plan or commitment) or any increase in the compensation payable
or to become payable to any officer or employee, except in the ordinary course
of business and consistent with past practice or as otherwise provided in
Schedule 10.03, (e) except in the ordinary course of business, modify, amend,
cancel or terminate any existing agreement material to its business or the Sale
Assets, including the making of any prepayment on any existing obligation in
respect of the Sale Assets, (f) take any other action which would materially
adversely affect or detract from the value of the Sale Assets or the CATV
System, or (g) except in the ordinary course of business, take any action or
operate in a manner which would cause the representations and warranties of
Seller set forth in this Agreement not to be true and correct as of the Closing
Date.
10.04 Contracts. Without the prior written consent of Buyer, which consent
shall not be unreasonably withheld, except for Subscription Agreements, Seller
shall not enter into any contract, agreement or other commitment which is not in
the ordinary course of business or which (i) would
31
bind Buyer with respect to the CATV System after the Closing and (ii) would
involve post-Closing Date payments or obligations of Seller, Buyer or the CATV
Operations of more than $10,000 individually (i.e., per any such contract,
agreement or other commitment) or $100,000 in the aggregate.
ARTICLE XI.
SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION
-----------------------------------------------------------
11.01 Survival of Undertakings. The respective representations and
warranties of Buyer and Seller contained herein shall survive for a period of
one year after the Closing Date. The respective covenants of Buyer and Seller
contained herein and to be performed to any extent on or before the Closing Date
shall, to such extent, not survive the Closing Date. The respective covenants of
Buyer and Seller contained herein and to be performed to any extent after the
Closing Date shall, to such extent, survive the Closing Date until the earlier
of the expiration of the one year period or the express period (if any)
referenced in any such covenant.
11.02 Agreement to Indemnify by Seller.
(a) Subject to the conditions and provisions herein set forth,
Seller hereby agrees to indemnify, defend and hold harmless Buyer from and
against all demands, claims, causes of action, assessments, losses, damages,
liabilities, reasonable costs and expenses, including, without limitation,
interest and penalties asserted against or imposed upon or incurred by Buyer
resulting from (i) any breach by Seller of any then-surviving representation or
warranty of Seller contained in this Agreement, (ii) any breach by Seller of any
covenant or agreement contained in this Agreement, (iii) any liability or
obligation of Seller not assumed by Buyer pursuant to this Agreement, (iv)
litigation instituted after the Closing Date that relates to conduct of the CATV
Operations prior to the Closing Date, (v) any taxes payable (or that shall
become payable) by Seller under this Agreement, (vi) or giving rise to a
purchase price adjustment in Seller's favor pursuant to Section 2.03(a)(i)
hereof; (vii) taxes relating to the CATV Operations by Seller that relate to the
period prior to the Closing Date; and (viii) any copyright payments determined
to be due and payable for any period (or portion thereof) prior to the Closing
Date (collectively, "Buyer Damages").
(b) Notwithstanding anything set forth in Section 11.02(a), Buyer
shall not be entitled to recover for and agrees not to assert any claim for
Buyer Damages on account of any breach of any then-surviving representation,
warranty, covenant or agreement of Seller contained in this Agreement, unless
Buyer gives Seller, in writing, within the applicable respective period of
survivability set forth in Section 11.01 hereof, if any, written notice in
accordance with Section 11.03 specifying such claim of breach.
(c) To establish the Indemnification Fund for Seller's
satisfaction, in accordance with the terms of this Section 11.02, of any
potential indemnification obligations hereunder, Buyer shall withhold the
Indemnification Escrow Deposit (i.e., the aggregate sum of $250,000) from the
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Purchase Price and shall deliver that sum on the Closing Date by wire transfer
in immediately available funds to the Escrow Agent to be held and disposed of in
accordance with the terms of the Escrow Agreement attached hereto as Exhibit C.
(d) Notwithstanding anything to the contrary set forth in this
Agreement, Buyer's Damages with respect only to the breach of any representation
or warranty set forth in this Agreement shall be limited to $1,400,000 in the
aggregate.
(e) Seller shall be liable for damages under Section 11.02(a)(i)
and (ii) hereof only to the extent that the aggregate amount of such Buyer
Damages exceeds $25,000, provided however, that when such aggregate amount is
reached, Seller shall be liable under such sections commencing at the first
dollar of such Buyer Damages that exceed $25,000. Notwithstanding the generality
of the foregoing, the parties desire to specifically acknowledge that Seller's
obligation to indemnify Buyer under Section 11.02(a)(viii) shall not be subject
to the previous sentence.
11.03 Procedure.
(a) In the event of any claim by Buyer under this Article XI,
Buyer shall give Seller written notice of said claim promptly (and in any event
within the statute of limitations applicable to such claims) in accordance with
Section 13.04 hereof, and in such notice Buyer shall set forth the basis of its
claim for Buyer Damages and its good faith estimate of the amount thereof.
(b) In the event that any portion of Buyer's claim for Buyer
Damages shall result from the assertion of liability by any third party (a
"Third Party Claim"), then, provided such Third Party Claim involves only
monetary damages and does not seek any injunctive or other equitable relief,
Seller shall have the right to elect to undertake the defense, compromise or
settlement of such Third Party Claim for Seller's account. If Seller elects to
undertake the defense, compromise or settlement of any such Third Party Claim,
(i) Seller shall, within ten (10) days after its receipt of Buyer's notice of
any such Claim, notify Buyer as to whether Seller is exercising such right of
election and confirming that Seller shall cover any liability with respect to
such Third Party Claim; (ii) Buyer shall not be responsible for any cost, fees
and expenses incurred in connection with the defense, compromise or settlement
of such Third Party Claim, (iii) Seller shall be entitled to defend such Third
Party Claim in accordance with Seller's sole discretion and to settle such Third
Party Claim for such cash amount (and without agreeing to any other limitation
on behalf of Buyer) as Seller, in its sole discretion, deems appropriate,
provided that Seller is proceeding in good faith, diligently and with counsel
reasonably acceptable to Buyer and (iv) Seller shall have no obligation to
obtain Buyer's consent to any aspect of Seller's defense, compromise or
settlement of such Third Party Claim provided that Seller is proceeding in good
faith, diligently and with counsel reasonably acceptable to Buyer. Buyer shall
cooperate with Seller, at Seller's reasonable request, in defending any such
action.
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11.04 Agreement to Indemnify by Buyer.
(a) Subject to the conditions and provisions herein set forth,
Buyer agrees to indemnify, defend and hold harmless Seller from and against all
demands, claims, causes of action, assessments, losses, damages, liabilities,
reasonable costs and expenses, including, without limitation, interest and
penalties, asserted against or imposed upon or incurred by Seller resulting from
(i) any material breach by Buyer of any then-surviving representation, warranty
or any then-surviving covenant or agreement of Buyer contained in this
Agreement; (ii) operation of the CATV Operations on and after the Closing Date;
and (iii) any liability or obligation of Seller expressly assumed by Buyer under
Section 2.05 hereof (collectively, "Seller Damages").
(b) Notwithstanding the above, Seller shall not be entitled to
recover for and agrees not to assert any claim for Seller Damages on account of
any breach of any then-surviving covenant or agreement of Buyer contained in
this Agreement unless Seller shall have delivered to Buyer, within the
applicable period of survivability set forth in Section 11.01 hereof, written
notice specifying the basis for such claim and Seller's good faith estimate of
the amount thereof. The procedures set forth in Section 11.03 shall apply to
this Section 11.04, except that Buyer shall have the rights and obligations of
Seller, and Seller shall have the rights and obligations of Buyer set forth in
such Section, and any claims by Seller under Section 5.02 shall be made within
the statute of limitations applicable to such claims.
(c) Notwithstanding any other provision of this Agreement, no
Affiliate of Buyer and no director, officer or employee of Buyer or of any
Affiliate of Buyer shall have any liability to Seller as a result of Buyer's
breach of any representation, warranty, covenant or agreement contained herein.
ARTICLE XII.
TERMINATION AND BREACH
----------------------
12.01 Methods of Termination. This Agreement and the transactions
contemplated herein may be terminated and abandoned at any time prior to, but
not after, the occurrence of the Closing, as follows:
(a) By express, written agreement executed by Buyer and Seller;
(b) By Buyer on or after the Walkaway Date (or the Extended
Walkaway Date, if applicable), upon written notice to Seller and the Escrow
Agent, if any of the conditions provided for in Article IX of this Agreement
shall not have been satisfied in all material respects (or waived in writing by
Buyer) on or prior to the Walkaway Date (or the Extended Walkaway Date, if
applicable), or (subject to the limitation set forth herein) if the number of
Closing Date Subscribers shall not comply with the provisions of Section 9.09
hereof; provided, that Buyer has timely performed and fulfilled in all material
respects its Closing and pre-Closing obligations, conditions
34
and covenants hereunder, and has not breached in any material respect any of its
representations and warranties contained in Article V hereof, except to the
extent that such failure to perform or fulfill such obligation, condition or
covenant or such breach of a representation or warranty is caused solely by
Seller's failure to timely perform or fulfill any of its obligations or
covenants hereunder or Seller's material breach of any of its representations or
warranties contained in Article IV hereof;
(c) By Seller on or after the Walkaway Date (or the Extended
Walkaway Date, if applicable), upon written notice to Buyer and the Escrow
Agent, if any of the conditions provided for in Article VIII of this Agreement
shall not have been satisfied in all material respects (or waived in writing by
Seller) on or prior to the Walkaway Date (or the Extended Walkaway Date, if
applicable); provided, that Seller has timely performed and fulfilled in all
material respects its Closing and pre-Closing obligations, conditions and
covenants hereunder, and has not breached in any material respect any of its
representations and warranties contained in Article IV hereof, except to the
extent that such failure to perform or fulfill such obligation, condition or
covenant or such breach of a representation or warranty is caused solely by
Buyer's failure to timely perform or fulfill any of its obligations or covenants
hereunder or Buyer's material breach of any of its representations or warranties
contained in Article V hereof.
12.02 Procedure upon Termination. In the event of termination and
abandonment by Buyer or by Seller, or both, pursuant to Section 12.01 hereof,
written notice thereof shall forthwith be given to the other party and the
transactions contemplated by this Agreement shall be terminated and abandoned,
without further action by Buyer or Seller. If the transactions contemplated by
this Agreement are terminated and abandoned as provided herein:
(a) Each party shall redeliver or destroy all documents, work
papers and other material of the other party relating to the transactions
contemplated hereby, whether so obtained before or after the execution hereof,
to the party furnishing the same; and
(b) All confidential information received by either party hereto
with respect to the business of the other party or any of its Affiliates shall
be treated in accordance with Section 13.07 hereof.
12.03 Limitation of Liability Upon Termination. In the event of
termination and abandonment of this Agreement, in accordance with this Article
XII, Buyer's liability hereunder and Seller's liability hereunder shall each be
limited to the recovery from the other party hereto of costs and expenses
relating to the transactions contemplated hereby if termination or abandonment
is the result of the breach of any representation, warranty or covenant by the
other party hereto, or the other party's fraud, gross negligence, willful
misconduct or failure to proceed in good faith to fulfill the terms and
conditions hereof.
12.04 Specific Performance. The parties acknowledge that if either Buyer
or Seller breaches its obligations hereunder to complete the Closing, the other
would be irreparably damaged by such breach and that, in addition to any other
remedies that may be available under this Agreement or at law, the other party
shall be entitled to specific performance and injunctive relief.
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ARTICLE XIII.
MISCELLANEOUS PROVISIONS
------------------------
13.01 Amendment and Modification. This Agreement may be amended or
modified only by an express written agreement executed by Seller and Buyer.
13.02 Waiver of Compliance. Any breach by Seller or Buyer of any of its
obligations, covenants, agreements or conditions herein may be waived only in
writing and then only if such writing is signed by the President of the party
executing such waiver, but such waiver of, or any failure to insist upon strict
compliance with, any obligation, covenant, agreement or condition shall not
operate as a waiver of, or estoppel with respect to, any subsequent or other
breach.
13.03 Expenses, Transfer Taxes, Etc. Whether or not the transactions
contemplated by this Agreement shall be consummated, and except as expressly set
forth herein, Seller and Buyer each agrees that all fees and expenses incurred
by it in connection with this Agreement shall be borne by it, including, without
limitation as to Seller or Buyer, all fees of financial advisors, counsel and
accountants; provided, that Seller and Buyer shall share equally all (i) HSR Act
filing fees, and (ii) sales (including, but not limited to, New York retail
sales taxes), recording, transfer and other similar taxes which may be payable
in connection with the transactions contemplated by this Agreement.
13.04 Notices. All notices, requests, demands and other communications
required or permitted hereunder shall be in writing, shall be deemed to have
been given on the date received and shall be delivered by hand, by registered or
certified mail, return receipt requested (with postage prepaid) or by reputable
overnight courier service (e.g., Federal Express) as follows:
(a) if to Buyer, to:
_Suncom, Inc.
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇▇▇▇▇, President
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
with a complete copy under separate cover:
▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
▇▇▇▇ Marks & ▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇ or 5941
36
or to such other person or address as Buyer shall furnish to Seller in writing
by means of a notice that shall comply with the terms of this Section 13.04; and
(b) If to Seller, to:
Taconic Technology Corp.
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, President
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
with a complete copy under separate cover to:
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Esq.
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
▇▇▇▇▇▇, ▇▇▇▇▇▇▇ & ▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
or to such other person or address as Seller shall furnish to Buyer in writing
by means of a notice that shall comply with the terms of this Section 13.04. For
purposes of this Section 13.04, delivery by reputable overnight courier service
shall be deemed to be delivery by hand.
13.05 Assignment. This Agreement and all of the provisions hereof shall be
binding upon and inure to the benefit of the parties hereto and their respective
successors and permitted assigns.
13.06 Third Parties. Except as specifically set forth or referred to
herein, nothing herein expressed or implied is intended or shall be construed to
confer upon or give to any person or other entity, other than the parties hereto
and their permitted successors or assigns, any rights or remedies existing under
or by reason of this Agreement.
13.07 Confidentiality. Buyer and Seller each agrees to keep confidential
and to cause its respective employees, counsel, accountants and other
representatives to keep confidential, the terms and provisions of this Agreement
as well as all documents and other information and data delivered pursuant
hereto, whether written or oral, relating to Seller, Buyer or any of the CATV
Operations. If the sale transaction contemplated hereby is not consummated for
any reason whatsoever, then Buyer and Seller shall each return to the other all
documents and other information and data obtained from Seller or Buyer, as the
case may be, and/or any of their respective employees, counsel, accountants or
representatives, and Buyer and Seller shall each destroy all summaries,
notations, analyses and other reports prepared by or for the other party which
incorporate or are based upon any of such documents, information or data.
Nothing herein contained shall prevent Buyer or Seller from delivering any
documents, information or data relating to Seller, Buyer or any
37
of the CATV Operations (i) in connection with any legal proceeding to which it
is a party (or otherwise pursuant to a subpoena), or (ii) to Buyer's or Seller's
consultants, advisors, counsel, accountants, lenders and investors provided that
Buyer or Seller shall take appropriate precautions to assure that any such
documents, information and data shall be and remain subject to the provisions of
this Section 13.07.
13.08 Publicity. Seller and Buyer shall each consult with and cooperate
with the other with respect to the content and timing of all press releases and
other public announcements, and any oral or written statements to Seller's
employees concerning this Agreement and the transactions contemplated hereby.
Except as required by applicable law neither Seller nor Buyer shall make any
such release, announcement or statement without the prior written consent and
approval of the other, which consent and approval shall not be unreasonably
withheld.
13.09 Interpretation. The headings of the Articles and Sections of this
Agreement are inserted for convenience of reference only and shall not
constitute a part hereof or affect in any way the meaning or interpretation of
this Agreement. Seller and Buyer each acknowledges that it has actively
participated in the preparation, drafting and review of this Agreement, and each
hereby waives any claim that this Agreement or any provision hereof (or any
Exhibit or Schedule hereto) is to be construed against the other party hereto as
the draftsperson thereof.
13.10 Entire Agreement. This Agreement, including the Schedules and
Exhibits hereto, and the other documents and certificates delivered on or after
the date hereof by or on behalf of either party hereto to the other party hereto
pursuant to the terms hereof, sets forth the entire agreement and understanding
of the parties hereto in respect of the subject matter hereof, and supersedes
all prior documents, agreements (including, without limitation, that certain
Letter of Intent between Seller and Buyer dated July 9, 1998), promises,
covenants, arrangements, communications, representations and warranties, whether
oral or written, by or on behalf of either party hereto or any officer,
employee, representative or agent of either party hereto.
13.11 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
13.12 Governing Law. This Agreement and the relations among the parties
hereto shall be governed by and construed in accordance with the laws of the
State of New York, without-giving effect to any conflict of laws. Any provision
of this Agreement prohibited by the laws of the State of New York shall be
ineffective to the extent of such prohibition without invalidating the remaining
provisions of this Agreement. Each party agrees to submit to personal
jurisdiction and to waive any objection as to venue in the County of New York,
State of New York, and further agrees that service of process on it in any
action arising out of or relating to this Agreement shall be effective if mailed
to it at its respective address listed in Section 13.04 hereof.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year as of the date first above written.
TACONIC TECHNOLOGY CORP.
By:___________________________
Name/Title:________________
AVALON CABLE OF NEW ENGLAND, LLC
By:___________________________
Name/Title:________________
TACONIC TELEPHONE CORP., solely
for purposes of Section 3.03 hereof
By:_____________________________
Name/Title:__________________
39
