ASSET PURCHASE AGREEMENT
AS OF AUGUST 12, 1997
BY AND BETWEEN
A-R CABLE SERVICES, INC.
AND
INSIGHT COMMUNICATIONS COMPANY, L.P.
TABLE OF CONTENTS
Page
1. Definitions ................................................. 1
1.01 Certain Definitions ............................. 1
1.02 Other Definitional Provisions ................... 9
2. Purchase and Sale ........................................... 9
2.01 Transfer of Assets .............................. 9
2.02 Purchase Price .................................. 9
2.03 Estimated Working Capital Statement ............. 9
2.04 Post Closing Adjustment ......................... 10
2.05 Assumptions of Liabilities ...................... 12
2.06 Xxxxxxx Money Deposit ........................... 12
2.07 Sales and Transfer Taxes ........................ 12
2.08 Indemnity Escrow ................................ 12
2.09 Allocation of Purchase Price .................... 12
3. Representations and Warranties of Seller .................... 12
3.01 Organization and Authority of Seller ............ 12
3.02 Legal Capacity; Approvals and Consents .......... 13
3.03 Financial Statements ............................ 14
3.04 Changes in Operation ............................ 14
3.05 Tax Returns ..................................... 14
3.06 Acquired Assets ................................. 15
3.07 The CATV Business ............................... 16
3.08 Labor Contracts and Actions ..................... 19
3.09 Employee Benefit Plans .......................... 19
3.10 Contracts ....................................... 20
3.11 Legal and Governmental Proceedings and
Judgments ....................................... 21
3.12 Finders and Brokers ............................. 21
3.13 Equipment ....................................... 21
3.14 Insurance ....................................... 21
3.15 Accounts Receivable ............................. 21
3.16 No Undisclosed Liabilities ...................... 22
3.17 Liabilities to Subscribers ...................... 22
3.18 Overbuilds ...................................... 22
3.19 Characteristics of CATV Business ................ 22
4. Representations and Warranties of Buyer ..................... 22
4.01 Organization and Authority of Buyer ............. 22
4.02 Legal Capacity: Approvals and Consents .......... 23
4.03 Legal and Governmental Proceedings and
Judgments ....................................... 23
4.04 Finders and Brokers ............................. 23
4.05 Buyer Consents .................................. 23
4.06 Acquisition of Rights ........................... 24
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5. Covenants Pending Closing ................................... 24
5.01 Business of Seller .............................. 24
5.02 Access to Information ........................... 25
5.03 Applications for Assignment of Contracts or CATV
Instruments ..................................... 26
5.04 Notification of Certain matters ................. 26
5.05 Risk of Loss; Condemnation ...................... 26
5.06 No Solicitation ................................. 27
5.07 Form 394 ........................................ 28
5.08 Title Matters ................................... 28
5.09 Phase I Study ................................... 28
5.10 monthly Financial Statements .................... 29
6. Deliveries at Closing ....................................... 29
6.01 Deliveries by Seller ............................ 29
6.02 Deliveries by Buyer ............................. 30
7. Conditions to the Obligations of Buyer ...................... 30
7.01 Receipt of Consents ............................. 31
7.02 Seller's Authority .............................. 31
7.03 Absence of Proceedings .......................... 31
7.04 Performance by Seller ........................... 31
7.05 Absence of Breach of Warranties and
Representations ................................. 31
7.06 Minimum Amount of Subscribers ................... 31
8. Conditions to the Obligations of Seller ..................... 31
8.01 Receipt of Consents ............................. 31
8.02 Buyer's Authority ............................... 32
8.03 Performance by Buyer ............................ 32
8.04 Absence of Breach of Warranties ............... 32
8.05 Absence of Proceedings .......................... 32
9. Covenants ................................................... 32
9.01 Compliance with Conditions ...................... 32
9.02 Compliance with HSR Act and Rules ............... 32
9.03 Records, Taxes and Related Matters .............. 33
9.04 Non-Assignment .................................. 34
9.05 Retained Franchises ............................. 34
9.06 Covenant Not to Compete ......................... 35
10. Survival of Representations, Warranties,
Covenants and Other Agreements; Indemnification ............. 36
10.01 Survival of Representations, Warranties,
Covenants and other Agreements .................. 36
10.02 Indemnification by Seller ....................... 36
10.03 Indemnification by Buyer ........................ 37
10.04 Third Party Claims .............................. 38
11. Further Assurances .......................................... 38
12. Closing .................................................... 38
12.01 Closing ........................................ 38
12.02 Termination .................................... 39
12.03 Remedies Upon Default .......................... 40
12.04 Return of Xxxxxxx Money Escrow ................. 40
13. Miscellaneous .............................................. 40
13.01 Amendments; Waivers ............................ 40
13.02 Entire Agreement ............................... 41
13.03 Binding Effect; Assignment ..................... 41
13.04 Construction; Counterparts ..................... 41
13.05 Notices ........................................ 41
13.06 Expenses of the Parties ........................ 42
13.07 Non-Recourse ................................... 42
13.08 Third Party Beneficiary ........................ 43
13.09 Governing Law .................................. 43
13.10 Press Releases ................................. 43
13.11 Severability ................................... 43
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EXHIBITS
--------
EXHIBIT A - System Area
EXHIBIT B - Xxxx of Sale, General Assignment, and
Instrument of Assumption of Liabilities
EXHIBIT C - [Intentionally Deleted]
EXHIBIT D - Form of Opinion of Seller's Local Counsel
EXHIBIT E - Form of Opinion of Buyer's Counsel
EXHIBIT F - Form of Opinion of Seller's FCC Counsel
SCHEDULES
---------
Schedule 1.01(a) - CATV Licenses
Schedule 1.01(b) - Current Assets
Schedule 1.01(c) - Current Liabilities
Schedule 1.01(d) - Excluded Assets
Schedule 1.01(e) - Excluded Liabilities
Schedule 1.01(f) - Permitted Encumbrances
Schedule 2.06 - Xxxxxxx Money Escrow Agreement
Schedule 2.08 - Indemnity Escrow Agreement
Schedule 3.02 - Consents and Approvals
Schedule 3.05 - Tax Notices and Assessments
Schedule 3.06(b) - Real Property
Schedule 3.06(d) - Environmental Matters
Schedule 3.07(c) - Material Contracts
Schedule 3.07(d) - Notice of Claims or Purported Defaults
in CATV Instruments
Schedule 3.07(e) - Regulatory
Schedule 3.09 - Employee Benefit Plans
Schedule 3.10 - Contracts and CATV Instruments in Default
Schedule 3.11 - Legal Proceedings
Schedule 3.13 - Equipment
Schedule 3.14 - Insurance and Bonds
Schedule 3.16 - Undisclosed Liabilities
Schedule 3.18 - Overbuilds
Schedule 3.19 - Characteristics
Schedule 4.05 - Buyer Consents
Schedule 9.06 - Covenant Not to Compete Exclusion
ASSET PURCHASE AGREEMENT
This Asset Purchase Agreement (the "Agreement") is made and entered
into as of August 12, 1997, by and between A-R Cable Services, Inc. , a
Massachusetts corporation ("Seller") , and Insight Communications Company, L.P.,
a Delaware limited partnership ("Buyer");
R E C I T A L S
Seller owns and operates cable television systems serving the
communities described in Exhibit A (the "CATV Business").
Seller desires to sell to Buyer, and Buyer desires to purchase from
Seller, the CATV Business and the assets used or held for the operation thereof
in accordance with the terms and conditions contained herein.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants contained herein, the parties agree as follows, each intending to be
legally bound as and to the extent herein provided.
1. Definitions.
1.01 Certain Definitions. For the purposes of this Agreement, the
following terms shall have the meanings set forth below:
Accounts Receivable: Basic Subscriber accounts receivable and
advertising receivables incurred in the ordinary course of business.
Acquired Assets: All of the properties, assets, privileges, rights,
interests, claims and goodwill, real and personal, tangible and intangible, of
every type and description, including Seller's leasehold interests or rights to
possession, whether owned or leased or otherwise possessed, used or held for use
by Seller in connection with the CATV Business, now in existence or hereafter
acquired by Seller as permitted by this Agreement prior to the Closing,
including, without limitation, the CATV Instruments, the Equipment, the Real
Property, the Contracts, the Inventory and the Intangible Property; provided
that Acquired Assets shall exclude the Excluded Assets and any assets disposed
of prior to the Closing in the usual and ordinary course of business and not in
violation of this Agreement.
Agreement: This Agreement and the Schedules and Exhibits attached
hereto.
Asserted Claim: As defined in Section 10.04.
Assumed Liabilities: All liabilities, obligations and commitments of
Seller (a) under the CATV Instruments, the CATV Licenses, the Equipment, the
Real Property, the Contracts, the Intangible Property and any other Acquired
Assets attributable to periods on and after the Closing Date, (b) all other
liabilities, obligations and commitments arising out of Buyer's ownership of the
Acquired Assets attributable to periods on and after the Closing Date and (c) to
the extent (and only to the extent) constituting Current Liabilities that are
included in the Final Working Capital Statement.
Balance Sheet: As defined in Section 3.03.
Basic Subscriber: As at any date of determination thereof, the sum of
(a) the total number of households (exclusive of courtesy accounts and "second
outlets", as such term is commonly understood in the cable television industry,
and exclusive of customers billed on a bulk-billing or commercials-account
basis) subscribing on such date to at least the most basic tier of service
offered by the CATV Business and paying the standard monthly service fees and
charges imposed in respect of such service, each of which has paid in full
without discount at least one monthly xxxx generated in the ordinary course of
business, none of which is pending disconnection for any reason, none of which
is, as of the date of determination, delinquent in payment for services for more
than ninety (90) days (exclusive of account balances of $4.00 or less attributed
to late fees), and none of which has been obtained as a subscriber since the
date of this Agreement by offers made, promotions conducted and discounts given
outside the ordinary course of business; and (b) the total number of Equivalent
Subscribers on such date; provided, there shall be excluded from the definition
of Basic Subscriber any subscriber or Equivalent Subscriber whose account has
been written off for nonpayment since the date of this Agreement.
Benefit Plans: As defined in Section 3.09(a).
Buyer: As defined in the Preamble to this Agreement.
Buyer Indemnified Party: As defined in Section 10.03.
Buyer' s Counsel: Xxxxxxxxx XxXxxx Xxxxxxxx Xxxxxx & Xxxxxx, P.C.
Buyer's Obligation: As defined in Section 2.04(c).
CATV: Cable television.
CATV Business: The CATV business to be transferred to Buyer, presently
owned and operated by Seller, which consists of the transmission, distribution
and local origination of audio and video
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signals over the CATV System used by the CATV Business located in the System
Area.
CATV Instruments: All franchises, ordinances or licenses granted to the
Seller by any Governmental Authority; permits for wire crossings over or under
highways, railroads, and other property; construction permits and certificates
of occupancy; business radio, Earth Station and other FCC licenses; pole
attachment and other Contracts with utilities; federal, state, county and
municipal permits, orders, variances, exemptions, approvals, consents, licenses
and other authorizations; retransmission agreements and must carry elections;
and all other approvals, consents and authorizations used or held for use in the
CATV Business.
CATV Licenses: The franchises and licenses issued by any Governmental
Authority and the licenses issued by the FCC used in the CATV Business as
presently conducted by Seller, all of which are listed in Schedule 1.01(a).
CATV System: A complete CATV reception and distribution system
consisting of one or more head-ends, trunk cable, subscriber drops and
associated electronic equipment, which is, or is capable of being, operated as
an independent system without interconnections to other systems.
Closing: A meeting for the purpose of concluding the transactions
contemplated by this Agreement held at the place and on the date fixed in
accordance with Section 12.01.
Closing Consents: As defined in Section 6.01(f).
Closing Date; Date of Closing: The date fixed for the Closing in
accordance with Section 12.01.
Code: The Internal Revenue Code of 1986, as amended.
Communications Act: Communications Act of 1934, as amended, and the
rules and regulations promulgated thereunder.
Consents: Any registration or filing with, consent or approval of,
notice to, or action by (i) any Governmental Authority required to permit the
transfer of the CATV Licenses to Buyer, and (ii) any Person required to permit
the transfer of Contracts and CATV Instruments to Buyer.
Contract: Any contract, mortgage, deed of trust, bond, indenture,
lease, license, note, certificate, option, warrant, right, or other instrument,
document or written agreement relating to the CATV Business to which the Seller
is a party or by which the Seller or the assets of the Seller included within
the CATV Business is bound, excluding any CATV Instrument.
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Copyright Act: Title 17 of the United States Code, as amended, and the
rules and regulations promulgated thereunder.
CPA Firm: As defined in Section 2.04(c).
Current Assets: Means ninety-eight and one-half percent (98.5%) of
Basic Subscriber Accounts Receivable and ninety-nine percent (99.0%) of the
other Accounts Receivable components, all deposits with utilities, under leases
or related to guides, billing service, postage, the pro rata portion of any
prepaid real property taxes and sales and use taxes, if any, all prepaid
expenses, including in respect of pole rental or equipment maintenance
agreements that are Assumed Liabilities, and in respect of rent, postage,
promotional expenditures, guides, and security service or two-way radio, each as
determined in accordance with GAAP (unless otherwise specified herein) except
that Excluded Assets shall not be included, and consistent with Schedule 1.01(b)
hereto, which Schedule sets forth the type and amounts of Current Assets as of
March 31, 1997.
Current Liability: Means accounts payable, accrued expenses and other
current liabilities determined in accordance with GAAP, except that the current
portion of any indebtedness for borrowed money and Excluded Liabilities shall
not be included, and consistent with Schedule 1.01(c) hereto, which Schedule
sets forth the type and amounts of Current Liabilities as of March 31, 1997.
DOJ: The United States Department of Justice.
Xxxxxxx Money Escrow: As defined in Section 2.06.
Xxxxxxx Money Escrow Agent: As defined in Section 2.06.
Xxxxxxx Money Escrow Agreement: As defined in Section 2.06.
Earth Station: A satellite earth receiving station consisting of one or
more "dish" antennas, usually operated in conjunction with a building which
houses electronic signal processing and amplification equipment, all of which is
also referred to as a "head end".
Employees: Means all current or former employees of Seller.
Encumbrances: Means any security agreement, financing statement filed
with any Governmental Authority, conditional sale or other title retention
agreement, any lien, mortgage, indenture, pledge, encumbrance, adverse interest,
constructive trust or other trust, attachment or claim of any kind that
otherwise constitutes an interest in or claim against property, whether arising
pursuant to any Law, under any Contract, CATV Instrument or otherwise.
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Environmental Law: means any law or regulation governing the protection
of the environment, (including air, water, soil and natural resources) or the
use, storage, handling, release or disposal of any hazardous or toxic substance.
Equipment: All tangible personality; electronic devices; towers; trunk
and distribution cable; decoders and spare decoders for scrambled satellite
signals; amplifiers; power supplies; conduit; vaults and pedestals; grounding
and pole hardware; installed subscriber's devices (including, without
limitation, drop lines, converters, encoders, transformers behind television
sets and fittings); "head-ends" and "Hubs" (origination, transmission and
distribution system) hardware; tools; spare parts; maps and engineering data;
vehicles; supplies, tests and closed circuit devices; furniture and furnishings;
and all other tangible personal property and facilities owned by Seller and used
in the CATV Business.
Equivalent Subscriber: At any date of determination thereof, the number
of Equivalent Subscribers shall be equal to the quotient of (a) the aggregate
xxxxxxxx by the CATV Business for basic and expanded basic service provided by
the CATV Business based on billing reports prepared in the ordinary course of
business, during the last full month ending on or prior to such date, to
residential multiple dwelling units, commercial accounts, other subscribers that
are billed for such service on a bulk basis and single family households which
pay less than the CATV Business' regular monthly rate for basic and expanded
basic service, divided by (b) the CATV Business' regular monthly subscriber
rate for basic and expanded basic service in effect for such month. For purposes
of the foregoing, there shall be excluded (A) all xxxxxxxx from premium
services, installation or other non-recurring charges, converter rental or from
any outlet or connection other than the first or from any pass-through charge
for sales taxes, line-itemized franchise fees, fees charged by the FCC and the
like, and (B) all xxxxxxxx to a commercial or bulk account or discounted family
household (i) which has not paid in full at least one monthly xxxx generated in
the ordinary course of business, (ii) which is delinquent in payment for
services for more than ninety (90) days (exclusive of account balances of $4.00
or less attributed to late fees) based on billing reports prepared in the
ordinary course of business, (iii) which is pending disconnection for any
reason, or (iv) which has been obtained as a subscriber since the date of this
Agreement by offers made, promotions conducted or discounts given outside the
ordinary course of business.
ERISA: The Employee Retirement Income Security Act of 1974, as the same
has been and may be amended from time to time.
Estimated Working Capital Amount: Means (i) if Current Liabilities
exceed Current Assets as reflected on the Estimated Working Capital Statement,
such excess, expressed as a negative
5
number, or (ii) if Current Assets exceed Current Liabilities as reflected on the
Estimated Working Capital Statement, such excess, expressed as a positive
number.
Estimated Working Capital Statement: As defined in Section 2.03 hereof.
Excluded Assets: Other than the Acquired Assets, all of the assets and
properties of Seller including, but not limited to, programming agreements
(other than retransmission consent agreements, must carry elections and lease
access agreements applicable to the CATV Business), Benefit Plans,
multiemployer plans, any Contract or other agreement relating to borrowings by
Seller (including the agreement between Seller and GECC listed on Schedule
3.07(c) hereto), and the assets and properties of Seller listed on Schedule
1.01(d).
Excluded Liabilities: All liabilities and obligations of Seller other
than the Assumed Liabilities, including but not limited to, all obligations of
the Seller and the CATV Business arising or relating to periods prior to the
Closing Date, indebtedness for money borrowed and obligations to Seller's
partners, directors and advisors, obligations of Seller for taxes (other than
real estate taxes and sales and use taxes to the extent disclosed on Schedule
1.01(c)), obligations relating to Excluded Assets, and the liabilities,
obligations and commitments of Seller identified on Schedule 1.01(e) under the
"Excluded Assets/Liabilities" column.
FCC: The Federal Communications Commission.
Final Working Capital Amount: Means (i) if Current Liabilities exceed
Current Assets as reflected on the Final Working Capital Statement, such excess,
expressed as a negative number, or (ii) if Current Assets exceed Current
Liabilities as reflected on the Final Working Capital Statement, such excess,
expressed as a positive number.
Final Working Capital Statement: As defined in Section 2.04(c) hereof.
Financial Statements: As defined in Section 3.03.
FTC: The Federal Trade Commission.
GAAP: Means U.S. generally accepted accounting principles.
Governmental Authority: The Federal Government, any state, county,
municipal, local or foreign government and any governmental agency, bureau,
court, tribunal, department, board, commission, authority or body.
6
Hazardous Substance: means any substance listed, defined, designated or
classified as hazardous, toxic or radioactive under any applicable Environmental
Law, including petroleum and petroleum related products.
HSR Act and Rules: The Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of
1976 and the rules and regulations promulgated thereunder, as from time to time
in effect prior to the Closing.
HSR Report: The Notification and Report Form for certain mergers and
acquisitions mandated by the HSR Act and Rules.
Income Statement: As defined in Section 3.03.
Indemnitee: As defined in Section 10.04.
Indemnitor: As defined in Section 10.04.
Indemnity Escrow Agent: As defined in Section 2.08.
Indemnity Escrow Deposit: As defined in Section 2.08.
Indemnity Escrow Agreement: As defined in Section 2.08.
Intangible Property: The copyrights, patents, trademarks, service marks
and trade names used in the CATV Business excluding the right to use the name
"Cablevision" or "Cablevision Systems" or any derivative thereof or any name
which may include any of such terms, and all applications for, or licenses,
permits or other rights to use any thereof, and the value associated therewith,
which are owned, used or held for use by Seller and used in the CATV Business.
Interim Financial Statements: As defined in Section 3.03.
Inventory: Means all inventory as defined under GAAP, plus, without
limitation, all supplies, all maintenance equipment, all converters, all cables
and all amplifiers owned by Seller on the Closing Date as determined by the
Seller's inventory control system and used in the CATV Business.
Judgment: Any judgment, writ, order, injunction, award or decree of or
by any court, or judge, justice or magistrate, including any bankruptcy court or
judge, and any order of or by any Governmental Authority.
Law: The common law and any statute, ordinance, code or other law,
rule, regulation, order, technical or other standard, requirement or procedure
enacted, adopted, promulgated, applied or followed by any Governmental Authority
or court, including, without limitation, Judgments.
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Material Adverse Effect: Means a material adverse effect on the assets,
financial condition or results of operations of the CATV Business taken as a
whole other than any such effect resulting from changes in general economic or
political conditions or legal, governmental, regulatory or competitive factors
affecting CATV systems operators generally.
1996 Financial Statements: As defined in Section 3.03 hereof.
Organizational Documents: As defined in Section 3.02(b).
Outside Date: As defined in Section 12.01.
Permitted Encumbrances: Means those Encumbrances set forth in Schedule
1.01(f) hereto and all other Encumbrances, if any, which do not materially
adversely effect the title to such property, do not materially detract from the
value of the property subject thereto and which do not materially interfere with
the present and continued use of such property in the operation of the CATV
Business.
Person: Any natural person, Governmental Authority, corporation,
general or limited partner, partnership, joint venture, trust, association,
limited liability company, or unincorporated entity of any kind.
Preliminary Working Capital Statement: As defined in Section 2.04(a).
Purchase Price: As defined in Section 2.02.
Real Property: All realty, fixtures, easements, rights-of-way,
leasehold and other interests in real property, buildings and improvements
owned, used or held for use in the CATV Business.
Retained Franchises: As defined in Section 9.05.
Retained Franchise Price: As defined in Section 9.05(a).
Seller: As defined in the Preamble to this Agreement.
Seller Indemnified Party: As defined in Section 10.02.
Seller's Local Counsel: Xxxxxx & Coff.
Seller's 1997 Budget: The 1997 budget for Seller prepared by Seller and
delivered to Buyer prior to the date hereof, and, if the Closing does not
occur until 1998, the 1998 budget for Seller to be prepared by Seller in the
ordinary course of business consistent with past practice, including customary
provision for capital expenditures and to be delivered to Buyer.
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Subscriber Adjustment: An amount equal to one Thousand Five Hundred
Sixteen Dollars ($1,516.00) times the difference between Sixty-Four Thousand
(64,000) subscribers and the number of Basic Subscribers of the CATV Business
actually delivered on the Closing Date if less than Sixty-Four Thousand (64,000)
subscribers.
System Area: The geographical area as described in Exhibit A hereto.
1.02 Other Definitional Provisions. Terms defined in the singular shall
have a comparable meaning when used in plural, and vice versa.
2. Purchase and Sale.
2.01 Transfer of Assets. At the Closing, upon the terms and conditions
set forth in this Agreement, Seller shall sell, convey, transfer, assign and
deliver to Buyer, and Buyer shall purchase, accept and receive, all of Seller's
right, title and interest in and to the Acquired Assets, free and clear of all
Encumbrances (other than Permitted Encumbrances and Assumed Liabilities) such
transaction to be effective as of 12:01 A.M. on the Closing Date.
2.02 Purchase Price. In consideration for the transfer of the Acquired
Assets pursuant to Section 2.01, and the other covenants, agreements,
representations and warranties contained herein, Buyer shall at Closing (i) pay
to Seller a total purchase price of Ninety-Seven Million Dollars ($97,000,000)
plus, if a positive number, or minus, if a negative number, the Estimated
Working Capital Amount provided in Section 2.03 (the "Purchase Price") , less
the Subscriber Adjustment, if any, less the Indemnity Escrow Deposit (which
shall be deposited by Buyer with the Indemnity Escrow Agent at closing, by
federal funds wire transfer of immediately available funds to such account at a
United States bank as shall be designated by Seller, less any other adjustments
provided for herein, and (ii) assume and agree to pay, discharge and perform the
Assumed Liabilities as and when due in accordance with the Xxxx of Sale, General
Assignment, and Instrument of Assumption of Liabilities attached as Exhibit B
hereto.
2.03 Estimated Working Capital Statement. At least ten (10) business
days prior to the Closing Date, Seller shall deliver to Buyer a working capital
statement of Seller as of the Closing Date, which statement shall set forth
Seller's good faith estimate of the Subscriber Adjustment, if any, and the
Current Assets and Current Liabilities of the CATV Business as of the Closing
Date as determined in accordance with GAAP and in a manner consistent with
the preparation of the Financial Statements, except as otherwise required by
this Agreement (the "Estimated Working Capital Statement"). Prior to Closing,
Seller shall provide Buyer or Buyer's representatives with access to all
relevant books and
9
records as Buyer may reasonably request for purposes of verifying the Estimated
Working Capital Statement.
2.04 Post Closing Adjustment.
(a) Within ninety (90) days after the Closing Date, Seller shall
prepare, or cause to be prepared, and deliver to Buyer a working
capital statement of the CATV Business as of the Closing Date, which
statement shall be prepared in accordance with GAAP and in a manner
consistent with the preparation of the 1996 Financial Statements,
except as otherwise required by this Agreement, and shall set forth
the Current Assets and Current Liabilities of Seller as of the Closing
Date (the "Preliminary Working Capital Statement") . Buyer shall
cooperate in providing to Seller all relevant books, records and
personnel of the CATV Business in order to facilitate the preparation
of the Preliminary Working Capital Statement.
(b) During the succeeding thirty (30) day period, Buyer shall
have the right to examine the Preliminary Working Capital Statement
and all records used to prepare the Preliminary Working Capital
Statement and Seller shall deliver to Buyer at Buyer's cost and
expense such copies of such records as Buyer may reasonably request;
provided, however, if any such request is too burdensome as reasonably
determined by Seller, such copies will not be delivered to Buyer by
Seller and shall instead be made available to Buyer at Seller's place
of business.
(c) In the event Buyer determines that the Preliminary Working
Capital Statement has not been prepared on the basis set forth in
Section 2.04(a) hereof, Buyer shall so inform Seller in writing (the
"Buyer's Objection"), setting forth a reasonably specific description
of the basis of the Buyer's Objection on or before the last day of the
thirty (30) day period referred to in Section 2.04(b) hereof. In the
event of the Buyer's Objection, Buyer and Seller shall attempt to
resolve the differences underlying the Buyer's Objection within twenty
(20) days of Seller's receipt thereof. If Seller and Buyer are unable
to resolve all their differences within such twenty (20) day period,
they shall refer their remaining differences to a nationally
recognized firm of independent public accountants as to which Buyer
and Seller may mutually agree (if the parties are unable for any
reason to mutually select such a firm, Buyer and Seller shall each
select a nationally-recognized firm of independent public accountants
which firms shall then select a final nationally recognized firm of
independent public accountants) (the "CPA Firm"), who shall, acting as
experts and not as arbitrators, determine on the basis of the standard
set forth in Section 2.04(a) hereof and only with respect to the
remaining
10
differences so submitted, whether and to what extent, if any, the
Preliminary Working Capital Statement requires adjustment. The CPA
Firm will base its determination only on evidence brought to it by the
parties and shall not conduct an audit. The CPA Firm shall deliver its
written determination to Buyer and Seller no later than the twentieth
(20th) business day after the remaining differences underlying the
Buyer's Objection are referred to the CPA Firm. The CPA Firm's
determination shall be conclusive and binding upon the parties. The
fees and disbursements of the CPA Firm shall be allocated between
Buyer and Seller in the same proportion that the aggregate amount of
any disputed items submitted to the CPA Firm that are unsuccessfully
disputed by each (as finally determined by the CPA Firm) bears to the
total amount of any disputed items so submitted. Buyer and Seller
shall readily available to the CPA Firm all relevant books and records
and any work papers relating to Working Capital Statement and all
other items reasonably requested by the CPA Firm. The "Final Working
Capital Statement" shall be (i) the Preliminary Working Capital
Statement in the event that (x) the Buyer's Objection is not delivered
to Seller in the period set forth in Section 2.04(b) hereof, or (y)
Seller and Buyer so agree; or (ii) the Preliminary Working Capital
Statement, as adjusted by either (x) the agreement of Seller and Buyer
or (y) the CPA Firm.
(d) On the fifth (5th) business day following the determination
of the Final Working Capital Statement pursuant to Section 2.04(c),
(i) if both the Estimated and Final Working Capital Amounts are
positive, then (AA) if the Final Working Capital Amount exceeds the
Estimated Working Capital Amount, then Buyer shall pay to Seller an
amount equal to such excess; and (BB) if the Estimated Working Capital
Amount exceeds the Final Working Capital Amount, then Seller shall
pay to Buyer an amount equal to such excess; (ii) if both the
Estimated and Final Working Capital Amounts are negative, then (AA) if
the absolute value of the Final Working Capital Amount exceeds the
absolute value of the Estimated Working Capital Amount, then Seller
shall pay to Buyer an amount equal to such excess; and (BB) if the
absolute value of the Estimated Working Capital Amount exceeds the
absolute value of the Final Working Capital Amount, then Buyer shall
pay to Seller an amount equal to such excess; (iii) if the Estimated
Working Capital Amount is negative and the Final Working Capital
Amount is positive, then Buyer shall pay to Seller an amount equal to
the sum of the absolute values thereof; and (iv) if the Estimated
Working Capital Amount is positive and the Final Working Capital
Amount is negative, then Seller shall pay to Buyer an amount equal to
the sum of the absolute values thereof.
11
(e) Any amount payable pursuant to Section 2.04 (d) hereof shall
be paid by wire transfer of immediately available funds to a bank
account designated by Buyer or Seller, as the case may be.
2.05 Assumptions of Liabilities. At the Closing Date, Buyer shall
assume the Assumed Liabilities in accordance with the Xxxx of Sale, General
Assignment, and Instrument of Assumption of Liabilities attached hereto as
Exhibit B.
2.06 Xxxxxxx Money Deposit. Concurrently herewith, Buyer has delivered
to or deposited with The Bank of New York as escrow agent ("Xxxxxxx Money Escrow
Agent") , either (i) an irrevocable letter of credit in the amount of
$9,700,000, in form and substance acceptable to Seller, or (ii) $9,700,000 by
federal funds wire transfer of immediately available funds, for the Xxxxxxx
Money Escrow ("Xxxxxxx Money Escrow") to be held pursuant to an escrow agreement
(the "Xxxxxxx Money Escrow Agreement") substantially in the form of Schedule
2.06 hereto. Such letter of credit or amount, as applicable, shall be deposited
and held under the Xxxxxxx Money Escrow and administered as provided in the
Xxxxxxx Money Escrow Agreement. The Xxxxxxx Money Escrow shall be distributed as
provided in the Xxxxxxx Money Escrow Agreement and Article 12 hereof.
2.07 Sales and Transfer Taxes. Buyer and Seller shall share equally all
sales and use taxes and transfer taxes, if any, arising from the transfer of the
Acquired Assets.
2.08 Indemnity Escrow. At the Closing, Buyer shall deposit out of the
Purchase Price, the sum equal to Five Million Dollars ($5,000,000) ("Indemnity
Escrow Deposit") with The Bank of New York, as escrow agent (the "Indemnity
Escrow Agent"), pursuant to the Indemnity Escrow Agreement in the form annexed
hereto as Schedule 2.08 (the "Indemnity Escrow Agreement"), to secure Buyer's
rights with respect to claims to indemnification under Section 10.2 hereof.
2.09 Allocation of Purchase Price. The parties agree that the Purchase
Price (as adjusted pursuant to Section 2.04) shall be allocated not later than
one hundred twenty (120) days after the Closing as the parties shall agree based
upon the respective fair market value of the Acquired Assets.
3. Representations and Warranties of Seller.
To induce Buyer to enter into this Agreement, Seller represents and
warrants to Buyer as follows:
3.01 Organization and Authority of Seller. Seller is a Massachusetts
corporation duly organized, validly existing and in good standing under the laws
of its jurisdiction of organization,
12
and is duly qualified to do business and is in good standing under the laws of
the State of Illinois. Seller has all requisite power and authority to own,
lease and use the Acquired Assets as they are currently owned, leased or used
and to conduct the CATV Business as it is currently conducted.
3.02 Legal Capacity; Approvals and Consents.
(a) Authority and Binding Effect. Subject to Section 9.02 hereof
and the Consents and approvals set forth on Schedule 3.02, Seller has
all requisite power and authority to execute and deliver this
Agreement and to perform its obligations hereunder. The execution and
delivery of this Agreement and the performance of its obligations
hereunder by Seller have been duly and validly authorized by all
necessary action on the part of Seller. This Agreement has been duly
executed and delivered by Seller and is the valid and binding
obligation of Seller enforceable in accordance with its terms, except
as such enforceability may be affected by the laws of bankruptcy,
insolvency, reorganization and creditors' rights generally and by the
availability of equitable remedies.
(b) No Breach. Subject only to Section 9.02 hereof and obtaining
the Consents and approvals set forth on Schedule 3.02, the execution,
delivery and performance of this Agreement does not, and will not,
contravene the certificate of incorporation or by-laws (the
"Organizational Documents") of the Seller, and does not, and will not:
(i) conflict with or result in a breach or violation by the Seller of,
or (ii) constitute a default (without regard to requirements of
notice, passage of time or election of any Person) by the Seller
under, or (iii) permit or result in the termination, suspension,
modification or impairment of, any CA-TV Instrument, Law, Judgment, or
Contract to which the Seller is a party or by which the Seller, the
CATV Business or any of the Acquired Assets is subject or bound or may
be affected; or (iv) create or impose, or result in the creation or
imposition of, any Encumbrance upon any of the Acquired Assets, in
each case under clause (i) through (iii) above, which conflict,
breach, violation, default or termination, suspension, modification or
impairment would not, individually or in the aggregate, reasonably be
expected to have a material adverse effect, or materially adversely
affect Seller's ability to perform its obligations hereunder.
(c) Required Consents. Except for the parties listed in Schedule
3.02, there are no parties whose approval or Consent, or with whom the
filing of any certificate, notice, application, report or other
document, is legally or contractually required or otherwise is
necessary in connection with the execution, delivery or performance of
this Agreement by Seller, except where failure to obtain such Consent
or
13
approval or failure to make such filing would not reasonably be
expected to have a material adverse effect, or materially adversely
affect Seller's ability to perform its obligations hereunder.
3.03 Financial Statements. Seller has delivered to Buyer true and
complete copies of the balance sheet of Seller as at December 31, 1996 (the
"Balance Sheet") and December 31, 1995, and related statements of income of
Seller for the years ending December 31, 1996 (the "Income Statement") and 1995
(collectively, the "Financial Statements") . The Balance Sheet and Income
Statement for the year 1996 (collectively, the "1996 Financial Statements") were
prepared in accordance with GAAP and present fairly in all material respects the
financial position of the Seller as of those dates and the results of its
operations for the periods then ended. Seller has also provided to Buyer a
balance sheet and income statement as of March 31, 1997 (the "Interim Financial
Statements"), which Interim Financial Statements were prepared in accordance
with the practices customarily followed by Seller in preparing its interim
statements and, subject to normal year-end adjustments and the procedures
followed in interim statements, present fairly in all material respects the
financial position and results of operation of Seller as at the date and for the
period indicated and are stated on a basis generally consistent with the
above-described Financial Statements.
3.04 Changes in Duration. Since the date of the Interim Financial
Statements, there has not been any event or circumstance which, individually or
in the aggregate, has had or would have a material adverse effect on the CATV
Business other than those events or circumstances which may affect the cable
television industry generally.
3.05 Tax Returns. Seller has and will have as of the Closing Date duly
filed all material federal, state, local and foreign income, information,
franchise, sales, use, property, excise and payroll and other tax returns or
reports (herein "Tax Returns") required to be filed by Seller on or prior to the
date hereof or to be filed by Seller as of the Closing Date. All taxes, fees and
assessments that are shown on such Tax Returns as due or payable by Seller on or
before the date hereof or the Closing Date, as the case may be, and that might
result in an Encumbrance upon any of the Acquired Assets have been or will be
duly paid. Except as set forth in Schedule 3.05, Seller has received no notice
or assessment to the effect that there is any unpaid tax, interest, penalty or
addition to tax due or claimed to be due from the Seller in respect of such Tax
Returns; Seller has received no notice of the assertion or threatened assertion
of any Encumbrances with respect to any Acquired Assets on account of any unpaid
taxes; and no audits of such Tax Returns by any Governmental Authority are
pending or, so far as Seller knows, threatened.
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3.06 Acquired Assets.
(a) Title; Encumbrances. Seller has (i) good and marketable title
to all of the Equipment, the Inventory and Real Property owned in fee,
and (ii) the right and authority (subject to the Consents specified
herein) to transfer to Buyer all of Seller's right, title and interest
in and to the other property or rights included in the Acquired
Assets, in each instance free and clear of any Encumbrances (except
Permitted Encumbrances).
(b) Real Property. Schedule 3.06(b)sets forth a complete and
correct list and general description of all Real Property owned,
leased, occupied or used by Seller in connection with the operation
of the CATV Business as presently conducted. The Real Property
comprises all real property interests necessary to conduct the CATV
Business as currently conducted. Except for routine repairs in the
ordinary course of business considering the nature and age of such
assets, all of the material improvements, leasehold improvements and
the premises of the Real Property are in good condition and repair
(ordinary wear and tear excepted) and suitable for the purposes used.
Each parcel of Real Property (i) has access to and over public
streets, or private streets for which Seller has a valid right of
ingress and egress, (ii) conforms in its current use to all zoning
requirements without reliance on a variance or a classification of the
parcel in question as a nonconforming use, and (iii) conforms in its
use to all material restrictive covenants, if any, or other
Encumbrances affecting all or part of such parcel. Seller has all
material easements, and all leases, fee interests, access agreements,
and other rights required by Law for the use of all Real Property used
in the CATV Business, including all Real Property over, under, or on
which the CATV Business is conducted. There are not pending or, to
Seller's knowledge, threatened, any condemnation actions or special
assessments or any pending proceedings for changes in the zoning with
respect to such Real Property or any part thereof and Seller has not
received any written notice of any public authority or other entity to
take or use any Real Property or any part thereof. Each parcel of Real
Property has access (either direct or by an easement included among
the Acquired Assets) to all utilities necessary for the operation of
the relevant system with respect to such parcel. Seller has complied
with all notices or orders to correct violations of Laws issued by any
Governmental Authority having jurisdiction against or affecting any of
the Real Property. The easements, rights of way and other similar
rights materially necessary for Seller's current use of the Real
Property are valid and in full force and effect and Seller has not
received any notice with respect to termination or breach of any such
right.
15
(c) Acquired Assets. The Acquired Assets include all material
assets owned, used or held for use by Seller and necessary to conduct
the CATV Business as it is presently being conducted except for
Excluded Assets. Except for Excluded Assets, Seller has no Intangible
Property.
(d) Environmental Matters. Except as disclosed in Schedule
3.06(d): (i) the Acquired Assets and the operation of the CATV
Business materially comply with applicable Environmental Laws; (ii)
Seller has not received any written notice from any Governmental
Authority alleging that, and Seller has no knowledge that, the
Acquired Assets and the operation of the CATV Business are in
violation of any applicable Environmental Law; (iii) the Acquired
Assets and the operation of the CATV Business are not the subject of
any written notice, court order, administrative order or decree
arising under any Environmental Law; (iv) during the period of
Seller's ownership and, to Seller's knowledge, prior to the period of
Seller's ownership, the Acquired Assets have not been used for the
generation, storage, discharge or disposal of any Hazardous Substances
except as permitted by applicable Environmental Laws; (v) Seller has
not installed, and, to Seller's knowledge, there are not located, any
underground storage tanks on any of the Acquired Assets, and, to
Seller's knowledge, no underground storage tanks were installed or
located on any of the Acquired Assets prior to the period of Seller's
ownership; and (vi) to the knowledge of Seller, (x) no Acquired Asset
has been used at any time as a gasoline service station or any other
facility for storing, pumping, dispensing, or producing gasoline or
any other petroleum products or wastes, and (y) no building or other
structure on or included in any of the Acquired Assets contains
asbestos or asbestos-containing material.
3.07 The CATV Business. With respect to the CATV Business, Seller makes
the following warranties and representations:
(a) As of June 30, 1997, the CATV Business included not less than
Sixty-Four Thousand (64,000) Basic Subscribers.
(b) Since the date of the Interim Financial Statements, (i) the
CATV Business has been operated only in the ordinary course; (ii)
there has been no sale, assignment or transfer of any material assets
or properties related to the CATV Business, or any theft, damage,
removal of property, destruction or casualty loss which might be
expected to materially adversely affect the CATV Business or such CATV
System; (iii) other than in the ordinary course of business, there has
been no waiver or release of any material right or claim of Seller
against any third party; and (iv) there has been no agreement by
Seller to take any of the actions
16
described in the preceding clauses (ii) and (iii), except as
contemplated by this Agreement.
(c) Schedule 3.07(c) contains a complete list of all material
Contracts and material CATV Instruments in effect on the date of this
Agreement. As used in this Section 3.07(c), the term "material
Contracts" means any Contracts requiring in any calendar year
payments exceeding $25,000 in the aggregate and that cannot be
terminated on thirty (30) days' notice without liability.
(d) Seller holds all material Contracts and CATV Instruments
reasonably necessary to enable it to operate the CATV Business as
presently conducted. Seller is in compliance in all material respects
with the terms and conditions of all such material Contracts and CATV
Instruments. Except as disclosed in Schedule 3.07(d), Seller has not
received or given any notice of any claimed or purported default in or
termination of any Contracts or CATV Instruments and there are no
proceedings pending, or, to the knowledge of Seller, threatened, to
cancel, modify or change any such Contracts or CATV Instruments,
except in each case as would not have a material adverse effect.
(e) The CATV Business is conducted by Seller in compliance with
all applicable Laws, including without limitation, the Communications
Act, the Copyright Act, and the rules and regulations of the FCC and
the United States Copyright Office, except to the extent that the
failure to so comply with any of the foregoing could not (either
individually or in the aggregate) reasonably be expected to have a
material adverse effect on the Acquired Assets, the CATV Systems or
the CATV Business. Without limiting the generality of the foregoing,
except to the extent that the failure to comply with any of the
following could not (either individually or in the aggregate)
reasonably be expected to have a material adverse effect on the
Acquired Assets, the CATV Systems or the CATV Business, and except as
set forth in Schedule 3.07(e) hereto:
(i) Each of the communities listed in Schedule 1.01(a) has been
registered with the FCC:
(ii) All of the semi-annual performance tests on the CATV Systems
required under the rules and regulations of the FCC have
been performed and the results of such tests demonstrates
satisfactory compliance with the applicable technical
requirements being tested in all material respects;
17
(iii) The CATV Systems are being operated in compliance with the
provisions of 47 C.F.R. Sections 76.610 through 76.619
(mid-band and super-band signal carriage), including 47
C.F.R. Section 76.611 (compliance with the cumulative signal
leakage index);
(iv) A valid request for renewal has been duly and timely filed
under Section 626 of the Communications Act with the proper
Governmental Authority with respect to all franchises to
operate the CATV Systems that have expired or will expire
within 36 months after the date of this Agreement;
(v) Seller has all of the CATV Licenses necessary to operate the
CATV Systems as the CATV Business is currently conducted,
all of which licenses are listed in Schedule 1.01(a), and
Seller operates such licensed facilities in conformance with
the terms and conditions of such licenses;
(vi) Seller has made all annual filings required to be made with
the FCC;
(vii) The carriage of all television station signals is in
compliance with the must-carry and retransmission consent
provisions of the Communications Act, as applicable;
(viii) No Governmental Authority has been certified, or applied
to be certified, to regulate the rates charged by the CATV
Systems;
(ix) To Seller's knowledge, the rates presently charged by the
CATV Systems are in compliance with the FCC's rules
governing the rates which cable television systems may
charge, and no complaint is pending at the FCC, nor is there
any proceeding pending before any other Governmental
Authority, with regard to such rates;
(x) All notices, statements of account, supplements and other
documents required under Section 111 of the Copyright Act
and under the rules of the Copyright Office with respect to
the carriage of off-air signals by the CATV Systems have
been duly filed, and the proper amount of copyright fees
have been paid on a timely basis for the six semi-annual
18
accounting periods of July 1 to December 31, 1994, through
January 1 to June 30, 1997, and the Systems qualify for the
compulsory license under Section 111 of the Copyright Act;
and
(xi) All necessary Federal Aviation Administration ("FAA")
approvals have been obtained with respect to the height and
location of towers used in connection with the operation of
the CATV Business and such towers are being operated in
compliance in all material respects with applicable FCC and
FAA rules.
3.08 Labor Contracts and Actions.
(a) Seller is not a party to any Contract with any labor
organization, nor has the Seller agreed to recognize any union or
other collective bargaining unit, nor has any union or other
collective bargaining unit been certified as representing any of the
employees of the Seller with respect to the operation of the CATV
Business, and
(b) Seller is not experiencing any strikes, work stoppages,
significant grievance proceedings or claims of unfair labor practices
filed with respect to the operation of the CATV Business.
3.09 Employee Benefit Plans.
(a) All "employee benefit plans" within the meaning of Section
3(3) of ERISA covering Employees, other than "multi-employer plans"
within the meaning of Section 3(37) of ERISA, and other benefit plans,
contracts or arrangements covering Employees (collectively, the
"Benefit Plans") are listed on Schedule 3.09. True and complete copies
of all Benefit Plans and all amendments thereto have been provided or
made available to Buyer. Schedule 3.09 also lists all multi-employer
plans covering Employees.
(b) All Benefit Plans, to the extent subject to ERISA, are in
substantial compliance with ERISA. There is no material pending or, to
the knowledge of Seller, threatened litigation relating to the Benefit
Plans. Seller has not engaged in a transaction with respect to any
Benefit Plan that, assuming the taxable period of such transaction
expired as of the date hereof or as of the Closing Date (as the case
may be), could subject Seller to a material tax or penalty imposed by
either Section 4975 of the Code or Section 502(i) of ERISA.
(c) No liability under Subtitle C or D of Title IV or ERISA has
been or is expected to be incurred by Seller with
19
respect to any ongoing, frozen or terminated "single-employer plan",
within the meaning of Section 4001(a)(15) of ERISA, currently or
formerly maintained by it, or the single-employer plan of any entity
which is considered one employer with Seller under Section 4001 of
ERISA or Section 414 of the Code (an "ERISA Affiliate"). Seller has
not incurred and does not expect to incur any withdrawal liability with
respect to a multiemployer plan under Subtitle E of Title IV of ERISA
and in no event will Buyer have any liability or obligations with
respect thereto. No notice of a "reportable event", within the meaning
of Section 4043 of ERISA for which the 30-day reporting requirement has
not been waived, has been required to be filed for any Benefit Plan
subject to Title IV of ERISA or by any ERISA Affiliate within the
12-month period ending on the date hereof.
(d) Neither any Benefit Plan nor any single-employer plan of an
ERISA Affiliate has an "accumulated" funding deficiency" (whether or
not waived) within the meaning of Section 412 of the Code or Section
302 of ERISA and no ERISA Affiliate has an outstanding funding waiver.
Seller has not provided, nor is it required to provide, security to
any Benefit Plan or to any single-employer plan of an ERISA Affiliate
pursuant to Section 401(a)(29) of the Code.
3.10 Contracts. Except as set forth in Schedule 3.10, there are no
defaults by Seller under the material Contracts or material CATV Instruments
(nor has Seller received written notice of a claim or purported default) and
Seller knows of no default by any other party to a material Contract or material
CATV Instrument. Each material CATV Instrument and material Contract, including
those that are entered into after the date hereof, is (unless it expires by its
terms) in full force and effect (and there are no proceedings pending, or, to
knowledge of Seller, threatened, to cancel, modify or change any such material
Contract or material CATV Instrument), except in each case as would not have a
material adverse effect, binding and enforceable in accordance with its terms,
and is valid under and complies in all material respects with all applicable
Laws. Seller is the authorized legal holder of all material CATV Licenses.
Except for Contracts and CATV Instruments shown as oral contracts and described
in all material respects on Schedule 3.07(c), and except for correct and
complete copies of all Contracts identified on Schedule 3.07(c) (other than any
such Contract relating to any of the Excluded Assets) and extracts of Benefit
Plans identified on Schedule 3.09, each of which have been delivered to Buyer,
correct and complete copies of all other material Contracts and CATV Instruments
have been delivered to Buyer and its representatives, and with respect to those
executed after the date hereof, copies will be made available to Buyer promptly
following such execution and in any event prior to the Closing Date.
20
3.11 Legal and Governmental Proceedings and Judgements. Except as may
affect the cable television industry generally, or as set forth on Schedule
3.11, there is no legal action, proceeding or investigation, pending or, to the
knowledge of Seller, threatened against the Seller, the CATV Business or the
Acquired Assets, nor is there any Judgment outstanding against the Seller or to
or by which the Seller, any of the Acquired Assets or the CATV Business is
subject or bound, which (i) results or is reasonably likely to result in any
modification, termination, suspension, impairment or reformation of any CATV
Instrument or Contract or any right or privilege thereunder in a manner that
could reasonably be expected to have a material adverse effect or (ii)
materially adversely affects the ability of Seller to consummate any of the
transactions contemplated hereby. Seller is not in default or violation, and no
event or condition exists which, with notice or lapse of time or both, is
reasonably likely to become or result in a default or violation of any Judgment.
Seller is not subject to any arbitrator's award.
3.12 Finders and Brokers. Seller has employed Bear Xxxxxxx as its
broker in the sale provided herein and will pay and discharge the claim thereof
for commission or expense reimbursement in connection therewith. Seller has not
entered into any other contract, arrangement or understanding with any Person or
firm, nor is it aware of any claim or basis for any claim based upon any act
or omission of Seller or any of its affiliates, which may result in the
obligation of Buyer to pay any finder's fees, brokerage or agent's commissions
or other like payments in connection with the negotiations leading to this
Agreement or the consummation of the transactions contemplated hereby.
3.13 Equipment. Schedule 3.13 contains Seller's listing of all material
Equipment, including converters, used or held for use by Seller in the operation
of the CATV Business. Except as set forth on Schedule 3.13, the Equipment and
Inventory is and will be at Closing in materially good operating condition and
repair (reasonable wear and tear excepted).
3.14 Insurance. Seller has in force policies of insurance with respect
to the Acquired Assets and the CATV Business and all bonds required to be
obtained by Seller with respect to the CATV Business, including without
limitation all bonds required by CATV Instruments, which insurance and bonds are
set forth on Schedule 3.14. Schedule 3.14 is complete and correct and the
insurance policies and bonds referred to therein are in full force and effect,
and Seller has received no notice of non-renewal or cancellation of such
insurance policies or bonds.
3.15 Accounts Receivable. The accounts receivable of Seller (to the
extent not heretofore or theretofore collected) arose and will arise from bona
fide transactions in the ordinary course of business.
21
3.16 No Undisclosed Liabilities. Except as and to the extent set forth
on Schedule 3.16, Seller did not have any liability or obligation (direct or
indirect, absolute, fixed, contingent or otherwise) arising out of the Acquired
Assets or conduct of the CATV Business of the type or nature required by GAAP to
be reflected or reserved therein which were not reflected or reserved on the
Financial Statements or Interim Financial Statements, and Seller has not
incurred any such liability or obligation since the last day of the last Interim
Financial Statements, other than in the ordinary course of business.
3.17 Liabilities to Subscribers. There are no obligations or
liabilities to subscribers of the CATV Systems except with respect to (i)
prepayments or deposits made by such subscribers as set forth in the Financial
Statements or Interim Financial Statements or, since the last day of the Interim
Financial Statements incurred in the ordinary course of business consistent with
past practices and (ii) the obligation to supply services to subscribers in the
ordinary course of business.
3.18 Overbuilds. Except as set forth in Schedule 3.18, no construction
programs have been undertaken, or to Seller's knowledge, are proposed or
threatened to be undertaken, by any municipality or other cable television,
multichannel multipoint distribution systems or multipoint distribution system
provider or operator in any System Area served by the Systems.
3.19 Characteristics of CATV Business. Schedule 3.19 sets forth
accurately and completely the following information as of the date shown
thereon, in all material respects, with respect to the CATV Business:
(a) the approximate length of each of aerial and underground
cable;
(b) a summary description of all current marketing programs and
Seller's past practices with respect to marketing programs for the
past year; and
(c) a summary description of Seller's current disconnect policy.
4. Representations and Warranties of Buyer.
To induce Seller to enter into this Agreement, Buyer represents and
warrants to Seller as follows:
4.01 Organization and Authority of Buyer. Buyer is a Delaware limited
partnership duly organized, validly existing and in good standing under the laws
of the jurisdiction of its organization, and at Closing will be in good standing
under the laws of the State of Illinois, with all requisite power and
22
authority to conduct its business and operations as presently conducted.
4.02 Legal Capacity: Approvals and Consents.
(a) Authority; Binding Effect. Subject to Section 9.02 hereof and
the Consents and approvals set forth on Schedules 3.02 and 4.05, Buyer
has all requisite power and authority to execute and deliver this
Agreement and to perform its obligations hereunder. Buyer has duly
taken all actions necessary to authorize the execution, delivery and
performance of this Agreement. This Agreement has been duly executed
and delivered by Buyer and is the valid and binding obligation of Buyer
enforceable in accordance with its terms, except as such enforceability
may be affected by laws of bankruptcy, insolvency, reorganization and
creditors rights generally and by the availability of equitable
remedies.
(b) No Breach or Violation. The execution, delivery and
performance of this Agreement does not, and will not, contravene the
certificate of limited partnership or agreement of limited partnership
of Buyer, and does not and will not: (i) conflict with or result in a
breach or violation by Buyer of, or (ii) constitute a default by Buyer
under, any Law, Judgment, contract, arrangement or understanding to
which Buyer is a party or by which Buyer is subject or bound or may be
affected.
4.03 Legal and Governmental Proceedings and Judgments. There is no
legal action, proceeding, or investigation pending or, to the knowledge of
Buyer, threatened against or otherwise involving Buyer, nor is there any
Judgment outstanding against Buyer or to or by which Buyer is subject or bound
which materially adversely affects the ability of Buyer to consummate any of the
transactions contemplated hereby.
4.04 Finders and Brokers. Buyer has employed Xxxxxx Capital
Corporation as its broker in the sale provided herein and will pay and discharge
the claim thereof for commission or expense reimbursement in connection
therewith. Buyer has not entered into any other contract, arrangement or
understanding with any Person, and is not aware of any claim or basis for any
claim based upon any act or omission of Buyer or any of its affiliates, which
may result in the obligation of Seller to pay any finder's fees, brokerage or
agent's commissions or other like payments in connection with the negotiations
leading to this Agreement or the consummation of the transactions contemplated
hereby.
4.05 Buyer Consents. Subject to Section 9.02 hereof, except for the
parties listed in Schedule 4.05 and the Consents, there are no parties whose
approval or consent, or with whom the filing of any certificate, notice,
application, report or other document, is
23
legally or contractually required or otherwise is necessary in connection with
the execution, delivery or performance of this Agreement by Buyer, except where
the failure to obtain such consent or approval would not reasonably be expected
to materially adversely affect Buyer's ability to perform its obligations
hereunder.
4.06 Acquisition of Rights. To Buyer's knowledge, there is no reason
relating to Buyer that any Governmental Authority or other party whose consent
is required or contemplated hereunder, would refuse to consent to the transfer
of CATV Instruments or any rights to Buyer hereunder or would condition granting
of any such consent on the performance by Seller or Buyer of any material
obligation not expressly set forth herein, except for matters which may come
into effect after the date of this Agreement affecting the cable television
industry generally.
5. Covenants Pending Closing.
5.01 Business of Seller. From the date hereof to the Closing Date, and
except as otherwise consented to or approved by Buyer in writing (which consent
shall not be unreasonably withheld), Seller covenants and agrees as follows:
(a) Business in Ordinary Course. Seller shall conduct the CATV
Business in the ordinary course, consistent with past practices and
will not engage in any material transaction, including, without
limitation, entering into or amending in any material respect any
material CATV Instrument or material Contract, or making any material
advance or expenditure, other than in the ordinary course of business
or in conformance with the then applicable budget, nor change in any
material respect its business policies or practices. Seller shall use
its reasonable commercial efforts to preserve the CATV Business
intact, to retain the services of its present employees and agents,
and to preserve its business relationships with, and the goodwill of,
its customers, suppliers and others. Seller shall pay before
delinquent all taxes and other charges upon or against Seller or any
of its properties or income, file when due all tax returns and other
reports required by Governmental Authorities and pay when due all
liabilities except those which it chooses to contest in good faith and
by appropriate proceedings.
(b) Books and Records. Seller shall maintain its books, accounts
and records in the usual, regular and ordinary manner.
(c) Litigation During Interim Period. Seller will advise Buyer in
writing promptly ofthe assertion or commencement of any material
claim, litigation, labor dispute, proceeding or investigation in which
the Seller is a party or
24
the Acquired Assets or CATV Business may materially be
affected.
(d) Material Contracts. Seller shall deliver to Buyer copies of
all material Contracts and all material CATV Instruments that are
entered into prior to the Closing.
(e) Capital Expenditures. Seller shall maintain the Acquired
Assets, including the plant and Equipment related thereto, in good
operating condition (normal wear and tear excepted), and Seller shall
implement any capital expenditures in accordance with Seller's 1997
Budget.
(f) Asset Sales. Seller shall not sell, transfer or assign any
Acquired Assets other than on an arms-length basis in the ordinary
course of business consistent with past practices.
(g) Salary Increase. Seller shall not increase the compensation
or change any benefits available to employees of Seller who work in
the CATV Business except as required pursuant to existing written
agreements or except in the ordinary course of business consistent
with past practice or in accordance with Seller's 1997 Budget.
(h) Continued Disconnect Policy. Seller shall continue to
implement its disconnect policy in connection with service to Basic
Subscribers.
(i) Inventory Maintenance. Seller shall maintain inventories of
equipment, cable and supplies at normal levels consistent with past
practice or Seller's 1997 Budget.
(j) Marketing Programs. Seller shall not implement any new
marketing program or implement any rate change, retiering or
repackaging unless required by law or consistent with Seller's 1997
Budget.
5.02 Access to Information. Between the date of this Agreement and the
Closing, Buyer shall have reasonable access during normal business hours to all
of the properties, books, reports, records, CATV Instruments and Contracts of
Seller related to the CATV Business, and Seller shall furnish Buyer with all
information it may reasonably request related to the CATV Business. All
information obtained by Buyer pursuant to this Agreement and in connection with
the negotiation hereof shall be used by Buyer solely for purposes related to
this Agreement and the acquisition of the Acquired Assets and, in the case of
non-public information, shall, except as may be required for the performance of
this Agreement or by Law, be kept in strict confidence by Buyer.
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5.03 Applications for Assignment of Contracts or CATV Instruments. In
order to secure requisite consents or approvals of the transfer of control to
Buyer of any Contracts or CATV Instruments, Seller shall proceed as promptly as
practicable and in good faith and using reasonable commercial efforts, to
prepare, file and prosecute such application or applications as may be necessary
to obtain each such consent or approval. Buyer and Seller shall use reasonable
efforts to promptly assist each other and shall take such prompt and affirmative
actions as may be reasonably necessary in obtaining such approvals and shall
cooperate with each other in the preparation, filing and prosecution of such
applications as may be reasonably necessary, and agree to furnish all
information required by the approving entity, and to be represented at such
meetings or hearings as may be scheduled to consider such applications. Without
limiting in any respect the foregoing, each party agrees to file mutually
acceptable applications to all appropriate Governmental Authorities for all
consents or approvals required to consummate the transactions hereunder within
forty-five (45) days after the date of this Agreement. In the event that Buyer
amends or modifies any such application for transfer of control of any Contracts
or CATV Instruments and the approval period for such transfer is extended by any
such Governmental Authority or other third party to a date beyond the Outside
Date, then Seller may (if it so elects) extend the Outside Date in Section 12.01
to a date that will give effect to any resulting delay. "Reasonable commercial
efforts" for this purpose shall not require any change in any CATV Instrument or
Contract as a condition to obtaining any Consent, the effect of which is to make
such CATV Instrument or Contract more burdensome, or otherwise to undertake
extraordinary or unreasonable measures to obtain such approvals and consents,
including, without limitation, the initiation or prosecution of legal
proceedings or the payment of fees in excess of normal and usual filing and
processing fees.
5.04 Notification of Certain Matters. Each party will promptly notify
the other of any fact, event, circumstance or action the existence or occurrence
of which would cause any of such party's representations or warranties under
this Agreement not to be true and correct in any material respect.
5.05 Risk of Loss; Condemnation.
(a) In the event of any loss or damage to the Acquired Assets or
the CATV Business resulting from fire, theft or other casualty at all
times prior to the Closing, (i) Seller shall either rebuild or restore
such Acquired Assets or the CATV Business in substantially the
condition immediately preceding such loss or damage, or (ii) at the
Closing, all insurance proceeds paid or payable as a result of the
occurrence of the event causing such loss or damage will be delivered
by Seller to Buyer, or the rights to such proceeds will be assigned by
Seller to Buyer if not yet paid
26
over to Seller, together with such additional sums, if any, that are
necessary to either rebuild or restore such Acquired Assets or the
CATV Business in substantially the condition immediately preceding
such loss or damage. If Buyer disputes the amount paid or payable in
clause (ii), Buyer's good faith itemized, with reasonable specificity,
written estimate of any deficiency shall be withheld from Buyer's
payment of the Purchase Price and deposited by Buyer in the Indemnity
Escrow until such matter is resolved. Notwithstanding the provisions
set forth above, if, in the event of such loss or damage, Buyer
notifies Seller that Buyer intends to rebuild or upgrade the CATV
System affected by such loss or damage and that, as a result thereof,
Buyer elects not to have Seller either rebuild or restore such
Acquired Assets or CATV Business, then Seller shall deliver to Buyer
at Closing (A) the amounts and/or rights to proceeds referred to in
clause (ii) above or (B) such amount as Seller would have been
required to expend or incur (which amount shall include a reasonable
allocation for in-house labor and similar expenses) to rebuild or
restore pursuant to clause (i) above, if Seller demonstrates, to
Buyer's reasonable satisfaction, that such amounts would have been
less than the amount referred to in clause (A) above.
(b) If, prior to the Closing, any portion of any CATV System is
taken or condemned as a result of the exercise of the power of eminent
domain, or if a Governmental Authority having such power informs
Seller or Buyer that it intends to condemn any portion of any CATV
System (such event being referred to herein, in either case, as a
"Taking"), then Seller shall be relieved of its obligation to convey
to Buyer the Acquired Asset or interests that are the subject of the
Taking, prior to the Closing, Seller shall not settle any claim for
damages without Buyer's consent (which consent shall not unreasonably
be withheld), and at the Closing Seller shall assign to Buyer all of
Seller's rights (including the right to receive payment of damages)
with respect to such Taking and shall pay to Buyer all damages
previously paid to Seller with respect to the Taking.
5.06 No Solicitation. Between the date of this Agreement and the
Closing Date, Seller shall not, and shall cause its officers, directors,
employees, agents and representatives not to, initiate, solicit or encourage,
directly or indirectly, any inquiries or the making of any proposal with respect
to the CATV Business, engage in any negotiations concerning, or provide to any
other Person any information or data relating to the CATV Business, the CATV
Systems, or the Acquired Assets for the purposes of, or have any discussions
with any Person relating to, or otherwise cooperate in any way with or assist
or participate in, facilitate or encourage, any inquiries or the making of any
proposal which constitutes, or may reasonably be expected to lead to, any effort
or attempt by any other Person to seek or effect a sale of all or
27
substantially all of the Acquired Assets, the CATV Systems or the CATV Business.
5.07 Form 394. Promptly after the date of this Agreement, Seller shall,
at its own expense, prepare and file within 45 days of the date hereof properly
prepared Applications for Franchise Authority Consent to Assignment or Transfer
of Control or Cable Television Franchise FCC 394 ("Form 394") with the local
Government Authorities that have issued franchises to Seller, and shall file all
additional information required by such franchises or applicable local Laws or
that the Governmental Authorities deem necessary or appropriate in connection
with their consideration of the request that such authority approve of the
transfer of the CATV Licenses to Buyer.
5.08 Title Matters. Within twenty (20) days after the execution of this
Agreement, Seller shall, at its expense, commission a qualified title company to
prepare and provide a preliminary title report, and Seller shall promptly
provide a copy of the preliminary title report to Buyer, together with complete
copies of all documents relating to the title exceptions referred to in the
preliminary title report with respect to each parcel of Real Property owned by
Seller. Prior to or at the Closing, Seller shall, at its expense, obtain title
insurance in form reasonably satisfactory to Buyer.
5.09 Phase I Study. Within twenty (20) days after the execution of this
Agreement, Seller shall at its sole expense, commission a qualified engineering
firm to conduct the Phase I Study (the "Study") in accordance with ASTM Standard
1527-94 with respect to all parcels of Real Property except for the CATV
Business' leased administrative offices. Within three (3) business days of
receipt of the completed Study, Seller shall promptly deliver the Study to
Buyer. Buyer shall notify Seller in writing within ten (10) business days of
receiving the Study if Buyer believes the Study discloses an environmental
condition that (i) could reasonably be expected to impair the use or value of
such Real Property for the continued operation of the CATV Business as operated
by Seller on the Closing Date or subject Buyer to any liability for fines,
penalties, or cleanup or response costs if Buyer consummates this Agreement, or
(ii) would cause a reasonable purchaser experienced in environmental matters to
perform further investigation or testing before proceeding with the transfer of
the Real Property. Seller shall promptly commence further investigation and/or
remedial action at its expense to cure the condition prior to the Closing;
provided that Seller shall not be obligated to spend more than One Million
Dollars ($1,000,000) in the aggregate in its attempt to cure all such
conditions. Seller shall notify Buyer within ten (10) business days after its
receipt of such written notice from Buyer if Seller determines that it is or
will be unable to cure such conditions for One Million Dollars ($1,000,000) or
less. If Seller exercises the right not to cure
28
such conditions because the aggregate cost would exceed One Million Dollars
($1,000,000), Buyer may elect (i) to terminate this Agreement with no cost or
obligation on the part of Seller or Buyer or (ii) to waive such obligations, in
which event Buyer shall receive a credit at the Closing in the amount, if any,
by which One Million Dollars ($1,000,000) exceeds the aggregate amount paid by
Seller to third parties in connection with curing such conditions and assume all
liabilities and obligations in connection with such conditions and hold harmless
and indemnify Seller from same in accordance with this Agreement.
5.10 Monthly Financial Statements. Between the date of execution and
delivery of this Agreement and the Closing Date, Seller shall deliver to Buyer
within thirty (30) days after the end of each calendar month, unaudited
financial reports ("Monthly Financial Statements") in the form customarily
prepared by Seller with respect to the CATV System and the CATV Business and
other reports with respect to the CATV System and the CATV Business (including,
without limitation, reports setting forth the revenue and cash flow of the
System for each month and year-to-date, subscriber information for Basic
Subscribers, disconnect requests, miles of plant, homes passed and such other
information as Buyer may reasonably request, if and to the extent customarily
prepared by Seller, and in the form customarily prepared by Seller, beginning as
soon as practicable after the date of this Agreement). Such Monthly Financial
Statements shall present fairly and accurately the financial condition and
results of operations of Seller and the CATV System for the period then ended
and as of such dates consistently applied through the periods specified subject
to normal year end adjustments. Seller shall additionally provide Buyer with
quarterly capital expenditure reports with respect to the CATV System.
6. Deliveries at Closing.
6.01 Deliveries by Seller. At the Closing, Seller will deliver or cause
to be delivered to Buyer:
(a) Such warranty or trustee's deeds, certificates or title
policies, bills of sale, endorsements, and other good and sufficient
instruments of conveyance, transfer and assignment as are necessary to
vest in Buyer the right, title and interest of Seller in accordance
herewith in and to the Acquired Assets in a form reasonably
satisfactory to Buyer.
(b) A certificate signed by a principal officer of the Seller,
dated as of the Closing, representing and certifying to Buyer as to
the matters set forth in Sections 7.02, 7.03, 7.04 and 7.05.
29
(c) The Xxxx of Sale, General Assignment, and Instrument of
Assumption of Liabilities in the form of Exhibit B hereto.
(d) An opinion of Seller's Local Counsel, substantially in the
form of Exhibit D hereto, and an opinion of Seller's FCC Counsel,
substantially in the form of Exhibit F hereto.
(e) Evidence that the waiting period under the HSR Act, if
applicable, has expired.
(f) Evidence in a form and substance reasonably satisfactory to
Buyer of receipt of the consents and approvals listed on Schedule 3.02
and designated by an asterisk as required as conditions to the
transactions contemplated hereunder have been obtained (the "Closing
Consents").
6.02 Deliveries by Buyer. At the Closing, Buyer will deliver or cause
to be delivered to Seller:
(a) The Purchase Price as provided in Section 2.02, less the
Subscriber Adjustment, if any, less the Indemnity Escrow Deposit,
which shall be delivered to the Indemnity Escrow Agent as provided in
Section 2.02, and less any other adjustments provided herein.
(b) The Xxxx of Sale, General Assignment, and Instrument of
Assumption of Liabilities in the form of Exhibit B hereto.
(c) A certificate signed by a principal officer of Buyer dated as
of the Closing, representing and certifying to Seller as to matters
set forth in Sections 8.02, 8.03 and 8.04.
(d) An opinion of Buyer's Counsel, substantially in the form of
Exhibit E hereto.
(e) Evidence in a form and substance reasonably satisfactory to
Seller that the consents and approvals referred to in Schedule 4.05
have been obtained.
(f) Evidence that the waiting period under the HSR Act, if
applicable, has expired.
7. Conditions to the Obligations of Buyer.
The obligations of Buyer to complete the transactions provided for
herein are subject to the fulfillment, of all of the following conditions any of
which may be waived in writing by Buyer:
30
7.01 Receipt of Consents. The conditions specified in Section 9.02 have
been satisfied, the approvals and consents of Governmental Authorities have been
obtained for franchises which represent at least ninety percent (90%) of the
Basic Subscribers, and shall be in full force and effect, and all other Closing
Consents have been obtained and shall be in full force and effect; provided,
however, that upon completion of the Closing, the provisions of Section 9.05
hereof with regard to Retained Franchises shall apply.
7.02 Seller's Authority. All actions under the documents governing the
Seller necessary to authorize (i) the execution and delivery of this Agreement
by Seller and the performance by Seller of its obligations under this Agreement
and (ii) the consummation of the transactions contemplated hereby, shall have
been duly and validly taken by Seller and shall be in full force and effect on
the Closing Date.
7.03 Absence of Proceedings. No Judgment shall have been issued
enjoining or preventing the consummation of the transactions contemplated
hereby.
7.04 Performance by Seller. Seller shall have performed its agreements
and covenants hereunder (including, without limitation, its covenants in
Articles 5 and 6) to the extent the failure to so perform would not result in a
Material Adverse Effect.
7.05 Absence of Breach of Warranties and Representations. The
representations and warranties of Seller contained in this Agreement shall be
true and correct on and as of the Closing Date with the same force and effect as
if made on and as of such date, except to the extent that such representations
and warranties describe a condition on a specified time or date or are affected
by the conclusion of the transactions permitted or contemplated hereby or the
conduct of the CATV Business in accordance with Article 5 hereof between the
date hereof and the Closing Date and except where the falsehood or inaccuracy of
any representation or warranty would not have or result in a Material Adverse
Effect.
7.06 Minimum Amount of Subscribers. As of the Closing, the CATV
Business shall include not less than Sixty-One Thousand Five Hundred (61,500)
Basic Subscribers.
8. Conditions to the Obligations of Seller.
The obligations of Seller to complete the transactions provided for
herein are subject to the fulfillment of all of the following conditions, any of
which may be waived in writing by Seller.
8.01 Receipt of Consents. The conditions specified in Section 9.02
shall have been satisfied and the approvals and
31
consents of Governmental Authorities shall have been obtained for franchises
which represent at least ninety percent (90%) of the Basic Subscribers and shall
be in full force and effect; provided, however, that upon completion of the
Closing, the provisions of Section 9.05 hereof with regard to Retained
Franchises shall apply.
8.02 Buyer's Authority. All actions under the documents governing Buyer
necessary to authorize (i) the execution, delivery and performance by Buyer of
this Agreement, and (ii) the consummation of the transactions contemplated
hereby, shall have been duly and validly taken by Buyer and shall be in full
force and effect on the Closing Date.
8.03 Performance by Buyer. Buyer shall have performed in all material
respects all covenants and agreements to be performed by it hereunder to the
extent such are required to be performed at or prior to the Closing.
8.04 Absence of Breach of Representations and Warranties. All
representations and warranties of Buyer contained in this Agreement shall be
true and correct in all material respects on and as of the Closing Date with the
same effect as if then made.
8.05 Absence of Proceedings. No Judgment shall have been issued
enjoining or preventing the consummation of the transactions contemplated
hereby.
9. Covenants.
9.01 Compliance with Conditions. Each of the parties hereto covenants
and agrees with the other to exercise reasonable commercial efforts to perform,
comply with and otherwise satisfy each and every one of the conditions to be
satisfied by such party hereunder and each party shall use reasonable commercial
efforts to notify promptly the other if it shall learn that any conditions to
performance of either party will not be fulfilled.
9.02 Compliance with HSR Act and Rules.
(a) The performance of the obligations of all parties under this
Agreement is subject to the condition that, if the HSR Act and Rules
are applicable to the transactions contemplated hereby, the waiting
period specified therein, as the same may be extended, shall have
expired without action taken to prevent the consummation of the
transactions contemplated hereby.
(b) Each of the parties hereto will use its reasonable commercial
efforts to comply promptly with any applicable requirements under the
HSR Act and rules relating to filing and furnishing of information to
the FTC and the Antitrust Division of the DOJ, the parties' actions to
32
include, without limitation, (i) filing or causing to be filed the HSR
report required to be filed by them, or by any other Person that is
part of the same "person" (as defined in the HSR Act and Rules) or any
of them, and taking all other action required by the HSR Act or Rules;
(ii) coordinating the filing of such HSR Reports (and exchanging drafts
thereof) so as to present both HSR Reports to the FTC and the DOJ at
the time selected by the mutual agreement of Seller and Buyer, and to
avoid substantial errors or inconsistencies between the two in the
description of the transaction; and (iii) using their reasonable
commercial efforts to comply with any additional request for documents
or information made by the FTC or the DOJ or by a court and assisting
the other parties to so comply.
(c) Notwithstanding anything herein to the contrary, in the event
that the consummation of the transactions contemplated hereby is
challenged by the FTC or the DOJ or any agency or instrumentality of
the federal government by an action to stay or enjoin such
consummation, then Buyer and Seller shall cooperate with each other, as
reasonably requested, to contest such action until such time as either
party terminates this Agreement under this Section or Article 12. In
the event that a permanent stay or injunction is granted, then either
Buyer or Seller may terminate this Agreement by prompt written notice
to the other. If any other form of equitable relief affecting any party
is granted to the FTC, the DOJ or other such agency or instrumentality,
then such party may terminate this Agreement by prompt written notice
to the other party. Upon any such termination pursuant to this Section
9.02(c), neither party shall have any further obligation or liability
to the other under this Agreement. To effectuate the intent of the
foregoing provisions of this Section 9.02, the parties agree to
exchange requested or required information in making the filings and in
complying as above provided, and the parties agree to take all
necessary steps to preserve the confidentiality of the information set
forth in any filings including, without limitation, limiting disclosure
of exchanged information to counsel for the nondisclosing party.
9.03 Records, Taxes and Related Matters. Seller and Buyer shall each
make their respective books and records (including work papers in the possession
of their respective accountants) available for inspection by the other party, or
by its duly authorized representatives, for reasonable business purposes at all
reasonable times during normal business hours, for a seven (7) year period after
the Closing Date with respect to all transactions of the CATV Business occurring
prior to or relating to the Closing, and the historical financial condition,
assets, liabilities, results of operation and cash flows of the CATV Business
for any period prior to the Closing. In the case of records owned by Seller,
such
33
records shall be made available at Seller's executive office, and in the case of
records owned by Buyer, such records shall be made available at the office at
which such records are maintained. As used in this Section 9.04, the right of
inspection includes the right to make copies for reasonable business purposes.
In all cases where Buyer, pursuant to the terms hereof, has assumed Seller's
liability for the payment of taxes (including, without limitation, deposits),
Buyer shall (unless and to the extent otherwise requested by Seller) prepare and
file all returns, reports, information statements, forms or other documents
required to be filed with respect to such taxes, all in a timely and proper
fashion and as may be necessary or appropriate to assure that the Seller shall
be in full and prompt compliance with law, and Buyer shall pay or cause to be
paid all such taxes when due.
9.04 Non-Assignment. Notwithstanding any provision to the contrary
contained herein (but not in limitation of Seller's obligations under Section
5.03 or the conditions set forth in Section 7.01), Seller shall not be
obligated to assign to Buyer any Contract or CATV Instrument which provides that
it may not be assigned without the consent of the other party thereto and for
which such consent is not obtained, but in any such event, Seller shall, to the
extent reasonably necessary, cooperate with Buyer in any commercially reasonable
arrangement designed to provide the benefits thereof to Buyer.
9.05 Retained Franchises. After satisfaction or waiver of the
conditions precedent to Buyer's obligation to close as set forth in Section
7.01, those franchises (and all assets related thereto) with respect to which
consent to transfer has not been obtained by the Closing Date (the "Retained
Franchises") shall be retained by the Seller and subsequently transferred to the
Buyer in accordance with the terms hereof.
(a) The Purchase Price payable at Closing shall be reduced by an
amount for each Retained Franchise determined as follows: the product
of One Thousand Five Hundred Sixteen Dollars ($1,516.00) and the
number of Basic Subscribers in such Retained Franchise at Closing (the
"Retained Franchise Price"). The Retained Franchise Price or, at
Buyer's option, an irrevocable letter of credit in an amount equal to
the Retained Franchise Price, shall be deposited or delivered by Buyer
into an escrow account. Concurrent with the Closing hereunder, the
parties shall adopt a form of escrow agreement with respect to the
Retained Franchises.
(b) Concurrent with the Closing hereunder, the Seller and the
Buyer shall adopt a form of management agreement with respect to each
of the Retained Franchises.
(c) Seller and Buyer shall continue to cooperate in attempting to
secure approval of the transfer of each Retained
34
Franchise in accordance with the provisions of Section 5.03 hereof and
where a renewal application is pending at Closing, renewals of the
Retained Franchise. When such approval is obtained, there shall be
delivered to Seller from the escrow the Retained Franchise Price and
any income thereon and the Seller shall deliver to the Buyer a xxxx of
sale for the assets related to such Retained Franchise and such other
transfer documents as the Buyer may reasonably request.
(d) If such approval is not obtained within two (2) years after
Closing, the Buyer and the Seller shall negotiate in good faith so
that each party shall obtain the benefits and burdens contemplated
under this Agreement.
9.06 Covenant Not to Compete. The term "Covenantors" as used in this
Section 9.06 shall be defined to mean each of Seller, its parent, Cablevision
Systems Corporation, and all corporations, firms and entities wholly owned by
any or any combination of them.
(a) Except as set forth on Schedule 9.06,each Covenantor
covenants and agrees for itself only, that for a period of three years
after Closing (or such period as allowed by law if less than three
years), that such Covenantor will not compete with the CATV Business
within the System Areas. Notwithstanding anything contained herein,
the ownership of passive securities of any company which is "publicly
held" and which do not constitute more than five percent (5%) of the
voting rights or equity interest of such entity shall not constitute a
violation of this covenant.
(b) Each Covenantor agrees that in the event that any Covenantor
commits a breach or threatens to commit a breach of any of the
provisions of this Section 9.06, Buyer shall have the right and remedy
to have the provisions of this Section 9.06 specifically enforced by
any court having jurisdiction, it being acknowledged and agreed that
any such breach could cause immediate irreparable injury to Buyer and
that money damages would not provide an adequate remedy at law for any
such breach or threatened breach.
(c) If any of the provisions of or covenants contained in this
Section 9.06 are hereafter construed to be wholly or to any extent
invalid or unenforceable in any jurisdiction, the same shall be deemed
automatically modified to the minimum extent necessary to make such
provision or covenant enforceable, and the same shall not affect the
remainder of the provisions to the extent not invalid or unenforceable
in such jurisdiction or the enforceability thereof without limitation
in any other jurisdiction.
35
10. Survival of Representations, Warranties, Covenants and Other
Agreements; Indemnification.
10.01 Survival of Representations, Warranties, Covenants and other
Agreements. All representations, warranties, covenants and other agreements made
by either party in this Agreement (other than representations and warranties
relating to (i) environmental matters, which shall survive the Closing for a
period of three years, and (ii) taxes, title, and third party claims for periods
prior to Closing, which shall survive for the applicable statute of limitations
period) shall survive the Closing for a period of one year, and shall thereafter
terminate.
10.02 Indemnification by Seller.
(a) Indemnity. Subject to Section 10.01, Seller agrees to
indemnify, defend and hold harmless Buyer, its affiliates and their
respective shareholders, directors, officers, partners, employees,
agents, successors and assigns (a "Seller Indemnified Party"), from
and against all losses, damages, liabilities, deficiencies or
obligations, including, without limitation, all claims, actions,
suits, proceedings, demands, judgments, assessments, fines, interest,
penalties, costs and expenses (including, without limitation,
settlement costs and reasonable legal fees) (collectively, "Losses")
to which they may become subject as a direct result of (x) the
Excluded Liabilities and (y) any and all misrepresentations or
breaches of a representation herein or warranty or the non-performance
or breach of any covenants or agreements of Seller contained herein;
provided, however, that for purposes of determining whether there
exists or has occurred a misrepresentation or breach of a
representation or warranty contained herein, or the nonperformance or
breach of any covenants or agreements of Seller contained herein, all
representations, warranties, covenants or agreements of Seller
contained in this Agreement shall be read without any reference to the
words or phrases "material," "material adverse affect,"
"materially adversely affect" or similar word or phrase relating to
materiality, as if such representation, warranty, covenant or
agreement were written without any such word or phrase.
(b) Payment. Any obligations of Seller under the provisions of
this Article shall be paid promptly to the Seller Indemnified Party by
Seller and shall represent a retrospective adjustment to Purchase
Price.
(c) Notwithstanding anything contained herein to the contrary,
the indemnification provided in this Section 10.02 shall only apply to
the extent that, and not until, (i) any particular indemnity claim or
series of related indemnity claims equals or exceeds Ten Thousand
Dollars
36
($10,000) (the "Section 10.02 Claim Threshold"), in which event the
indemnification shall apply to the full amount of the claim without
regard to the Section 10.02 Claim Threshold and (ii) the aggregate of
all amounts subject to indemnification hereunder exceeds the sum of
Five Hundred Thousand Dollars ($500,000) (the "Section 10.02 Basket"),
in which event the indemnification shall apply only to the extent that
the aggregate amount of all claims exceed the Section 10.02 Basket. In
any event, the maximum amount that Seller will be required to pay
under this Section 10.02 in respect of all claims by all parties is
Five Million Dollars ($5,000,000); provided, however, that the Section
10.02 Claim Threshold, the Section 10.02 Basket and the $5,000,000
maximum shall not apply to the failure of Seller to pay the Excluded
Liabilities.
10.03 Indemnification by Buyer.
(a) Indemnity. Subject to Section 10.01, Buyer agrees to
indemnify, defend and hold harmless Seller and its shareholders,
partners, directors, officers, employees, agents, successors and
assigns (a "Buyer Indemnified Party"), from and against all losses,
damages, liabilities, deficiencies or obligations including, without
limitation, all claims, actions, suits, proceedings, demands,
judgments, assessments, fines, interest, penalties, costs and expenses
(including, without limitation, settlement costs and reasonable legal
fees) to which they may become subject as a direct result of: (i) any
and all misrepresentations or breaches of a representation or warranty
or the nonperformance or breach of any covenant or agreement of Buyer
contained herein; (ii) the Assumed Liabilities; or (iii) the ownership
and operation of the Acquired Assets and the CATV Business after the
Closing.
(b) Payment. Any obligations of Buyer under the provisions of
this Article shall be paid promptly to the Buyer Indemnified Party by
Buyer.
(c) Notwithstanding anything contained herein to the contrary,
the indemnification provided in this Section 10.03 shall only apply to
the extent that, and not until, (i) any particular indemnity claim
or series of related indemnity claims equals or exceeds Ten Thousand
Dollars ($10,000) (the "Section 10.03 Claim Threshold"), in which
event the indemnification shall apply to the full amount of the claim
without regard to the Section 10.03 Claim Threshold and (ii) the
aggregate of all amounts subject to indemnification hereunder exceeds
the sum of Five Hundred Thousand Dollars ($500,000) (the "Section
10.03 Basket"), in which event the indemnification shall apply only to
the extent that the aggregate amount of all claims exceed the Section
37
10.03 Basket. In any event, the maximum amount that Buyer will be
required to pay under this Section 10.03 in respect of all claims by
all parties is Five Million Dollars ($5,000,000); provided, however,
that the Section 10.03 Claim Threshold, the Section 10.03 Basket and
the $5,000,000 maximum shall not apply to the failure of Buyer to pay
all or any portion of the Purchase Price and the failure of Buyer to
pay the Assumed Liabilities.
10.04 Third Party Claims. If any claim ("Asserted Claim") covered by
the foregoing indemnities is asserted against any indemnified party
("Indemnitee"), it shall be a condition to the obligations under this Article
that the Indemnitee shall promptly give the indemnifying party ("Indemnitor")
notice thereof in accordance with Section 13.05. The Indemnitee shall give
Indemnitor an opportunity to control negotiations toward resolution of such
claim without the necessity of litigation, and, if litigation ensues, to defend
the same with counsel reasonably acceptable to Indemnitee, at Indemnitor's
expense, and Indemnitee shall extend reasonable cooperation in connection with
such defense. If the Indemnitor fails to assume control of the negotiations
prior to litigation or to defend such action within a reasonable time,
Indemnitee shall be entitled, but not obligated, to assume control of such
negotiations or defense of such action, and Indemnitor shall be liable to the
Indemnitee for its expenses reasonably incurred in connection therewith which
Indemnitor shall promptly pay. Neither Indemnitor nor Indemnitee shall settle,
compromise, or make any other disposition of any Asserted Claims, which would or
might result in any liability to Indemnitee or Indemnitor, respectively, under
this Article 10 without the written consent of Indemnitee or Indemnitor,
respectively, which shall not be unreasonably withheld, provided, that the
Indemnitor may settle, compromise or make any other disposition of any Asserted
Claims if the same includes a complete discharge of the Indemnitee.
11. Further Assurances.
From time to time after the Closing, each party will execute and
deliver such other instruments of conveyance and transfer, fully cooperate with
the other party and take such other actions as the other party reasonably may
request to effect the purposes and intent of this Agreement; provided, however,
that nothing in this Agreement shall be deemed to require or permit the Seller
or Buyer to take any action that would otherwise require approval of any CATV
Licenses by any Governmental Authority prior to the time such approval is
obtained.
12. Closing.
12.01 Closing. The Closing shall take place at the offices of Buyer's
Counsel at 10:00 A.M., local time, on the fifth (5th) business day after all
conditions to Closing hereunder shall have
38
been satisfied or waived by the parties hereto (the "Closing Date"); provided,
however, that if the Closing shall not have occurred prior to one year from the
date of this Agreement or as extended pursuant to Section 5.03 (the "Outside
Date"), this Agreement shall terminate unless otherwise provided by the mutual
written agreement of Buyer and Seller; provided, further, without Buyer's
consent, the Closing shall not occur prior to November 30, 1997 (however, if all
of the conditions to the obligations of the Buyer set forth in Article 7 shall
have been waived or materially satisfied prior to November 30, 1997, and Buyer
has not closed as provided hereinabove prior to November 30, 1997, at Closing,
Buyer shall reimburse Seller for all budgeted capital expenditure payments made
by Seller between the date the Closing would have occurred pursuant to the first
clause of this sentence and the Closing). If, as of the Outside Date, the
Closing cannot be effected, all parties hereto shall be released from all
obligations hereunder other than obligations arising from a breach or default
hereunder, and each party hereto will bear expenses as provided in Section 13.06
hereof. At the Closing, the parties hereto shall execute and deliver all
instruments and documents as shall be necessary in the reasonable opinion of
counsel for the respective parties to consummate the transactions contemplated
herein.
12.02 Termination. In addition to the termination provided for in
Section 12.01, this Agreement may be terminated and the transactions
contemplated hereby may be abandoned:
(a) At any time, by the mutual written agreement of Buyer and
Seller;
(b) By Buyer, upon and effective as of the date of written notice
to Seller, if any of the conditions to the obligations of Buyer set
forth in Article 7 shall not have been waived or materially satisfied
at the time of the Closing;
(c) By Seller, upon and effective as of the date of written
notice to Buyer, if any of the conditions to the obligations of
Seller set forth in Article 8 shall not have been waived or materially
satisfied at the time of the Closing;
(d) By Buyer, upon and effective as of the date of written notice
to Seller, pursuant to the termination provisions of Section 5.09; or
(e) By Seller or Buyer, upon and effective as of the date of
written notice to the other, pursuant to the termination provisions of
Section 9.02.
39
12.03 Remedies Upon Default.
(a) Buyer's Default. Subject to the last sentence of this
Section, if Seller terminates this Agreement pursuant to Section 12.02
(c) hereof, if any of the conditions set forth in Sections 8.02, 8.03
or 8.04 shall not have been waived or materially satisfied at the time
of Closing, then, unless Seller is in material breach hereunder or at
the Closing there is a nonfulfillment of any of the conditions
precedent specified in Article 7 hereof, Seller shall be entitled to
receive the deposit or the proceeds thereof in the Xxxxxxx Money
Escrow, plus all interest earned thereon, pursuant to the Xxxxxxx
Money Escrow Agreement. The parties agree that such payment to Seller
shall constitute liquidated damages and not a penalty, and Buyer shall
have no further obligation or liability to Seller under this
Agreement.
(b) Seller's Default. If all conditions to the obligations of the
parties set forth in Articles 7 and 8 have been waived or materially
satisfied and Seller refuses to close the transaction contemplated
hereunder, or if by action or inaction, Seller shall not have met or
refuses to meet its obligations hereunder at any time, Buyer shall be
entitled to specific performance if and to the extent available. If
specific performance is not for any reason an available remedy, and if
Buyer terminates this Agreement pursuant to Section 12.02(b) if any
of the conditions set forth in Sections 7.02, 7.04 or 7.05 shall not
have been waived or materially satisfied at the time of Closing or
Seller shall not have met or refuses to meet its obligations
hereunder, then Buyer shall be entitled to its direct out-of-pocket
costs and expenses (including reasonable attorneys' fees) up to a
maximum of Five Hundred Thousand Dollars ($500,000); provided,
however, (i) if Seller sells or agrees to sell the CATV Business to
any other party within two (2) years after the earlier of the date
Buyer terminates this Agreement pursuant to Section 12.02(b) or the
Outside Date or (ii) Seller intentionally breaches this Agreement,
resulting in Seller not selling the CATV Business to Buyer, then, and
only in either of such events, Buyer shall be entitled to Losses,
without regard to a threshold to a maximum of Nine Million Seven
Hundred Dollars ($9,700,000).
12.04 Return of Xxxxxxx Money Escrow. Subject to the provisions of
Section 12.03(a), upon termination of this Agreement, the Xxxxxxx Money
Escrow, plus all interest earned thereon, shall be paid or delivered to Buyer.
13. Miscellaneous.
13.01 Amendments; Waivers. This Agreement cannot be changed or
terminated orally and no waiver of compliance with any provision
40
or condition hereof and no consent provided for herein shall be effective unless
evidenced by an instrument in writing duly executed by the party hereto sought
to be charged with such waiver or consent. No waiver of any term or provision
hereof shall be construed as a further or continuing waiver of such term or
provision or any other term or provision. Any condition to the performance of
any party hereto which may legally be waived at or prior to the Closing may be
waived in writing at any time by the party or parties entitled to the benefit
thereof.
13.02 Entire Agreement. This Agreement and all contemporaneously
executed documents, letters and understandings set forth the entire
understanding and agreement of the parties and supersedes any and all prior
agreements, memoranda, arrangements and understandings relating to the subject
matter hereof. No representation, warranty, promise, inducement or statement of
intention has been made by any party which is not contained in this Agreement or
any such contemporaneously executed documents, letters and understandings, and
no party shall be bound by, or be liable for, any alleged representation,
promise, inducement or statement of intention not contained herein or therein.
13.03 Binding Effect; Assignment. This Agreement shall be binding upon
and inure to the benefit of the parties and their respective successors and
permitted assigns. This Agreement may not be assigned by any party without the
prior written consent of the other parties hereto.
13.04 Construction; Counterparts. The Article and Section headings of
this Agreement are for convenience of reference only and do not form a part
hereof and do not in any way modify, interpret or construe the intentions of the
parties. This Agreement may be executed in one or more counterparts, and all
such counterparts shall constitute one and the same instrument.
13.05 Notices. All notices and communications hereunder shall be in
writing and shall be deemed to have been duly given to a party when delivered in
person or by facsimile, or three business days after such notice is enclosed in
a properly sealed envelope, certified or registered, and deposited (postage and
certification or registration prepaid) in a post office or collection facility
regularly maintained by the United States Postal Service, or one business day
after delivery to a nationally recognized overnight courier service, and
addressed as follows:
If to Seller: A-R Cable Services, Inc.
Xxx Xxxxx Xxxxxxxxx
Xxxxxxxx, Xxx Xxxx 00000
Facsimile No.: (000) 000-0000
Telephone: (000) 000-0000
Attention: General Counsel
41
copies to: Cablevision Systems Corporation
Xxx Xxxxx Xxxxxxxxx
Xxxxxxxx, Xxx Xxxx 00000
Facsimile No.: (000) 000-0000
Telephone: (000) 000-0000
Attention: General Counsel
and
Xxxxxx & Coff
00 X. Xxxxxx Xxxxxx, Xxxxx 0000
Xxxxxxx, XX 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xxxxxx X. Xxxxx, Esq.
If to Buyer: c/o Insight Communications, Inc.
000 X. 00xx Xx.
Xxx Xxxx, XX 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: President
copies to: Xxxxxxxxx Xxxxxx Xxxxxxxx Xxxxxx &
Xxxxxx, P.C.
000 0xx Xxxxxx
Xxx Xxxx, XX 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xxxxxx X. Xxxxxxxx, Esq.
Any party may change its address for the purpose of notice by giving notice in
accordance with the provisions of this Section 13.05.
13.06 Expenses of the Parties. Except as otherwise provided herein, all
expenses incurred by or on behalf of the parties hereto in connection with the
authorization, preparation and consummation of this Agreement, including,
without limitation, all fees and expenses of agents, representatives, counsel
and accountants employed by the parties hereto in connection with the
authorization, preparation, execution and consummation of this Agreement shall
be borne solely by the party who shall have incurred the same.
13.07 Non-Recourse. No partner, officer, director, shareholder or other
holder of an ownership interest of or in either party to this Agreement shall
have any personal liability in respect of any such party's obligations under
this Agreement by reason of his or its status as such partner, officer,
director, shareholder or other holder.
42
13.08 Third Party Beneficiary. This Agreement is entered into only for
the benefit of the parties and their respective successors and assigns, and
nothing hereunder shall be deemed to constitute any person a third party
beneficiary to this Agreement.
13.09 Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE INTERNAL LAWS, AND NOT THE LAW OF CONFLICTS, OF THE STATE
OF NEW YORK.
13.10 Press Releases. No press release or other public information
relating to the purchase and sale contemplated in this Agreement shall be made
or disclosed by either party hereto without the consent of the other party;
provided however, that either party may disclose such information if reasonably
deemed to be required by law by the legal counsel for such party.
13.11 Severability. If any provision of this Agreement is finally
determined to be illegal, void or unenforceable, such determination shall not,
of itself, nullify this Agreement which shall continue in full force and effect
subject to the conditions and provisions hereof.
[Signature Page Follows]
43
IN WITNESS WHEREOF, the parties hereto have duly executed this Asset
Purchase Agreement as of the day and year first above written.
SELLER:
A-R CABLE SERVICES, INC.
By: /s/ Xxxxxxx X. Xxxx
--------------------------------
Name: Xxxxxxx X. Xxxx
Title: Vice Chairman
BUYER:
INSIGHT COMMUNICATIONS COMPANY, L.P.
By: ICC Associates, L.P.,
its general partner
By: Insight Communications, Inc.
its general partner
By: /s/ Xxxxxxx X. Xxxxxxx
----------------------------
Name: Xxxxxxx X. Xxxxxxx
Title: President
