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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
--------------------
FORM 8-K
Current Report
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): January 16, 1998
PEGASUS COMMUNICATIONS CORPORATION
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(Exact name of registrant as specified in charter)
Delaware 0-21389 51-0374669
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(State or other (Commission (I.R.S. Employer
jurisdiction of File Number) Identification No.)
incorporation)
c/o Pegasus Communications Management Company, 100 Matsonford Road,
5 Radnor Corporate Center, Suite 454, Radnor, Pennsylvania 19087
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 610-341-1801
Not Applicable
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(Former name or former address, if changed since last report.)
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Item 5. Other Events.
Sale of New England Cable System. On January 16, 1998,
Pegasus Cable Television, Inc., a subsidiary of Pegasus, entered into a
definitive agreement with Avalon Cable of New England, LLC ("Avalon") to sell
its New England cable systems, which consist of five headends serving 13 towns
in Connecticut and Massachusetts. As of December 31, 1997, Pegasus' New
England cable systems served approximately 15,200 subscribers. The
consideration for the sale will be based upon the twelve month trailing
location cash flow of the systems measured as of the month-end prior to
closing, multiplied by nine, but not less than $28 million or more than $31
million. As of December 31, 1997, Pegasus' New England cable systems had
trailing location cash flow of approximately $3.1 million. In addition to
being subject to consents from regulatory agencies, including local franchise
authorities, the sale will also be subject to conditions customary in
transactions of this nature.
Item 7. Financial Statements, Pro Forma Financial Information
and Exhibits.
(a) Financial Statements of Business Acquired.
Not Applicable
(b) Pro Forma Financial Information.
Not Applicable
(c) Exhibits.
2.1 Asset Purchase Agreement dated as of
January 16, 1998 between Avalon Cable of
New England, LLC and Pegasus Cable
Television, Inc. and Pegasus Cable
Television of Connecticut, Inc. (all
schedules have been omitted but will be
provided upon request by the SEC).
-1-
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act
of 1934, the registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
PEGASUS COMMUNICATIONS CORPORATION
By: /s/ Ted S. Lodge
-----------------------------
Ted S. Lodge,
Senior Vice President
March 2, 1998
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EXHIBIT INDEX
2.1 Asset Purchase Agreement dated as of January 16, 1998 between Avalon
Cable of New England, LLC and Pegasus Cable Television, Inc. and
Pegasus Cable Television of Connecticut, Inc. (all schedules have
been omitted but will be provided upon request by the SEC).
-3-
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ASSET PURCHASE AGREEMENT
dated as of January 16, 1998
between
AVALON CABLE OF NEW ENGLAND, LLC
and
PEGASUS CABLE TELEVISION, INC. and
PEGASUS CABLE TELEVISION OF CONNECTICUT, INC.
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TABLE OF CONTENTS
<TABLE>
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ARTICLE 1 - CERTAIN DEFINITIONS................................................................................. 1
ARTICLE 2 - PURCHASE AND SALE................................................................................... 6
Section 2.1 Covenant of Purchase and Sale; Assets................................................ 6
Section 2.2 Excluded Assets...................................................................... 7
Section 2.3 Assumed and Retained Obligations and Liabilities..................................... 8
Section 2.4 Purchase Price....................................................................... 9
Section 2.5 Escrow Amount........................................................................ 10
Section 2.6 Current Items Amount................................................................. 10
Section 2.7 Current Items Amount Calculated...................................................... 11
Section 2.8 Accounts Receivable.................................................................. 12
ARTICLE 3 - RELATED MATTERS..................................................................................... 12
Section 3.1 Bulk Sales........................................................................... 12
Section 3.2 Use of Names and Logos............................................................... 12
Section 3.3 Transfer Taxes; Filing Fees.......................................................... 12
Section 3.4 Allocation of Purchase Price......................................................... 13
ARTICLE 4 - BUYER'S REPRESENTATIONS AND WARRANTIES.............................................................. 13
Section 4.1 Organization of Buyer................................................................ 13
Section 4.2 Authority............................................................................ 13
Section 4.3 No Conflict; Required Consents....................................................... 13
Section 4.4 Litigation........................................................................... 14
Section 4.5 Funds................................................................................ 14
ARTICLE 5 - SELLERS' REPRESENTATIONS AND WARRANTIES............................................................. 14
Section 5.1 Organization and Qualification of Sellers............................................ 14
Section 5.2 Authority............................................................................ 14
Section 5.3 No Conflict; Required Consents....................................................... 14
Section 5.4 Title to Assets; Sufficiency......................................................... 15
Section 5.5 Franchises, Licenses, and Contracts.................................................. 15
Section 5.6 Employee Benefits.................................................................... 16
Section 5.7 Employees............................................................................ 16
Section 5.8 Litigation........................................................................... 17
Section 5.9 Tax Returns; Other Reports........................................................... 17
Section 5.10 Compliance with Legal Requirements................................................... 17
Section 5.11 Systems Information.................................................................. 18
Section 5.12 Environmental Matters................................................................ 19
Section 5.13 Financial and Operational Information................................................ 20
Section 5.14 No Adverse Change.................................................................... 20
Section 5.15 Taxpayer Identification Number....................................................... 20
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Section 5.16 Intangibles.......................................................................... 20
Section 5.17 Accounts Receivable.................................................................. 20
Section 5.18 Bonds................................................................................ 21
Section 5.19 Transactions with Affiliates and Employees........................................... 21
Section 5.20 Renewal of Franchises................................................................ 21
Section 5.21 Sole Franchisee...................................................................... 21
Section 5.22 Real Property........................................................................ 21
Section 5.23 Full Disclosure...................................................................... 21
ARTICLE 6 - COVENANTS........................................................................................... 22
Section 6.1 Certain Affirmative Covenants of Sellers Regarding the Systems....................... 22
Section 6.2 Approvals from Governmental Authorities.............................................. 23
Section 6.3 Employee Matters..................................................................... 24
Section 6.4 WARN Act............................................................................. 24
Section 6.5 Certain Negative Covenants of Sellers................................................ 24
Section 6.6 Supplements to Schedules............................................................. 25
Section 6.7 Notification of Certain Matters...................................................... 25
Section 6.8 Commercially Reasonable Efforts...................................................... 25
Section 6.9 Release of Certain Liens, Litigation and Other Obligations........................... 25
Section 6.10 Duty of Good Faith and Fair Dealing.................................................. 25
Section 6.11 Post-Closing Covenant................................................................ 26
Section 6.12 Certain Deliveries by Sellers........................................................ 26
Section 6.13 Certain Rate Increases............................................................... 26
ARTICLE 7 - CONDITIONS PRECEDENT................................................................................ 27
Section 7.1 Conditions to Buyer's Obligations.................................................... 27
Section 7.2 Conditions to Sellers' Obligations................................................... 29
ARTICLE 8 - CLOSING............................................................................................. 31
Section 8.1 Closing; Time and Place.............................................................. 31
Section 8.2 Sellers' Obligations................................................................. 31
Section 8.3 Buyer's Obligations.................................................................. 33
ARTICLE 9 - OBLIGATIONS SUBSEQUENT TO CLOSING................................................................... 33
Section 9.1 Post-Closing Covenant................................................................ 33
Section 9.2 Access to Books and Records.......................................................... 34
Section 9.3 Additional Financial Statements...................................................... 34
Section 9.4 Covenant Not to Compete.............................................................. 34
ARTICLE 10 - TERMINATION........................................................................................ 34
Section 10.1 Termination Events................................................................... 34
Section 10.2 Effect of Termination................................................................ 35
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ARTICLE 11 - REMEDIES........................................................................................... 36
Section 11.1 Specific Performance................................................................. 36
Section 11.2 Attorney's Fees...................................................................... 36
Section 11.3 Escrow Deposit....................................................................... 36
ARTICLE 12 - INDEMNIFICATION.................................................................................... 37
Section 12.1 Indemnification by Sellers........................................................... 37
Section 12.2 Indemnification by Buyer............................................................. 38
Section 12.3 Indemnified Third Party Claim........................................................ 38
Section 12.4 Determination of Indemnification Amounts and Related Matters......................... 39
Section 12.5 Time and Manner of Certain Claims.................................................... 40
Section 12.6 Exclusive Remedy..................................................................... 40
ARTICLE 13 - MISCELLANEOUS...................................................................................... 40
Section 13.1 Expenses............................................................................ 40
Section 13.2 Brokerage........................................................................... 40
Section 13.3 Waivers............................................................................. 40
Section 13.4 Notices............................................................................. 41
Section 13.5 Entire Agreement; Amendments........................................................ 42
Section 13.6 Binding Effect; Benefits............................................................ 42
Section 13.7 Headings, Schedules, and Exhibits................................................... 42
Section 13.8 Counterparts........................................................................ 43
Section 13.9 Publicity........................................................................... 43
Section 13.10 Governing Law....................................................................... 43
Section 13.11 Third Parties; Joint Ventures....................................................... 43
Section 13.12 Construction........................................................................ 43
Section 13.13 Risk of Loss........................................................................ 44
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LIST OF SCHEDULES AND EXHIBITS
SCHEDULES
Schedule 1 Proposed Rate Increases
Schedule 2.1(a) Tangible Personal Property
Schedule 2.1(b) Real Property
Schedule 2.1(c) Franchises
Schedule 2.1(d) Licenses
Schedule 2.1(e) Contracts
Schedule 2.2(a) Excluded Bonds, Letters of Credit and Similar Items
Schedule 2.2(b) Excluded DirectTV Assets
Schedule 2.2(c) Other Excluded Assets
Schedule 5.3 Sellers' Required Consents
Schedule 5.4 Liens; Condition of Assets
Schedule 5.5 Defaults
Schedule 5.7 Employment Matters
Schedule 5.8 Litigation
Schedule 5.10 Compliance with Legal Requirements
Schedule 5.11 System Information
Schedule 5.13 Financial Statements
Schedule 5.14 Pricing Policies
Schedule 5.18 Bonds
Schedule 5.19 Competition
Schedule 5.22 Real Property
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ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT is made and entered into as of January
16, 1998 by and between AVALON CABLE OF NEW ENGLAND, LLC, a Delaware limited
liability company ("Buyer"); and PEGASUS CABLE TELEVISION, INC., a
Massachusetts corporation ("PCT"), and PEGASUS CABLE TELEVISION OF
CONNECTICUT, INC., a Connecticut corporation ("PCT Connecticut"; PCT and PCT
Connecticut each being referred to as "Seller" and collectively as "Sellers").
RECITALS
A. Sellers own and operate cable television systems (the "Systems")
which serve 13 towns in Massachusetts and Connecticut, pursuant to the
Franchises (as hereinafter defined) and the Licenses (as hereinafter defined).
B. Sellers are willing to convey to Buyer, and Buyer is willing to
purchase from Sellers, all of the assets comprising the Systems other than the
Excluded Assets (as hereinafter defined), upon the terms and conditions set
forth in this Agreement.
AGREEMENTS
In consideration of the mutual covenants and promises set forth
herein, Buyer and Sellers agree as follows:
ARTICLE 1
CERTAIN DEFINITIONS
As used in this Agreement, the following terms, whether in singular
or plural forms, shall have the following meanings:
"Agreement" means this Asset Purchase Agreement.
"Assets" has the meaning given in Section 2.1.
"Assumed Obligations and Liabilities" has the meaning given in
Section 2.3.
"Basic Cable" means the tier of service which contains television
broadcast stations and is described as Standard Services on Schedule 5.11.
"Bill of Sale" has the meaning given in Section 8.2(a).
"Calculation Period" shall have the meaning given in Section 2.4(a).
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"CATV" means Community Antenna Television.
"Closing" has the meaning given in Section 8.1.
"Closing Certificate" has the meaning given in Section 2.4.
"Closing Date" means the date of any Closing.
"Closing Financial Statements" has the meaning given in Section 2.4.
"Closing Time" means 11:59 p.m. local time on the date immediately
prior to the Closing Date.
"Code" means the Internal Revenue Code of 1986, as amended, and the
regulations thereunder, or any subsequent legislative enactment thereof, as in
effect from time to time.
"Communications Act" means the Communications Act of 1934, 47 U.S.C.
ss.ss. 151 et. seq., as amended by the Cable Communications Policy Act of
1984, Pub. L. No. 98-549, the Cable Consumer Protection and Competition Act of
1992, Pub. L. No. 102-385, and the Telecommunications Act of 1996, Pub. L. No.
104-104, as such statutes may be amended from time to time, and the rules and
regulations promulgated thereunder.
"Contracts" has the meaning given in Section 2.1(e).
"Copyright Act" means the Copyright Act of 1976, as amended.
"Current Items Amount" has the meaning given in Section 2.6.
"Deposit" has the meaning given in Section 2.5.
"Eligible Accounts Receivable" has the meaning given in Section 2.6.
"Employee Benefit Plan" means any pension, retirement,
profit-sharing, deferred compensation, vacation, severance, bonus, incentive,
medical, vision, dental, disability, life insurance or any other employee
benefit plan as defined in Section 3(3) of ERISA to which a Person contributes
or which a Person sponsors or maintains, or by which a Person is otherwise
bound.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Escrow Agent" has the meaning given in Section 2.5.
"Escrow Agreement" has the meaning given in Section 2.5.
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"Excluded Assets" has the meaning given in Section 2.2.
"Expenses" has the meaning given in Section 2.6.
"FAA" means the Federal Aviation Administration.
"FCC" means the Federal Communications Commission.
"Final Adjustment Certificate" has the meaning given in Section 2.7.
"Final FCC Order" shall mean an order of the FCC as to which the time
for filing a request for administrative or judicial review, or for instituting
administrative review sua sponte, shall have expired without any such filing
having been made or notice of such review having been issued.
"Franchises" has the meaning given in Section 2.1(c).
"GAAP" means generally accepted United States accounting principles,
as in effect on the date hereof unless otherwise specified.
"Governmental Authority" means the United States of America, any
state, commonwealth, territory, or possession thereof and any political
subdivision or quasi-governmental authority of any of the same.
"Hazardous Substances" has the meaning given in Section 5.12(d).
"HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended.
"Initial Adjustment Certificate" has the meaning given in Section 2.7.
"Indemnitee" has the meaning given in Section 11.3(a).
"Indemnitor" has the meaning given in Section 11.3(a).
"Individual Subscriber" means, as to each System, any active single
household subscriber of such System that pays the applicable Seller for Basic
Cable services, has made at least two monthly payments for Basic Cable and is
less than 60 days past due on all of its payments to Sellers.
"Judgment" means any judgment, writ, order, injunction, award, or
decree of any court, judge, justice or magistrate, the FCC or any other
Governmental Authority.
"Leased Real Property" has the meaning given in Section 2.1(b).
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"Legal Requirements" means applicable common law and any statute,
ordinance, code or other law, rule, regulation, or order enacted, adopted or
promulgated by any Governmental Authority, including, without limitation,
Judgments and the Franchises.
"Licenses" has the meaning given in Section 2.1(d).
"Lien" means any security agreement, financing statement filed with
any Governmental Authority, conditional sale or other title retention
agreement, any lease, consignment or bailment given for purposes of security,
any lien, mortgage, indenture, pledge, option, encumbrance, adverse interest,
constructive trust or other trust, claim, attachment, exception to or defect
in title or other ownership interest (including, but not limited to,
reservations, rights of entry, rights of first refusal, possibilities of
reverter, encroachments, easement, rights-of-way, restrictive covenants,
leases, and licenses) of any kind, which otherwise constitutes an interest in
or claim against property, whether arising pursuant to any Legal Requirement,
under any Contract or otherwise.
"Litigation" means any claim, action, suit, proceeding, arbitration,
investigation, hearing, or other similar activity or procedure that could
result in a Judgment.
"Location Cash Flow" means, as to each System, earnings before
interest, taxes, depreciation, amortization, non-operating income or expense,
corporate charges, extraordinary items and non-cash incentive compensation, in
each case as determined in accordance with generally accepted accounting
principles ("GAAP") consistently applied, excluding rate increases levied
during the six month period immediately prior to the Closing Date other than
the rate increases reflected on Schedule 1. Any adjustments for non-recurring
items that in the absence of a materiality threshold would be required by GAAP
shall be included in the determination of Location Cash Flow.
"Losses" means any claims, losses, liabilities, damages, penalties,
costs, and expenses, including, without limitation, reasonable counsel fees
and reasonable costs and expenses incurred in the investigation, defense or
settlement of any claims covered by the indemnification provided for in
Article 11 hereof, but shall in no event include incidental or consequential
damages.
"Notice" has the meaning given in Section 11.3(a).
"Owned Real Property" has the meaning given in Section 2.1(b).
"Outside Closing Date" has the meaning given in Section 8.1.
"Partial Closing" shall have the meaning given in Section 8.1(b).
"Permitted Lien" means (i) liens for Taxes not yet due and payable or
being contested in good faith by appropriate proceedings; (ii) rights reserved
to any Governmental Authority
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to regulate the affected property; (iii) as to leased Assets, interests of the
lessors thereof and Liens affecting the interests of the lessors thereof; (iv)
inchoate materialmen's, mechanics', workmen's, repairmen's or other like liens
arising in the ordinary course of business; and (v) as to any parcel of Owned
Real Property or Leased Real Property, any encumbrance, adverse interest,
constructive or other trust, claim, attachment, exception to or defect in
title or other ownership interest (including, but not limited to,
reservations, rights of entry, rights of first refusal, possibilities of
reverter, encroachments, easement, rights-of-way, restrictive covenants,
leases, and licenses) of any kind, which otherwise constitutes an interest in
or claim against property, whether arising pursuant to any Legal Requirement,
under any Contract or otherwise that do not, individually or in the aggregate,
affect or impair the value or use thereof as it is currently being used by
either Seller in the ordinary course of business or render title thereto
unmarketable or uninsurable.
"Person" means any natural person, Governmental Authority,
corporation, general or limited partnership, joint venture, trust,
association, limited liability company, or unincorporated entity of any kind.
"Pole Attachment Agreements" means pole attachment authorizations and
agreements held by either Seller that relate to a System and were granted by a
public utility (or other Person providing similar service), municipality or
other Governmental Authority.
"Purchase Price" has the meaning given in Section 2.4.
"Qualified Intermediary" has the meaning given to it in the rules and
regulations promulgated pursuant to section 1031 of the Code.
"Securities Act" means the Securities Act of 1933, as amended.
"Subscriber Equivalent" means, as to each System, an equivalent to an
Individual Subscriber, the number of Subscriber Equivalents served by such
System being equal, as of any date and for any month, to the quotient of (i)
the aggregate revenues, excluding taxes, earned by that System for Basic Cable
provided by such System during the relevant month from: billings to hotels,
motels, or other non-residential customers (each a "Commercial Account");
billings to residential multiple dwelling units (each, an "MDU") and billings
from other subscribers that are billed for such service on a bulk basis
divided by (ii) such System's regular monthly subscription rate for Basic
Cable in effect for the relevant month; provided, however, that each
Commercial Account, MDU, and other subscribers billed on a bulk basis has paid
at least two monthly payments and is less than 60 days past due on all of its
payments to Seller.
"Supplemental Documents" means the Bill of Sale (and each other
transfer document to be delivered at Closing) and the Escrow Agreement.
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"Systems" has the meaning given in Recital A, and "System" means any
of the Systems.
"System Financial Statements" has the meaning given in Section 5.13.
"Taxes" means all levies and assessments imposed by any Governmental
Authority, including but not limited to income, sales, use, ad valorem, value
added, franchise, severance, net or gross proceeds, withholding, payroll,
employment, excise or property taxes, and interest, penalties and other
government charges with respect thereto.
ARTICLE 2
PURCHASE AND SALE
Section 2.1 Covenant of Purchase and Sale; Assets. Subject to the
terms and conditions set forth in this Agreement, at Closing each Seller shall
sell, convey, assign, and transfer to Buyer, and Buyer shall acquire from such
Seller, for the Purchase Price, free and clear of all Liens (except for
Permitted Liens), all right, title and interest of such Seller in and to all
of the assets and properties, real and personal, tangible and intangible,
owned or leased, used or held for use by such Seller in the operation of its
Systems (the "Assets"), including, without limitation, the following:
(a) Tangible Personal Property. All tangible personal
property, including but not limited to towers, tower equipment,
antennae, aboveground and underground cable, distribution systems,
headend amplifiers, line amplifiers, feeder line cable, distribution
plant, programming signal decoders for each satellite service which
scrambles its signal, housedrops, including disconnected housedrops,
installed subscriber devices, utility poles (if owned by such
Seller), local origination equipment, vehicles and trailers,
microwave equipment, converters, testing equipment, office equipment,
furniture, fixtures, supplies, inventory, and other physical assets,
including but not limited to the items described on Schedule 2.1(a).
(b) Real Property. All interests in real property owned by
such Seller ("Owned Real Property") or leased by such Seller ("Leased
Real Property"), including all improvements thereon owned by such
Seller, including but not limited to the Owned Real Property and
Leased Real Property described on Schedule 2.1(b).
(c) Franchises. The existing governmental authorizations for
construction, maintenance and operation of the Systems (individually
a "Franchise" and collectively the "Franchises") presently held by
such Seller, as listed on Schedule 2.1(c).
(d) Licenses. The intangible CATV channel distribution
rights, cable television relay service (CARS), business radio and
other licenses, authorizations, or permits issued by the FCC or any
other Governmental Authority used in the operation
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of the Systems and that are in effect as of the date hereof or
entered or obtained in the ordinary course of business between the
date hereof and the Closing Date (the "Licenses"), including, without
limitation, the Licenses described on Schedule 2.1(d).
(e) Contracts. To the extent assignable or transferable, the
leases, private easements or rights of access, contractual rights to
easements, MDU agreements, bulk and commercial service agreements,
cable guide agreements, retransmission consent agreements, and other
contracts, Pole Attachment Agreements, agreements or understandings
relating to the Systems and which are in effect as of the date hereof
or entered or obtained in the ordinary course of business between the
date hereof and the Closing Date (other than Excluded Assets) (the
"Contracts"), including, without limitation, the Contracts described
on Schedule 2.1(e).
(f) Accounts Receivable. All subscriber, trade and other
accounts receivable arising from such Seller's operation of the
Systems, except for accounts receivable relating to programming
agreements and advertising aired prior to Closing Time.
(g) Books and Records. All engineering records, files, data,
drawings, blueprints, schematics, reports, lists, plans and
processes, and all files of correspondence, lists, records, and
reports concerning subscribers including account and credit records
and prospective subscribers of each System, personnel records
relating to employees of each System to be hired by Buyer upon
Closing (if any), signal and program carriage, and dealings with
Governmental Authorities, including but not limited to all reports
filed by or on behalf of such Seller with the FCC with respect to
each System and statements of account filed by or on behalf of such
Seller with the U.S. Copyright Office with respect to each System.
Section 2.2 Excluded Assets. Notwithstanding the provisions of
Section 2.1, the Assets shall not include the following, which shall be
retained by Sellers (the "Excluded Assets"): (i) insurance policies and rights
and claims thereunder; (ii) bonds, letters of credit, surety instruments, and
other similar items listed on Schedule 2.2(a); (iii) cash and cash
equivalents; (iv) any agreement, right, asset or property owned or leased by
either Seller that is not used or held for use in connection with its
operation of the Systems; (v) all subscriber deposits and advance payments
held by either Seller as of the Closing Time in connection with the operation
of the Systems; (vi) all claims, rights, and interest in and to any refunds of
taxes or fees of any nature, or other claims against third parties, relating
to the operation of the Systems prior to the Closing Time; (vii) the account
books of original entry, general ledgers and financial records used in
connection with the Systems, provided, however, that Sellers shall provide to
Buyer access to any of such books and records as may be in Sellers' possession
for a reasonable period, not to exceed five (5) years from the Closing Date
(seven (7) years if Buyer needs reasonable access because of an Internal
Revenue Service inquiry), from time to time upon reasonable notice from Buyer
to Sellers; (viii) Sellers' trademarks, trade names, service marks, service
names, logos, and similar proprietary rights; (ix) the
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assets and properties of Sellers' affiliates relating to their distribution of
DIRECTV; (x) the capital stock of PCT Connecticut; (xi) PCT's partnership
interest in, and any asset of, the entities conducting PCT's CATV business in
Puerto Rico; (xii) rights under any agreement in connection with PCT's sale of
its New Hampshire CATV business in January, 1997; (xiii) to the extent not
assignable, the Pole Attachment Agreements, joint line agreements, underground
conduit agreements, crossing agreements and programming agreements relating to
the Systems; and (xiv) any other items described on Schedule 2.2(b).
Section 2.3 Assumed and Retained Obligations and Liabilities.
(a) Assumed Obligations and Liabilities. At Closing, Buyer
shall assume, pay, discharge, and perform the following (the "Assumed
Obligations and Liabilities"): (i) those obligations and liabilities
attributable to periods after the Closing Time under or with respect
to the Franchises, Licenses or Contracts that are assigned to Buyer
at the Closing; (ii) other obligations and liabilities of Sellers to
the extent that there shall have been a credit in favor of Buyer with
respect thereto pursuant to Section 2.6; and (iii) all obligations
and liabilities arising out of or relating to Buyer's ownership of
the Assets or operation of the Systems after the Closing Time.
(b) Retained Obligations and Liabilities. All obligations
and liabilities to a Person other than Buyer arising out of or
relating to the Assets or the Systems and all other liabilities and
obligations of Sellers to a Person other than Buyer, other than the
Assumed Obligations and Liabilities, shall remain and be the
obligations and liabilities solely of the applicable Seller
(collectively, the "Retained Obligations and Liabilities"). Without
limiting the generality of the foregoing, Retained Obligations and
Liabilities shall include the following:
(i) subject to Section 6.11, all obligations and
liabilities arising out of or relating to the Litigation and
Judgments disclosed on Schedule 5.8 and any other Litigation
to the extent arising out of actions or inaction of Sellers
or events occurring before the Closing Time, regardless of
whether known or unknown, asserted or unasserted, as of the
Closing Time;
(ii) all obligations and liabilities, unless
specifically assumed by the Buyer, to the extent arising
before or from events occurring before the Closing Time with
respect to the Franchises, Contracts, and Leased Real
Property;
(iii) all obligations and liabilities for
adjustments of revenues from a System and for any rate
refunds, rollback, credit, penalty and/or interest payment
required by the FCC or any local franchising authority to
the extent such obligations and liabilities relate to the
rates charged to customers of a System during any period
prior to the Closing Time, including, without
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limitation but subject to Section 6.11, all obligations and
liabilities relating to the Litigation described on Schedule
5.8 annexed hereto;
(iv) any liability under any claim relating to the
period ending as of the Closing Time that is or, but for the
consummation of the transactions contemplated hereby, would
have been covered under any insurance policy of Sellers, and
all liability associated with workmen's compensation claims
to the extent such liability relates to the period prior to
the Closing Time, whether or not reported or due or payable
as of the Closing Time;
(v) any liability for salary, sick or vacation pay,
or other employee benefits due to any employee of Sellers or
under any employee benefit plan maintained by Sellers, in
all cases other than liabilities of Buyer to Sellers'
employees hired by Buyer pursuant to Section 6.3 and arising
after the Closing; and
(vi) all obligations and liabilities with respect
to the Excluded Assets.
Section 2.4 Purchase Price.
(a) The aggregate consideration for the Assets to be paid by
Buyer pursuant to this Agreement shall consist of (i) nine (9) times
the Location Cash Flow of the Systems acquired for the 12-month
period ending on the last day of the month last ended before the
applicable Closing Date (the "Calculation Period") for which
internally prepared financial statements for the Systems are
available (the "Closing Financial Statements"), but in any event not
less than Twenty-Eight Million Dollars ($28,000,000) nor more than
Thirty-One Million Dollars ($31,000,000) (the "Purchase Price"), and
(ii) the assumption by Buyer of the Assumed Obligations and
Liabilities. The Closing Financial Statements shall be prepared by
Sellers in accordance with GAAP consistently applied with those used
in the preparation of the financial information described in Section
5.13 below. The calculation of the Purchase Price shall be set forth
in a reasonably detailed certificate (the "Closing Certificate")
delivered to Buyer for review not less than ten business days prior
to the Closing Date. Seller and Buyer shall act in good faith and use
reasonable efforts to resolve any dispute regarding the Closing
Certificate prior to closing. The Purchase Price shall be subject to
adjustment pursuant to Section 2.6 and shall be payable to Sellers
(or, upon Sellers' written instructions, to the Qualified
Intermediary designated by Sellers) at Closing by wire transfer of
immediately available funds.
(b) If the Buyer and the Sellers agree pursuant to Section
8.1(b) below to conduct one or more Partial Closings (as defined in
Section 8.1(b)), the aggregate consideration for the Assets of the
System(s) to be purchased at such Closing by the Buyer shall consist
of (i) nine (9) times the Location Cash Flow of such System(s) for
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the appropriate Calculation Period, and (ii) the assumption by Buyer
of the Assumed Obligations and Liabilities appertaining to the
System(s) being purchased at such Closing. The minimum cash portion
of the purchase price for any such System shall be Twenty-Eight
Million Dollars ($28,000,000) and the maximum purchase price shall be
Thirty-One Million Dollars ($31,000,000), multiplied in each case by
a fraction, the numerator of which is the Location Cash Flow of the
System(s) being purchased for the Calculation Period and the
denominator of which is the Location Cash Flow of all System(s) for
the Calculation Period, in all cases as reflected on a Closing
Certificate prepared, submitted and otherwise treated as provided in
Section 2.4(a). Any such Purchase Price shall be adjusted as provided
in Sections 2.6 and 2.7 below with respect to the assets and expenses
of the System(s) being purchased.
Section 2.5 Escrow Amount. On November 27, 1997, Buyer delivered into
escrow pursuant to an Escrow Agreement (the "Escrow Agreement") among Buyer,
Sellers, and First Union Bank ("Escrow Agent"), the sum of Two Hundred Fifty
Thousand Dollars ($250,000), to be held and applied pursuant to the terms of
the Escrow Agreement. Simultaneously with the execution and delivery of this
Agreement the Buyer shall deposit an additional Two Hundred Fifty Thousand
Dollars ($250,000) into escrow and the Escrow Agreement shall be amended to
give effect to the provisions of Section 11.3 hereof. Upon the Closing, the
amount of the deposit, together with interest and income thereon, shall be
credited against the Purchase Price, but retained by Escrow Agent in
accordance with the terms of the Escrow Agreement, as amended, to secure
Sellers' performance pursuant to Article 12.
Section 2.6 Current Items Amount. The Purchase Price shall be
adjusted by the net amount of the credits and prorations made pursuant to
paragraphs 2.6(a), (b), and (c) (the "Current Items Amount").
(a) Eligible Accounts Receivable. Sellers shall be entitled
to a credit in an amount equal to the face amount of all Eligible
Accounts Receivable. "Eligible Accounts Receivable" shall mean
accounts receivable resulting from a Seller's provision of cable
television service prior to the Closing Time to a System's
subscribers, which are collected on or before ninety (90) days after
the Closing Date.
(b) Advance Payments and Deposits and Certain Liens. Buyer
shall be entitled to a credit at the Closing in an amount equal to
the aggregate of (i) all deposits of subscribers of a System, and all
interest, if any, required to be paid thereon as of the Closing Time
which are retained by Sellers and (ii) all advance payments received
by Sellers for services to be rendered by Buyer to subscribers of a
System after the Closing Time, or for other services to be rendered
by Buyer to other third parties after the Closing Time for cable
television commercials, channel leasing, or other services or
rentals, but only to the extent the obligations of Sellers relating
thereto are assumed by Buyer at Closing; and liens encumbering the
Assets and
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permitted by clause (iv) of the definition of Permitted Lien to the
extent that such liens are not discharged or retained at or prior to
Closing by Sellers.
(c) Expenses. As of the Closing Time, expenses of a
recurring nature that are incurred to benefit a System and are
incurred in the ordinary course of business (the "Expenses"),
including those set forth below, shall be prorated, in accordance
with GAAP, so that all such Expenses for periods prior to the Closing
Time shall be for the account of Sellers and all such Expenses for
periods after the Closing Time shall be for the account of Buyer:
(i) all Expenses under the Franchises, the
Licenses, and the Contracts that are assigned to the Buyer
at the Closing;
(ii) Taxes levied or assessed against any of the
Assets or payable with respect to cable television service
and related sales to a System's subscribers; expenses for
utilities, municipal assessments, rents and service charges,
and other goods or services furnished to a System;
(iii) all FCC regulatory fees and all copyright
fees based on signal carriage by the Systems (it being
agreed that all such copyright fees that are payable with
respect to periods after the Closing Date shall be paid by
Buyer); and
(iv) all other items of Expense relating to a
System, except that (A) Sellers and Buyer shall not prorate
any items of Expense payable under or with respect to any
Excluded Asset, all of which shall remain and be solely for
the account of Sellers, and (B) there shall be no adjustment
or proration for capital expenditures made by Sellers.
Section 2.7 Current Items Amount Calculated. The Current Items Amount
shall be estimated in good faith by Sellers and shall be set forth in a
certificate (the "Initial Adjustment Certificate"), together with a detailed
statement of the calculation thereof, delivered to Buyer not later than three
business days prior to the Closing Date. The Initial Adjustment Certificate
shall constitute the basis on which the Current Items Amount paid at Closing
is calculated. On or before ninety (90) days after the Closing Date, Buyer
shall deliver to Sellers a final calculation of the Current Items Amount
calculated as of the Closing Date, together with such supporting documentation
as Sellers may reasonably request, in a certificate (the "Final Adjustment
Certificate"), which shall evidence in reasonable detail the nature and extent
of each adjustment. If Sellers do not object to the Final Adjustment
Certificate by delivering to Buyer a reasonably detailed written explanation
of its objections thereto within twenty (20) days after the Final Adjustment
Certificate is delivered (the "Final Adjustment Objection Period"), Sellers or
Buyer, as appropriate, shall pay to the other an amount equal to the amount by
which the Current Items Amount as set forth in the Final Adjustment
Certificate differs from the Current Items Amount as estimated in the Initial
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Adjustment Certificate. If Sellers timely object to the Final Adjustment
Certificate within the Final Adjustment Objection Period, Sellers and Buyer
shall attempt in good faith to resolve such objections within twenty (20) days
after Buyer's receipt of Sellers' written objections, failing which the
parties shall appoint a mutually agreeable independent accounting firm
knowledgeable in the cable television business to review the Final Adjustment
Certificate and Sellers' written objections thereto, and make adjustments to
the Final Adjustment Certificate (the "Adjusted Final Adjustment Certificate")
within thirty (30) days after its appointment. The fees and expenses of such
firm shall be shared equally by the parties. The Adjusted Final Adjustment
Certificate shall be final and binding. Sellers or Buyer, as appropriate,
shall pay to the other within twenty (20) days after resolving Sellers'
objections or after delivery of the Adjusted Final Adjustment Certificate, as
the case may be, an amount equal to the amount by which the Current Items
Amount as finally agreed upon by the parties or as set forth in the Adjusted
Final Adjustment Certificate, as the case may be, differs from the Current
Items Amount as estimated in the Initial Adjustment Certificate.
Section 2.8 Accounts Receivable. Buyer shall use its commercially
reasonable best efforts to collect all accounts receivable for periods prior
to the Closing and, at the request of Sellers, shall reassign to them any
accounts not collected within the ninety (90) day period referred to above.
ARTICLE 3
RELATED MATTERS
Section 3.1 Bulk Sales. Buyer and Sellers waive compliance by the
other with any bulk sales Legal Requirements which may be applicable to the
transactions contemplated hereby.
Section 3.2 Use of Names and Logos. Buyer and Sellers shall cooperate
in the removal promptly after Closing of the trademarks, trade names, service
marks, service names, logos, and similar proprietary rights of Sellers to the
extent incorporated in or on the Assets.
Section 3.3 Transfer Taxes; Filing Fees. Sellers, on the one hand,
and Buyer, on the other hand, each shall be liable for one-half of all sales,
use, transfer, and similar Taxes arising from or payable by reason of the
transactions contemplated by this Agreement, and each party shall indemnify
and hold the other party harmless from and against all Losses arising from
Taxes for which it is liable hereunder. Sellers, on the one hand, and Buyer,
on the other hand, also each shall be liable for one-half of all filing and
application fees (including HSR fees, if any) payable to a Governmental
Authority by reason of or for the purpose of carrying out the transactions
described in this Agreement. Sellers and Buyer shall each pay one-half of any
HSR filing fees.
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Section 3.4 Allocation of Purchase Price. Prior to the Closing Date,
Buyer and Sellers shall each use reasonable efforts and act in good faith to
agree upon the allocation (the "Allocation") of the Purchase Price and the
Assumed Obligations and Liabilities to the individual assets or classes of
assets (within the meaning of Section 1060 of the Code). Buyer, Seller, and
their respective affiliates shall file all tax returns and schedules thereto,
including, without limitation, those returns and forms required by Section
1060 of the Code, consistent with the Allocation unless otherwise required by
applicable Legal Requirements.
ARTICLE 4
BUYER'S REPRESENTATIONS AND WARRANTIES
Buyer represents and warrants to Sellers as follows as of the date of
this Agreement:
Section 4.1 Organization of Buyer. Buyer is a limited liability
company duly organized, validly existing, and in good standing under the laws
of the State of Delaware, and has all requisite power to own and lease the
properties and assets it currently owns and leases and to conduct its
activities as such activities are currently conducted.
Section 4.2 Authority. Buyer has all requisite power to execute,
deliver, and perform this Agreement and the Supplemental Documents to which
Buyer is a party (the "Buyer's Supplemental Documents") and to consummate the
transactions contemplated hereby and thereby. The execution, delivery, and
performance of this Agreement and the Buyer's Supplemental Documents and the
consummation of the transactions contemplated hereby and thereby by Buyer have
been duly and validly authorized by all necessary action on the part of Buyer.
This Agreement constitutes, and the Buyer's Supplemental Documents, when
executed and delivered by Buyer, will constitute, valid and binding
obligations of Buyer, enforceable against Buyer in accordance with their
terms, except as may be limited by general principles of equity and by
applicable bankruptcy, insolvency and similar laws affecting creditors' rights
generally and the availability of equitable remedies.
Section 4.3 No Conflict; Required Consents. The execution, delivery,
and performance by Buyer of this Agreement and the Buyer's Supplemental
Documents do not and will not: (i) conflict with or violate any provision of
the Limited Liability Company Agreement and other organizational documents, if
any, of Buyer; (ii) violate any provision of any Legal Requirement (assuming
the receipt at or prior to Closing of all necessary consents or licenses);
(iii) conflict with, violate, result in a breach of, or constitute a default
under any agreement to which Buyer is a party or by which Buyer or the assets
or properties owned or leased by it are bound or affected; or (iv) except as
expressly contemplated by this Agreement, require any consent, approval, or
authorization of, or filing of any certificate, notice, application, report,
or other document with, any Governmental Authority or other Person; except,
with respect to (ii), (iii) and (iv) of this Section 4.3, for any conflict,
violation, breach, default, consent or filing that would not materially impair
the ability of Buyer to perform its obligations hereunder.
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Section 4.4 Litigation. Except for any Litigation that may affect the
cable television industry (nationally or regionally) generally, there is no
Litigation pending or, to Buyer's knowledge, threatened, by or against or
affecting or relating to Buyer or any of its affiliates in any court or before
any Governmental Authority or any arbitrator, which, if adversely determined,
would restrain or materially hinder or delay the consummation of the
transactions contemplated by this Agreement or cause any of such transactions
to be rescinded.
Section 4.5 Funds. As of the date hereof, Buyer has provided to
Sellers a letter indicating Buyer's receipt of and satisfaction with term
sheets from an institutional investor and a reputable commercial bank pursuant
to which Buyer expects to obtain equity financing in an amount equal to not
less than 20% of the purchase price payable by it hereunder and debt financing
in an amount equal to not less than the remaining amount of the Purchase Price
payable by it hereunder.
ARTICLE 5
SELLERS' REPRESENTATIONS AND WARRANTIES
Sellers jointly and severally represent and warrant to Buyer as
follows as of the date of this Agreement:
Section 5.1 Organization and Qualification of Sellers. PCT is a
corporation duly organized, validly existing, and in good standing under the
laws of Massachusetts, and PCT Connecticut is a corporation duly organized,
validity existing and in good standing under the laws of Connecticut. Each
Seller has all requisite corporate power to own and lease the properties and
assets it currently owns and leases and to conduct its activities as such
activities are currently conducted.
Section 5.2 Authority. Each Seller has all requisite corporate power
to execute, deliver, and perform this Agreement and the Supplemental Documents
to which such Seller is a party (the "Sellers' Supplemental Documents") and to
consummate the transactions contemplated hereby and thereby. The execution,
delivery, and performance of this Agreement and the Sellers' Supplemental
Documents and the consummation of the transactions contemplated hereby and
thereby on the part of Sellers have been duly and validly authorized by all
necessary corporate action on the part of Sellers. This Agreement constitutes,
and the Sellers' Supplemental Documents, when executed and delivered by
Sellers, will constitute, valid and binding obligations of Sellers,
enforceable against Sellers in accordance with their terms, except as may be
limited by general principles of equity and by applicable bankruptcy,
insolvency and similar laws affecting creditors' rights generally and the
availability of equitable remedies.
Section 5.3 No Conflict; Required Consents. Except as required by the
HSR Act or as described on Schedule 5.3, the execution, delivery, and
performance by Sellers of their
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obligations under this Agreement and the Sellers' Supplemental Documents do
not and will not: (i) conflict with or violate any provision of the articles
of incorporation or bylaws of either Seller; (ii) violate any provision of any
Legal Requirement; (iii) conflict with, violate, result in a breach of, or
constitute a default under any contract, agreement or understanding to which
either Seller is a party or by which either Seller or the Assets are bound or
affected; (iv) require any consent, approval or authorization of, or filing of
any certificate, notice, application, report, or other document with, any
Governmental Authority or other Person; or (v) result in the creation or
imposition of any Lien or other encumbrance of any nature whatsoever against
or upon any of the Assets; except, with respect to (ii), (iii), (iv) and (v)
of this Section 5.3, for any conflict, violation, breach, default, consent,
filing or imposition of any Lien that would not materially impair the ability
of Sellers to perform hereunder and that would not have a material adverse
effect on the Assets or the financial condition or the business of the
Systems.
Section 5.4 Title to Assets; Sufficiency. Sellers have good and
marketable title to (or in the case of Assets that are leased, valid leasehold
interests in) and possession of all of the Assets, free and clear of all Liens
except for Permitted Liens and the Liens described on Schedule 5.4 provided
that all liens that are not Permitted Liens shall be released or discharged at
Closing. Except as set forth on Schedule 5.4, no Person (including any
Governmental Authority) has any right to acquire an interest in the Systems or
any material Asset (including any right of first refusal or similar right),
other than rights of condemnation or eminent domain afforded by law (none of
which have been exercised and no proceedings for which have been commenced).
Except for the Excluded Assets, the Assets constitute all property and rights,
real and personal, tangible and intangible, necessary or required to operate
the Systems as currently operated and conduct the business of the Systems as
currently conducted. Also attached at Schedule 5.4 is a copy of the latest
proof of performance tests for each of the Systems. Sellers represent and
warrant that each of the Systems will meet or exceed, at Closing, the
performance standards met by the Systems as shown by these proof of
performance tests.
Section 5.5 Franchises, Licenses, and Contracts. Sellers have
delivered to Buyer true and complete copies of each of the Franchises, the
Licenses, the Contracts listed on Schedule 2.1(e), and all amendments,
assignments and consents thereto. Except for the Licenses and Contracts
included in the Excluded Assets, neither Seller is bound or affected by any
other material contract, agreement or understanding which relates to a System.
Except for the Franchises and the Licenses, neither Seller requires any
franchise, material license or material permit from any Governmental Authority
to enable it to operate the Systems as they are currently operated. To
Sellers' knowledge, each of the Franchises, Licenses and Contracts is in full
force and effect and is valid, binding and enforceable in accordance with its
terms. Except as described on Schedule 5.5, (a) there has not occurred any
material default by either Seller or, to Sellers' knowledge, by any other
Person under any of the Franchises, Licenses or Contracts, and (b) since
Sellers have owned the Systems they have received no notice or acquired actual
knowledge of any unresolved claims by a
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property owner asserting that Sellers do not have any necessary right of way
to lay or gain access to cable included in the Systems in its current
location.
Section 5.6 Employee Benefits. Neither Seller is, and no Employee
Benefit Plan maintained by either Seller is, in violation of the provisions of
ERISA in any material respect; no reportable event, within the meaning of
Sections 4043(c)(1), (2), (3), (5), (6), (7), (10) or (13) of ERISA, has
occurred and is continuing with respect to any such Employee Benefit Plan; and
no prohibited transaction, within the meaning of Title I of ERISA, has
occurred with respect to any such Employee Benefit Plan. Buyer is not required
under ERISA, the Code or any collective bargaining agreement to establish,
maintain or continue any Employee Benefit Plan maintained by either Seller or
any affiliate of either Seller.
Section 5.7 Employees. With respect to Sellers' employees serving the
Systems:
(a) Except as set forth on Schedule 5.7, there are no
collective bargaining agreements applicable to any persons employed
by either Seller that renders services in connection with a System,
and neither Seller has any no duty to bargain with any labor
organization with respect to any such Person. There are not pending
any unfair labor practice charges against either Seller, nor is there
any demand for recognition, or any other request or demand from a
labor organization for representative status with respect to any
person employed by either Seller that renders services in connection
with a System.
(b) Sellers are in substantial compliance with all
applicable Legal Requirements respecting employment conditions and
practices, have withheld all amounts required by any applicable Legal
Requirements or Contracts to be withheld from the wages or salaries
of System employees, and are not liable for any arrears of wages or
any Taxes or penalties for failure to comply with any of the
foregoing.
(c) Sellers have not engaged in any unfair labor practice
within the meaning of the National Labor Relations Act and have not
violated any Legal Requirement prohibiting discrimination on the
basis of race, color, national origin, sex, religion, age, marital
status, or handicap in its employment conditions or practices, in any
respect material to the Assets or the financial condition of the
Systems. There are no pending or, to Sellers' knowledge, threatened
unfair labor practice charges or discrimination complaints relating
to race, color, national origin, sex, religion, age, marital status,
or handicap against either Seller before any Governmental Authority.
(d) There are no existing or, to Sellers' knowledge,
threatened, labor strikes, disputes, grievances or other labor
controversies affecting the Systems. There are no pending or, to
Sellers' knowledge, threatened representation questions respecting
either Seller's employees. There are no pending or, to Sellers'
knowledge,
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threatened arbitration proceedings under any Contract. To Sellers'
knowledge, there exists no basis for any of the above.
(e) Except as set forth on Schedule 5.7, neither Seller is a
party to any employment agreement, written or oral, relating to
employees of a System which cannot be terminated at will by such
Seller.
(f) Schedule 5.7 sets forth a true and complete list of the
names, titles and rates of compensation of all of the employees of
the Systems.
Section 5.8 Litigation. Except for any Litigation that may affect the
cable television industry (nationally or regionally) generally and except as
set forth on Schedule 5.8, there is no Litigation or Judgment pending or, to
Sellers' knowledge, threatened against either Seller which will adversely
affect the financial condition or operations of the Systems, the Assets or the
ability of Sellers to perform their obligations under this Agreement, or which
seeks or could result in the modification, revocation, termination,
suspension, or other limitation of any of the Franchises, Licenses or
Contracts. Subject to Section 6.11, Sellers are retaining all obligations and
liabilities for the litigation described on Schedule 5.8.
Section 5.9 Tax Returns; Other Reports. Each Seller has duly filed
all federal, state, local, and foreign tax returns and other tax reports
relating to the Systems that are required to be filed on or prior to the date
hereof, and has paid all Taxes shown thereon to be due and payable. Neither
Seller has received any notice of deficiency or assessment of proposed
deficiency or assessment from any taxing Governmental Authority pertaining to
the Systems. All Taxes with respect to Sellers, the Assets, or the business or
operation of the Systems that are due and payable have been paid by Sellers.
Section 5.10 Compliance with Legal Requirements.
(a) Each Seller is in compliance in all material respects
with the Communications Act, the Copyright Act, the Occupational
Safety and Health Act, and rules and regulations promulgated
thereunder. Neither Seller has received notice from the FCC of any
violation of its rules and regulations insofar as they apply to the
Systems.
(b) Sellers have submitted to the FCC all material filings,
including, without limitation, cable television registration
statements, current annual reports, annual regulatory fee filings,
aeronautical frequency usage notices, and current cumulative leakage
index reports, that are required under the rules and regulations of
the FCC. As of August 21, 1995, and at all times thereafter, each of
the Systems was and is a "small system" owned by a "small cable
company," as defined by Sections 76.901(c) and (e), respectively, of
the FCC rules, and thus qualifies for small system rate treatment
pursuant to Section 76.934 of the FCC rules. Except as set forth on
Schedule 5.10: Sellers have, with respect to the Systems, been
certified
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as in compliance with the FCC's equal opportunity rules for reporting
years 1993 through 1996; each System has submitted to the FCC
annually Form 320s showing complying index scores; each of the
television broadcast signals carried on each of the systems is being
carried in accordance with the rules and regulations of the FCC; each
of the Systems, respectively, is carrying all television broadcast
stations that elected to be carried pursuant to must-carry provisions
of the Communications Act and the FCC's rules, including default
election procedures; any television broadcast station that did not
make a must-carry election (or default election) and is being carried
on any of the Systems, has given its written retransmission consent
to such carriage; and each Seller is in compliance in all material
respects with all other federal, state and local laws, rules and
regulations applicable to the operation of the Systems.
(c) Sellers have deposited with the U.S. Copyright Office
all statements of account and other documents and instruments, and
paid all royalties, supplemental royalties, fees and other sums to
the U.S. Copyright Office under the Copyright Act with respect to the
business and operations of the Systems as are required to obtain,
hold and maintain the compulsory license for cable television systems
prescribed in the Copyright Act. To the knowledge of Sellers, except
as set forth on Schedule 5.10, there is no inquiry, claim, action or
demand pending before the U.S. Copyright Office or from any other
party that questions the copyright filings or payments made by
Sellers with respect to the Systems.
(d) Each of the Sellers is providing syndicated exclusivity
and network non-duplication protection to stations entitled thereto
which have requested such protection.
(e) All necessary FAA approvals have been obtained with
respect to the height and location of towers used in connection with
the operation of the Systems.
Section 5.11 Systems Information. Schedule 5.11 sets forth a true and
accurate description of the following information as of the dates set forth in
such Schedule:
(i) the approximate number of miles of plant that
are included in the Assets;
(ii) a general description of Basic Cable services
available from the Systems and the rates charged by Sellers
for such services;
(iii) the stations and signals carried by the
Systems and the channel position of each such signal and
station;
(iv) the Mhz capacity of the Systems;
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(v) the channel capacity of the Systems; and
(vi) the principal marketing, promotional and
advertising programs currently in effect for the Systems and
any other such program that had been in effect at any time
since January 1, 1997.
Section 5.12 Environmental Matters.
(a) To Sellers' knowledge, none of the Owned Real Property
or Leased Real Property is listed on the National Priorities Lists or
the Comprehensive Environmental Response, Compensation, Liability
Information System ("CERCLIS"), or is the subject of any "Superfund"
evaluation or investigation, or any other investigation or proceeding
of any Governmental Authority evaluating whether any remedial action
is necessary to respond to any release of Hazardous Substances on or
in connection with the Owned Real Property or Leased Real Property.
(b) To Sellers' knowledge, no above ground or underground
storage tanks or surface impoundments have been or are located in or
on the Owned Real Property or Leased Real Property.
(c) To the knowledge of Sellers, Sellers are in compliance
in all material respects with, and hold all permits, licenses and
authorizations required under all Legal Requirements with respect to
pollution or protection of the environment, including Legal
Requirements relating to actual or threatened emissions, discharges,
or releases of Hazardous Substances into the ambient air, surface
water, ground water, land, or otherwise relating to the manufacture,
processing, distribution, use, treatment, storage, disposal,
transport or handling of Hazardous Substances, insofar as they relate
to the Owned Real Property or Leased Real Property. Neither Seller
has received any notice of, and to Sellers' knowledge there are no
circumstances relating to, any past or present condition,
circumstance, activity, practice or incident (including without
limitation, the presence, use, generation, manufacture, disposal,
release or threat to release of any Hazardous Substances from or on
the Owned Real Property or Leased Real Property), that could
interfere with, prevent continued compliance with, or result in any
Losses pursuant to, any Legal Requirement with respect to pollution
or protection of the environment, or that is reasonably likely to
give rise to any liability, based upon or related to the processing,
distribution, use, treatment, storage, disposal, transport, or
handling, or the emission, discharge, release, or threatened release
into the environment, of any Hazardous Substance on, from or
attributable to the Owned Real Property or Leased Real Property.
(d) "Hazardous Substances" has the meaning given in the
Comprehensive Environmental Response, Compensation and Liability Act
of 1980 (42 U.S.C.A. ss.ss. 9601 et seq.) ("CERCLA"), as amended, and
rules and regulations promulgated thereunder.
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Section 5.13 Financial and Operational Information. Attached as
Schedule 5.13 are (i) unaudited statements of net assets to be acquired of the
Massachusetts Systems as of December 31, 1996 and September 30, 1997 and
unaudited statements of operations for the Massachusetts Systems for the
twelve-month and nine-month periods then ended, respectively (the
"Massachusetts System Financial Statements"), and (ii) the audited balance
sheet of PCT Connecticut as of December 31, 1996 and the audited statements of
operations of PCT Connecticut for the twelve-month period then ended, and
(iii) the unaudited balance sheet of PCT Connecticut as of September 30, 1997
and the unaudited statements of operation of PCT Connecticut for the
nine-month period then ended, respectively (the "PCT Connecticut Financial
Statements" and, together with the Massachusetts System Financial Statements,
the "System Financial Statements"). The System Financial Statements have been
prepared by Sellers in accordance with GAAP and present fairly the net assets
and results of operations of the Massachusetts Systems, and the financial
condition and results of operation of PCT Connecticut, respectively, as of the
dates and for the periods indicated subject to normal year-end adjustments.
Section 5.14 No Adverse Change. Since December 31, 1996, (i) there
has been no material adverse change in the condition (financial or otherwise)
or results of operations of the Systems taken as a whole; (ii) the Assets and
the financial condition and operations of the Systems taken as a whole have
not been materially and adversely affected as a result of any fire, explosion,
accident, casualty, labor trouble, flood, drought, riot, storm, condemnation,
or act of God or public force or otherwise; (iii) Sellers have not made any
sale, assignment, lease or other transfer of assets or properties of a System
other than in the normal and usual course of business; and (iv) except as set
forth on Schedule 5.14, Sellers have continued the pricing policies and have
conducted the promotional, advertising and other business and operational
activities with respect to the Systems (including, without limitation,
billing, collection, subscriber relations, and joint trenching activities)
substantially and materially in the normal and ordinary course of business
consistent with past practices and cable television industry practices.
Section 5.15 Taxpayer Identification Number. Sellers' respective U.S.
Taxpayer Identification Numbers are as set forth in the introductory paragraph
of this Agreement.
Section 5.16 Intangibles. Sellers neither use nor hold any
copyrights, trademarks, trade names, service marks, service names, logos,
licenses, permits or other similar intangible property rights and interests in
the operations of the Systems that do not incorporate the name "Pegasus" or
variations thereof. In the operation of the Systems, Sellers are not aware
that they are infringing upon or otherwise acting adversely to any such
intangible property rights and interests owned by any other Person or Persons,
and there is no claim or action pending, or to Sellers' knowledge threatened,
with respect thereto.
Section 5.17 Accounts Receivable. Sellers' accounts receivable from
the Systems are actual and bona fide receivables representing obligations for
the total dollar amount
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thereof shown on the books of Sellers which resulted from the regular course
of Sellers' business.
Section 5.18 Bonds. Except as set forth on Schedule 5.18, there are
no franchise, construction, fidelity, performance, or other bonds or letters
of credit posted by either Seller in connection with the Systems or the
Assets.
Section 5.19 Transactions with Affiliates and Employees. There is no
lease, sublease, indebtedness, contract, agreement, understanding, or other
arrangement of any kind entered into by either Seller with respect to the
Systems with any employee, affiliate or shareholder of such Seller which will
be an Assumed Obligation and Liability.
Section 5.20 Renewal of Franchises. Sellers have filed notice of
their intent to renew the PCT Connecticut franchise pursuant to Section 546 of
the Communications Act.
Section 5.21 Sole Franchisee. Except as described on Schedule 5.21,
Seller is the sole franchisee for each of its franchise areas.
Section 5.22 Real Property. Schedule 5.22 describes each interest in
real property owned or leased by Sellers, including, the lessor of any such
leased property and the principal terms and conditions of each lease. Except
as described in Schedule 5.22 to the knowledge of Sellers, Sellers have good
title in fee simple to all of the real property (other than leased property)
reflected on the Schedule 5.22, in each case free and clear of any
restriction, mortgage, deed of trust, pledge, lien, security interest or other
charge, claim, lien or encumbrance except for (a) liens for current taxes,
assessments and governmental charges and levies which may be paid without
penalty, interest or other additional charge or which are being contested in
good faith by appropriate proceedings and are not material in amount or value
in relation to the value of the associated property; (b) such minor utility
and municipal easements and restrictions, if any, as do not detract in any
material respect from the value or marketability of the property subject
thereto and do not interfere with the use of such property; (c) Permitted
Liens; and (d) Liens which will be removed at or prior to closing. No
condemnation proceeding is pending or to the knowledge of Sellers, threatened
with respect to any real property identified in Schedule 5.22 and owned by
Sellers. The current use of all real property owned by Sellers is in
compliance in all material respects with the applicable certificate of
occupancy and all applicable laws, rules, and regulations.
Section 5.23 Full Disclosure. No representation or warranty of
Sellers contained in this Agreement contains any untrue statement of a
material fact.
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ARTICLE 6
COVENANTS
Section 6.1 Certain Affirmative Covenants of Sellers Regarding the
Systems. Except as Buyer may otherwise consent in writing, between the date of
this Agreement and Closing each Seller shall:
(a) (i) continue to operate its Systems in the ordinary
course of business in accordance with such Seller's past practices,
(ii) continue to maintain the tangible Assets in their present
condition and repair consistent with such Seller's past practices,
ordinary wear excepted, (iii) continue to perform all of its
obligations under all of the Franchises, Licenses and material
Contracts without material breach or default consistent with such
Seller's past practices, (iv) continue to operate the Systems in
substantial compliance with applicable Legal Requirements consistent
with such Seller's past practices; (v) continue the pricing,
marketing, advertising, promotion and other activities with respect
to the Systems (including without limitation billing, collection,
subscriber, and joint trenching matters) substantially and materially
in the normal and ordinary course of business consistent with such
Seller's past practices except for increases set forth on Schedule 1
and except for television and spot advertisements, which may increase
from prior periods; and (vi) use commercially reasonable efforts to
(A) preserve the current business organization of the Systems intact,
including preserving existing relationships with Persons having
business with the Systems, (B) keep available the services of its
employees providing services in connection with the Systems, and (C)
maintain inventories of equipment and supplies for the Systems at
historic levels;
(b) upon reasonable prior notice to such Seller, give to
Buyer and its counsel, accountants, and other representatives access
during normal business hours to the Systems, the employees of the
Systems, the Owned Real Property, the Leased Real Property, the other
Assets and such Seller's books and records relating to the Systems,
provided that such persons who are provided access shall be
accompanied by a representative of such Seller and that such access
shall not disrupt the normal business operations of the Systems;
(c) as soon as practicable after the date of this Agreement,
and at its expense, exercise commercially reasonable efforts to
obtain in writing as promptly as practicable all approvals,
authorizations and consents described on Schedule 5.3 from all
Persons that are not Governmental Authorities, and deliver to Buyer
copies thereof promptly upon receiving them; provided that
"commercially reasonable efforts" for this purpose shall not require
Seller 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; provided,
further, that the costs and expenses associated with the performance
after the Closing Date of obligations which
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are required by a third party as a condition of granting its consent
or approval shall be borne solely by Buyer, if Buyer consented
thereto in writing in advance of obtaining such signed consents. In
the event that Buyer's cooperation is required to obtain such
consents, Buyer shall be responsible for its own out-of-pocket costs
in connection therewith;
(d) promptly within 31 days after the end of each month
between the date hereof and the Closings deliver to Buyer copies of
any monthly and year-to-date financial statements for the Systems
(including subscriber reports and Location Cash Flows) with respect
to the operation of the Systems and such other reports as are
regularly prepared by such Seller at any time from the date hereof
until Closing;
(e) promptly inform Buyer in writing of any material adverse
change in the condition (financial or otherwise), operations or
business of the Systems taken as a whole;
(f) continue to carry and maintain in full force and effect
its existing casualty and liability insurance through and including
the Closing Date; and
(g) maintain its books, records and accounts with respect to
the Assets and the operation of the Systems in the usual, regular and
ordinary manner on a basis consistent with past practices.
Section 6.2 Approvals from Governmental Authorities. As soon as
practicable, but in no event later than 10 days after the date of this
Agreement, Sellers and Buyer (a) shall file the appropriate notifications
under the HSR Act, if applicable, and (b) shall file with any Governmental
Authorities from which the approvals, authorizations and consents described in
Schedule 5.3 must be obtained, joint applications requesting such approvals,
authorizations and consents. Sellers and Buyer shall each exercise
commercially reasonable efforts in furtherance of the foregoing (including
Buyer's cooperation in attending meetings with Governmental Authorities and
providing the financial data, information as to operating experience,
appropriate insurance and surety bonds and any other information required to
timely prepare and submit the applications referenced above), and the parties
shall exercise commercially reasonable efforts necessary or appropriate to
expedite the processing of the applications and to secure such authorizations,
approvals and consents and to obtain early termination of the waiting period
under the HSR Act. Sellers and Buyer shall furnish each other with any
correspondence from or to, and notify each other of any other communications
with, Governmental Authorities that relate to such authorizations, approvals
and consents, and each party shall have the right to participate in any
hearings or proceedings before Governmental Authorities with respect to such
authorizations, approvals and consents. Each party shall bear its own expenses
in connection with its compliance with the foregoing. Buyer shall prepare and
file, with Seller's assistance, FCC Form 394 with all relevant Government
Authorities within 15 days after the execution of this Agreement. Concurrent
with the filing of the FCC Form 394, Buyer and Sellers shall jointly submit an
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amendment of the Connecticut Franchise to extend its term. Notice of Sellers'
intent to sell the Charlton System has been delivered to the Town of Charlton
in accordance with the Charlton franchise agreement.
Section 6.3 Employee Matters. Buyer may offer employment to any and
all of the employees of Sellers who primarily perform services with respect to
the operation of the Systems as of the Closing Date. Sellers shall be
responsible for and shall cause to be discharged and satisfied in full all
amounts owed to any employee of either Seller through the Closing Time,
including wages, salaries, accrued vacation, any employment, incentive,
compensation or bonus agreements, or other benefits or payments on account of
termination, and shall indemnify and hold Buyer harmless from any Losses
thereunder.
Section 6.4 WARN Act. Sellers shall comply with the employee
notification requirements, if applicable, of the Federal Worker Adjustment and
Retraining Notification Act.
Section 6.5 Certain Negative Covenants of Sellers. Between the date
hereof and Closing, Sellers shall not solicit or participate in negotiations
with (and Sellers shall use their best efforts to prevent any affiliate,
partner, director, officer, employee or other representative or agent of
Sellers from negotiating with, soliciting or participating in negotiations
with) any third party with respect to the sale of the Assets or the Systems or
any transaction inconsistent with those contemplated hereby. Additionally,
except as Buyer may otherwise consent in writing, which consent shall not be
unreasonably withheld, or except as otherwise permitted by this Agreement,
between the date of this Agreement and Closing, Sellers shall not (a) modify,
terminate, enter into, renew, suspend, or abrogate any Franchise, License or
material Contract other than in the ordinary course of business if such
modification, termination, renewal, suspensions, change or entry would be
materially adverse to the Systems, (b) sell, assign, lease or otherwise
dispose of any of the Assets, unless such Assets are consumed or disposed of
in the ordinary course of business or disposed of in conjunction with the
acquisition of replacement property of equivalent kind and value, (c) create,
assume, or permit to exist any Lien upon any Asset except for Liens granted by
Sellers to their lenders (which Sellers agree shall be listed on Schedule 5.4
and discharged by Sellers at or prior to closing as provided in Section 6.9)
and Permitted Liens or (d) change customer rates for any service or charges
for remotes or subscriber installations or add, delete, tier, retier or
repackage any cable television programming offered by the Systems except to
the extent required under the Communications Act or any other Legal
Requirement except as set forth on Schedule 1. Further, Sellers shall not,
without notifying Buyer in advance, seek amendments or modifications to
existing Franchises or Contracts or accept or agree to accede to any
modification or amendment to, or any condition to the transfer of, any of the
Franchises, Contracts, Owned Real Property or Leased Real Property other than
any reasonable modification, amendment or condition that does not materially
and adversely affect Buyer.
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Section 6.6 Supplements to Schedules. Sellers shall, from time to
time prior to Closing, supplement the Schedules to this Agreement with
additional information that, if existing or known to Sellers on the date of
this Agreement, would have been required to be included in one or more
Schedules to this Agreement. Subject to Section 10.1(d), for purposes of
determining the satisfaction of any of the conditions to the obligations of
Buyer in Section 7.1 and the liability of Sellers for breaches of Sellers'
representations and warranties under this Agreement, the Schedules to this
Agreement shall be deemed to include (a) the information contained in such
Schedules as they have been amended pursuant to Section 6.7 to reflect
Superseding Disclosure and (b) information disclosed to the Buyer in writing
by Sellers prior to Closing that reflects actions expressly permitted by this
Agreement to be taken prior to Closing.
Section 6.7 Notification of Certain Matters. Each party will promptly
notify the other party in writing of any fact, event, circumstance, action or
omission (i) which, if known at the date of this Agreement, would have been
required to be disclosed by it in or pursuant to this Agreement, or (ii) the
existence or occurrence of which would cause any of such party's
representations or warranties under this Agreement not to be true and accurate
in any material respect, and with respect to clause (ii), the notifying party
shall use commercially reasonable efforts to remedy the same. Subject to
Section 10.1(d), any disclosure by Sellers pursuant to this Section 6.7 shall
supersede any and all prior representations and warranties under this
Agreement concerning the subject matter of such disclosure and shall be deemed
to amend this Agreement to the extent of such superseding disclosure
("Superseding Disclosure").
Section 6.8 Commercially Reasonable Efforts. Each party shall use
commercially reasonable efforts to take all steps within its power, and will
cooperate with the other party, to cause to be fulfilled those of the
conditions to the other party's obligations to consummate the transactions
contemplated by this Agreement that are dependent upon its actions, and will
execute and deliver such instruments and take such other commercially
reasonable actions as may be necessary to carry out the intent of this
Agreement and consummate the transactions contemplated hereby.
Section 6.9 Release of Certain Liens, Litigation and Other
Obligations. Sellers shall take all necessary actions, including without
limitation the discharging or other satisfaction of related claims and
obligations, to cause the termination, release, and removal on or prior to the
Closing Date of all Liens, other than Permitted Liens, listed on Schedule 5.4.
In addition, Sellers shall discharge or otherwise satisfy all other
outstanding liabilities and obligations relating to the Systems not assumed by
the Buyer hereunder other than subscriber deposits and prepaid subscriber
fees, in each case without incurring any obligations on the part of Buyer or
otherwise adversely affecting Buyer.
Section 6.10 Duty of Good Faith and Fair Dealing. Each party agrees
that it will act in good faith with regard to all matters that are the subject
of this Agreement, and will neither intentionally nor knowingly take any
action or omit to take any action at any time for
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the primary purpose of depriving the other party unfairly of any right or
benefit that the other party has at such time under this Agreement.
Section 6.11 Post-Closing Covenant. In the event that Sellers are
unsuccessful in the rate appeal described in Schedule 5.8 and the FCC issues
an order requiring that refunds be made to subscribers (the "FCC Refund
Order"), Sellers shall deliver to Buyer the amount of such actual refund, plus
any and all interest required by the FCC Refund Order, within 30 days of the
earlier of (1) the date on which the FCC Refund Order becomes a Final FCC
Order or (2) the expiration of a stay suspending any requirement to issue
refunds. Unless prohibited by the applicable rules or regulations of the FCC
from doing so, Buyer shall submit a refund plan under Section 76.961(c)(2) of
the FCC's Rules to the FCC in accordance with the FCC Refund Order and shall
issue refunds to subscribers pursuant to the refund plan approved by the FCC;
provided, however, that in no event shall Buyer be responsible for any refund
amount (or interest thereon) in excess of the amount delivered to Buyer by
Sellers pursuant to this Section 6.11 and in no event shall Sellers be
responsible for any amount greater than the actual refund (including interest)
paid or credited to subscribers; provided, however, that if Buyer is
prohibited by the FCC Rules from submitting a refund plan under Section
76.961(c)(2) and is required to provide refunds to persons who are no longer
subscribers, then Sellers shall be liable for the reasonable out of pocket
expenses incurred by Buyer in locating prior subscribers to the extent
required to do so by the FCC's Rules. If any prior subscribers are required to
be identified, Sellers shall cooperate with Buyer in making and shall be
responsible for such identification.
Section 6.12 Certain Deliveries by Sellers. On or before 5:00 P.M. on
January 23, 1998, Sellers shall deliver to Buyer copies of all Pole Attachment
Agreements, vehicle leases, real property leases, and programming agreements
to which either of the Sellers is a party and which appertain to the
operations or business of the Systems whether or not reflected on the
Schedules as of the date hereof, copies of the most current title reports
relating to the Owned Real Property in the possession of Sellers, copies of
environmental questionnaires and Phase I environmental reports, if any,
obtained by Seller since January 1, 1994, and in their possession, such
additional information, if any, as Sellers may determine to include on any
Schedule to this Agreement ("Additional Scheduled Information"), and copies of
any Contracts added to the Schedules after the date hereof through January 23
and not previously provided to Buyer. Any Additional Scheduled Information
shall be deemed to have been included on the Schedules hereto as of and from
and after the date hereof as if included thereon on the date hereof.
Section 6.13 Certain Rate Increases. Sellers shall make the rate
increases set forth on Schedule 1 on or before June 30, 1998.
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ARTICLE 7
CONDITIONS PRECEDENT
Section 7.1 Conditions to Buyer's Obligations. The obligations of
Buyer to consummate the transactions contemplated by this Agreement shall be
subject to the following conditions, any one or more of which may be waived by
Buyer, in its sole discretion.
(a) Accuracy of Representations and Warranties. Each
representation and warranty (as supplemented pursuant to Sections 6.6
and 6.12) of Sellers set forth in this Agreement that is qualified by
materiality shall be true and correct as of the date of this
Agreement and as of the Closing Date as though made on and as of the
Closing Date, except for changes contemplated under this Agreement.
Each representation and warranty (as supplemented pursuant to
Sections 6.6 and 6.12) of Sellers set forth in this Agreement that is
not so qualified shall be true and correct in all material respects
as of the date of this Agreement and as of the Closing Date as though
made on and as of the Closing Date, except for changes contemplated
under this Agreement.
(b) Performance of Agreements. Sellers shall have performed
in all material respects all obligations and agreements and complied
in all material respects with all covenants in this Agreement to be
performed and complied with by them at or before Closing, and no
event which would constitute a material breach of the terms of this
Agreement on the part of Sellers shall have occurred and be
continuing.
(c) Officer's Certificate. Buyer shall receive a certificate
executed by an executive officer of each Seller, dated as of Closing,
reasonably satisfactory in form and substance to Buyer, certifying
that the conditions specified in Sections 7.1(a) and (b) have been
satisfied.
(d) Legal Proceedings. There shall be no Legal Requirement,
and no Judgment shall have been entered and not vacated by any
Governmental Authority of competent jurisdiction in any Litigation or
arising therefrom, which enjoins, restrains, makes illegal, or
prohibits consummation of the transactions contemplated by this
Agreement, and there shall be no Litigation pending or threatened
that seeks or that, if successful, would have the effect of any of
the foregoing.
(e) Sellers' Counsel Opinion. Buyer shall have received an
opinion counsel to Sellers, dated as of the Closing Date, in form and
substance reasonably satisfactory to it.
(f) Sellers' FCC Counsel Opinion. Buyer shall have received
an opinion of Vorys, Sater, Seymour & Pease, special FCC counsel to
Sellers, dated as of the Closing Date, in form and substance
reasonably satisfactory to it.
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(g) Consents. (i) Buyer shall have received evidence, in
form and substance reasonably satisfactory to it, that all consents,
approvals and authorizations identified on Schedule 5.3 as required
consents and marked with an asterisk "*" have been obtained and
remain in full force and effect, except for consents, approvals and
authorizations the failure to obtain which would not, individually or
in the aggregate, have a material adverse effect on operations or
business of the Systems; provided, however, that to the extent such
required consents relate to consents by the FCC to assignments of
Licenses, this condition shall be deemed met if such consents to
assignment have been requested prior to Closing and Buyer is entitled
to operate the Systems under such Licenses pursuant to conditional
use authorizations until the FCC's consent is received; and (ii)
Buyer shall have either received an assignment of or, if such
contracts prove to be not assignable, entered into contracts or other
arrangements replacing those Contracts identified on Schedule 5.3
(except for Contracts that if not replaced would not, in the
aggregate, have a material adverse effect on the operations or
business of the systems) and marked with a double asterisk "**," and
such replacement contracts or arrangements shall not impose on Buyer
terms or conditions which, in the aggregate, would be materially more
detrimental to Buyer than the terms of the Contracts, taken in the
aggregate, that they replace.
(h) Evidence of Authorizing Actions. Sellers shall have
delivered to Buyer evidence reasonably satisfactory to Buyer to the
effect that Sellers have taken all action necessary to authorize its
execution of this Agreement and the consummation of the transactions
contemplated hereby.
(i) Subscribers. Sellers shall have delivered to Buyer a
Closing Date subscriber list showing that (i) if the Closing occurs
after July 20, 1998 and on or before October 20, 1998 the sum of
Individual Subscribers and Subscriber Equivalents is at least 15,700
as of Closing and (ii) otherwise, the sum of Individual Subscribers
and Subscriber Equivalents is at least 15,350 as of Closing, in every
case, as that number may be reduced by the number of subscribers
served by any System omitted from the Systems transferred at Closing
pursuant to Section 7.1(m) or Section 8.1(b).
(j) Lien Releases. Sellers shall have delivered evidence
satisfactory to Buyer that all Liens (other than Permitted Liens)
affecting or encumbering the Assets have been terminated, released
and removed of record prior to or as of the Closing Date as required
by Section 6.9.
(k) No Material Adverse Change. There shall not have been
any material adverse change in the condition (financial or otherwise)
or results of operations of the Systems taken as a whole as a result
of any change, event or development occurring after the date hereof.
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(l) Other Documents. All other documents and other items
required to be delivered under this Agreement to Buyer at or prior to
Closing shall have been delivered or shall be tendered at the
Closing.
(m) Right of First Refusal. Sellers shall notify Buyer
within ten (10) days of receipt of notice from the Town of Charlton
that the Town has exercised or has chosen not to exercise its Right
of First Refusal. If the Town of Charlton exercises its Right of
First Refusal, the Systems will be deemed to exclude the System
served by the Charlton headend (Brookfield, Charlton, East
Brookfield, and North Brookfield) and the Purchase Price will be
reallocated in accordance with Sections 2.4 and 2.6.
(n) HSR Act. The waiting period under the HSR Act shall have
expired or shall have been terminated.
(o) Renewal of Franchises. Neither the renewed Charlton
Franchise nor the new Connecticut Franchise shall contain any terms
that are materially more adverse to the franchisee than the pertinent
existing franchise. No term contained in the pertinent existing
franchise agreement shall be deemed to be a "material adverse
change," if contained in the applicable new or renewed franchise,
except that the line extension expenditures required by the existing
Connecticut Franchise are to be, as between the parties, replaced by
a requirement for an extension of service to density levels no lower
than ten (10) homes per aerial mile and twenty-five (25) homes per
underground mile.
(p) Environmental Matters. Any Phase I environmental report
ordered by Buyer with respect to any Owned or Leased Real Property
hereunder and which is received by Buyer within ninety (90) days
after the date hereof shall not reflect any condition that would
materially and adversely affect such property. This condition
precedent shall be deemed satisfied unless Buyer shall have notified
Sellers that it has not been satisfied on or before the one-hundredth
(100th) day after the date hereof.
(q) Title Reports and Insurance. The Owned Real Property to
be conveyed to Buyer hereunder shall be insurable at regular standard
rates, at Buyers' expense, by a reputable title company and the Owned
Real Property shall be free of exceptions to title which would,
individually or in the aggregate, materially impair the ability of
the Buyer following the Closing from operating the Systems and using
the Owned Real Property as presently operated or used.
Section 7.2 Conditions to Sellers' Obligations. The obligations of
Sellers to consummate the transactions contemplated by this Agreement shall be
subject to the following conditions, any one or more of which may be waived by
Sellers, in their sole discretion:
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(a) Accuracy of Buyer's Representations and Warranties. Each
representation and warranty of Buyer set forth in this Agreement that
is qualified by materiality shall be true and correct as of the date
of this Agreement and as of the Closing Date as though made on and as
of the Closing Date, except for changes contemplated under this
Agreement. Each representation and warranty of Buyer set forth in
this Agreement that is not so qualified shall be true and correct in
all material respects as of the date of this Agreement and shall be
true as of the Closing Date as though made on and as of the Closing
Date, except for changes contemplated under this Agreement.
(b) Performance of Obligations. Buyer shall have performed
in all material respects all obligations and agreements and complied
in all material respects with all covenants in this Agreement to be
performed and complied with by it at or before Closing and no event
which would constitute a material breach of the terms of this
Agreement on the part of Buyer shall have occurred and be continuing.
(c) Officer's Certificate. Sellers shall have received a
certificate executed by an executive officer of Buyer, dated as of
Closing, reasonably satisfactory in form and substance to Sellers,
certifying that the conditions specified in Sections 7.2(a) and (b)
have been satisfied.
(d) Legal Proceedings. There shall be no Legal Requirement,
and no Judgment shall have been entered and not vacated by any
Governmental Authority of competent jurisdiction in any Litigation or
arising therefrom, which enjoins, restrains, makes illegal, or
prohibits consummation of the transactions contemplated hereby, and
there shall be no Litigation pending or threatened that seeks or
that, if successful, would have the effect of any of the foregoing.
(e) Buyer's Counsel Opinion. Sellers shall have received an
opinion of Baer Marks & Upham LLP, counsel to Buyer, dated as of the
Closing Date, in form and substance reasonably acceptable to it.
(f) Evidence of Authorizing Actions. Buyer shall have
delivered to Sellers evidence reasonably satisfactory to Sellers to
the effect that Buyer has taken all action necessary to authorize the
execution of this Agreement and the consummation of the transactions
contemplated hereby.
(g) Other Documents. All other documents and other items
required to be delivered under this Agreement to Sellers at or prior
to Closing shall have been delivered or shall be tendered at the
Closing.
(h) HSR Act. The waiting period, if any, under the HSR Act
shall have expired or shall have been terminated.
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ARTICLE 8
CLOSING
Section 8.1 Closing; Time and Place.
(a) Subject to the terms and conditions of this Agreement,
the closing of the transactions contemplated by this Agreement
("Closing") shall occur and be effective as of 11:59 p.m. on the last
calendar day of the month in which all of the conditions to Closing
have been satisfied; provided that in no event shall Closing occur
later than September 30, 1998 (the "Outside Closing Date"). To the
extent practicable, all documents to be delivered at Closing shall be
exchanged by facsimile and by overnight courier for receipt by the
other party no later than the business day immediately preceding the
Closing Date. If an in-person exchange of documents is required for
Closing, then such exchange shall be held at the offices of Drinker
Biddle & Reath LLP at 10:00 a.m. on the business day immediately
preceding the Closing Date (or at such other location as may be
reasonably requested by the principal lender to Buyer).
(b) If at any time or from time to time a Closing cannot be
held solely because franchise renewals, or extensions or transfers
for one or more Systems have not been obtained, Buyer and Sellers
may, if they mutually agree, elect to effectuate one or more Closings
(each, a "Partial Closing") for the purchase by Buyer of the Assets
to be acquired from the System(s) for which the appropriate
renewal(s) or extension(s) have been received. In the event of any
such Partial Closing, the Purchase Price to be paid at it shall be
determined as provided in Section 2.4, the representations and
warranties of Sellers shall be required to be true with respect to
the Assets being conveyed only, the covenants of the Sellers shall be
required to be performed only as they appertain to such Assets, and
each Closing delivery and condition and each other affected provision
of this Agreement (such as the indemnification provisions and the
provisions of Section 2.3 hereof) shall be modified as appropriate to
refer only to such Assets. In any such case, the number of
subscribers set forth in Section 7.1(i) shall continue to be
determined by reference to all Systems. In all other respects, this
Agreement shall remain in full force and effect with respect to all
other Assets and Systems until terminated in accordance with its
terms. Except as otherwise provided in Section 7.1(m), however,
neither Sellers nor Buyer shall have any obligation to effect any
such Partial Closing.
Section 8.2 Sellers' Obligations. At or prior to Closing, Sellers
shall deliver or cause to be delivered to Buyer the following:
(a) Closing Certificate. The Closing Financial Statements
and Closing Certificate described in Section 2.4.
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(b) Initial Adjustment Certificate. The Initial Adjustment
Certificate described in Section 2.7.
(c) Bill of Sale. Executed counterparts of a Bill of Sale
and Assignment and Assumption Agreement relating to the Assets in
form and substance reasonably acceptable to the parties (the "Bill of
Sale") and such other assignment documentation as Buyer may
reasonably request.
(d) Officer's Certificate. The certificate described in
Section 7.1(c).
(e) Evidence of Authorizing Actions. Evidence reasonably
satisfactory to Buyer that Sellers have taken all action necessary to
authorize the execution of this Agreement and the consummation of the
transactions contemplated hereby.
(f) Opinion of Sellers' Counsel. The opinion described in
Section 7.1(e).
(g) Opinion of Sellers' FCC Counsel. The opinion described
in Section 7.1(f).
(h) Vehicle Titles. Title certificates to all vehicles
included among the Assets, endorsed for transfer of title to Buyer,
and separate bills of sale and other title transfer documentation
therefor, as required by the laws of the state in which such vehicles
are titled.
(i) Deed to Owned Real Property. Deeds of Sellers conveying
to Buyer title to the Owned Real Property warranting against
restrictions or Encumbrances placed on the property by Sellers.
(j) Possession. Actual possession and operating control of
the Systems.
(k) Conditions Precedent. To the extent not described above,
all items set forth in Section 7.1.
(l) Documents and Records. All (i) existing blueprints,
schematics, working drawings, plans, specifications, projections,
statistics, engineering records, original plant records, System
construction and as-built maps relating to the Systems, (ii) customer
lists, files and records used by Sellers in connection with the
operation of the Systems, including a list of all pending subscriber
hook-ups, disconnects and repair orders, supply orders and any other
lists pertinent to the operation of the Systems, and (iii) personnel
files and records relating to the employees of the Systems who Buyer
may have arranged to hire upon Closing. Delivery of the foregoing
shall be deemed made to the extent such lists, files and records are
located as of the Closing Time at any of the offices included in the
Owned Real Property or Leased Real Property.
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(m) Lien Searches. If requested by Buyer at least thirty
(30) days prior to Closing, Sellers shall have delivered to Buyer the
results of reasonably comprehensive searches of the public records of
jurisdictions in which any of the Assets are located, dated as of a
date prior to the Closing Date, regarding any and all Liens and
Judgments affecting, encumbering or otherwise relating to the Systems
or the Assets.
(n) Other. Such other documents and instruments bills of
sale and certificates of title as shall be necessary to effect the
intent of this Agreement and consummate the transactions contemplated
hereby.
Section 8.3 Buyer's Obligations. At Closing, Buyer shall deliver or
cause to be delivered to Sellers the following:
(a) Purchase Price. The Purchase Price, plus or minus the
estimated Current Items Amount required by Section 2.6 of this
Agreement.
(b) Bill of Sale. Executed counterparts of the Bill of Sale
and such other assumption documentation as Sellers may reasonably
request.
(c) Officer's Certificate. The certificate described in
Section 7.2(c).
(d) Evidence of Authorizations. Evidence reasonably
satisfactory to Sellers that Buyer has taken all action necessary to
authorize the execution of this Agreement and the consummation of the
transactions contemplated hereby.
(e) Opinion of Buyer's Counsel. The opinion described in
Section 7.2(e).
(f) Conditions Precedent. To the extent not described above,
all items set forth in Section 7.2.
(g) Other. Such other documents and instruments as shall be
necessary to effect the intent of this Agreement and consummate the
transactions contemplated hereby.
ARTICLE 9
OBLIGATIONS SUBSEQUENT TO CLOSING
Section 9.1 Post-Closing Covenant. If Sellers are unsuccessful in the
rate appeal described in Schedule 5.8 and the FCC orders that refunds be made
to subscribers, Sellers shall, within 30 days after a final FCC order, deliver
to Buyer the amount of the refund order. Buyer shall be responsible for
complying with the FCC order promptly upon receipt of the amount of the refund
order from Sellers.
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Section 9.2 Access to Books and Records. For a period of seven years
from and after the Closing Date, Buyer will permit Sellers, during reasonable
business hours on not less than two business days prior notice, to review any
books, records, or other documents transferred to Buyer hereunder and relating
to the period prior to the Closing for any purpose reasonably related to the
interests of Sellers and permit Sellers, at Sellers' cost and expense, to make
copies of any such books, records, or other materials. Sellers shall use
reasonable efforts not to materially interfere with conduct of Buyers'
business. If Buyer chooses to dispose of any such books, records, or other
materials during such seven year period, Buyer shall notify Sellers
sufficiently in advance so that Sellers may review and copy or retain any such
records.
Section 9.3 Additional Financial Statements. On or before May 1,
1998, Buyer shall deliver to Seller an audited balance sheet for PCT
Connecticut as of December 31, 1997, and audited statements of operations for
PCT Connecticut for the twelve-month period then ended. The assets and results
of operations reflected in the foregoing audited financial statements, shall
not reflect any material adverse change in the assets or operations of PCT
Connecticut as compared to the unaudited financial statements for the
nine-month period ended September 30, 1997 furnished pursuant to Section 5.13.
Section 9.4 Covenant Not to Compete. For a period of four (4) years
following the Closing, neither Pegasus Communications Corporation nor Pegasus
Media Communications, Inc. or Pegasus Cable Television, Inc. or Pegasus Cable
Television of Connecticut, Inc. shall own or operate or hold, directly or
indirectly, a controlling interest in any entity owning or operating any cable
television system that competes directly with the Systems conveyed to the
Buyer at the Closing or at one or more Closings held in accordance with
Section 8.1(b); provided, however, that this restrictive covenant shall not
apply to the operations of any Person who acquires a controlling interest in
any of the foregoing entities after the date hereof and who owned or operated
a competing system prior to the date of its acquisition of such interest. For
the purposes of this Section 9.4, a controlling interest shall mean the
beneficial ownership (as that term is defined in Rule 13d-3 under the
Securities Exchange Act of 1934, as amended) of fifty-one percent (51%) or
more of the issued and outstanding voting stock of the entity controlled.
ARTICLE 10
TERMINATION
Section 10.1 Termination Events. This Agreement may be terminated and
the transactions contemplated hereby may be abandoned as follows:
(a) at any time, by the mutual agreement of Buyer and
Sellers;
(b) by either Buyer or Sellers, upon written notice to the
other, if the other is in material breach or default of its
respective covenants, agreements, or other
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obligations herein, or if any of its representations (as they may be
supplemented pursuant to Sections 6.6 and 6.12) herein are not true
and accurate in all material respects when made or when otherwise
required by this Agreement to be true and accurate, and Buyer or
Sellers, as the case may be, notifies the other of such breach,
default or failure and such breach, default or failure is not cured
within 30 days of receipt of notice that such breach, default or
failure exists or has occurred;
(c) by either Buyer or Sellers, upon written notice to the
other, if any conditions to its obligations set forth in Sections 7.1
and 7.2, respectively, shall not have been satisfied on or before the
Outside Closing Date for any reason other than a breach or default by
such party of its respective covenants, agreements, or other
obligations hereunder, or any of its representations herein not being
true and accurate when made or when otherwise required by this
Agreement to be true and accurate;
(d) by Buyer, upon written notice to Sellers, if any
Superseding Disclosure made by Sellers pursuant to Section 6.6
discloses a material breach or default by Sellers of Sellers'
covenants, agreements or other obligations herein or a material
misrepresentation by Sellers and such breach, default or
misrepresentation is not cured within 30 days of Buyer's receipt of
such Superseding Disclosure; or
(e) by Buyer in accordance with Section 13.13.
(f) by Sellers if, on or before the sixtieth (60th) day
after the date hereof, Buyer shall not have received (and delivered
copies to Sellers) from the institutional investor and financial
institutions referred to in Section 4.6 hereof, commitments for
equity financing in an amount equal to not less than 20% of the
Purchase Price payable by Buyer hereunder and debt financing in an
amount equal to not less than the remainder of the maximum Purchase
Price payable by Buyer hereunder or if the Buyer fails to close other
than by reason of a failure of a condition precedent set forth in
Section 7.1.
(g) by Buyer, on or before 5:00 P.M. on January 30, 1998, if
the information delivered to Buyer by Sellers pursuant to Section
6.12 above shall contain any fact or reflect any set of facts or
circumstances which, individually or in the aggregate, would have a
material adverse affect on the operations or business of the Systems.
Section 10.2 Effect of Termination. If this Agreement shall be
terminated pursuant to Section 10.1(a), (c), (d), (e), (f) or (g), all
obligations of the parties hereunder shall terminate, except for the
obligations set forth in Sections 10.2, 11.2, 11.3(a), 13.1, 13.2, and 13.9,
and no party hereto shall have any right or claim hereunder or otherwise
except for rights and claims arising under one of these six sections. The same
Sections and Section 11.1 shall survive a termination of this Agreement
pursuant to Section 10.1(b), and all other obligations of the parties shall
also terminate, except that such a termination shall not limit or
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impair any remedies that Buyer or Sellers may have under this Agreement with
respect to a breach or default by the other of its covenants, agreements or
obligations hereunder occurring prior to termination; provided however that
the remedies of Buyer under this Agreement and otherwise in any such case
shall be limited to the maximum amount payable under Section 12.4(c), and, if
applicable, to specific performance as and to the extent provided in Section
11.1.
ARTICLE 11
REMEDIES
Section 11.1 Specific Performance. Sellers and Buyer acknowledge that
if either breaches its obligation hereunder to complete the Closing, the other
would be irreparably damaged by such breach and that, in addition to the other
remedies that may be available under this Agreement or at law, the other party
shall be entitled to specific performance of this Agreement and injunctive
relief.
Section 11.2 Attorney's Fees. In the event of any Litigation between
Sellers and Buyer with respect to this Agreement or the transactions
contemplated hereby, the party prevailing under such Litigation shall be
entitled, as part of the Judgment rendered in such Litigation, to recover from
the other party its reasonable attorneys' fees and costs and expenses in such
Litigation.
Section 11.3 Escrow Deposit.
(a) Delivery Prior to Closing. In the event this Agreement
is terminated by the parties in accordance with Section 10.1(a), by
Buyer in accordance with Section 10.1(b), 10.1(d) 10.1(e), or 10.1(g)
or by either Buyer or Sellers in accordance with Section 10.1(c),
then Buyer and Sellers promptly shall send a Joint Disbursement
Notice (as defined in the Escrow Agreement) to Escrow Agent
instructing Escrow Agent to transfer the Escrow Funds (as defined in
the Escrow Agreement) to Buyer in accordance with such Joint
Disbursement Notice. In the event this Agreement is terminated by
Sellers in accordance with Section 10.1(b) or 10.1(f), then Buyer and
Sellers promptly shall send a Joint Disbursement Notice to Escrow
Agent instructing Escrow Agent to transfer the Escrow Funds to
Sellers in accordance with such Joint Disbursement Notice. The
disbursement of the Escrow Funds to Buyer or Sellers prior to Closing
shall not preclude a party following a termination pursuant to
Section 10.1(b) from exercising any other rights or remedies provided
for in Section 10.2 of this Agreement.
(b) Delivery After Closing. In the event that, following
Closing, Buyer incurs Losses for which Buyer believes it is entitled
to indemnification from Sellers in accordance with Article 12, then
Buyer shall promptly submit to Sellers a claim for indemnification
describing in reasonable detail the nature and, to the extent then
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reasonably practicable, the extent of the Losses that Buyer believes
are indemnifiable by Sellers (an "Indemnification Notice"), and
provided that there is no dispute as to the applicability of
indemnification for such Losses, Buyer and Sellers promptly shall
send a Joint Disbursement Notice to Escrow Agent instructing Escrow
Agent to transfer to Buyer, in accordance with such Joint
Disbursement Notice, Escrow Funds as necessary to indemnify Buyer for
such indemnifiable Losses. If, by the close of business on the last
calendar day of the twelfth month after the Closing Date (or on the
next business day if such last calendar day is not a business day)
(the "Expiration Date"), Sellers shall not have received an
Indemnification Notice from Buyer, then on the business day next
following the Expiration Date, Buyer and Sellers shall send a Joint
Disbursement Notice to Escrow Agent instructing Escrow Agent to
transfer the balance of the Escrow Funds to Sellers in accordance
with such Joint Disbursement Notice. If, however, Sellers have
received an Indemnification Notice on or prior to the Expiration
Date, then Escrow Agent shall retain control over the Escrow Funds
until the parties have resolved Buyer's claims for indemnification,
whereupon Buyer and Sellers promptly shall send a Joint Disbursement
Notice to Escrow Agent instructing Escrow Agent to transfer Escrow
Funds to Buyer and/or Sellers in accordance with the parties'
resolution of such dispute. The disbursement of the Escrow Funds to
Buyer shall not preclude Buyer from exercising any other rights or
remedies provided for in this Agreement.
ARTICLE 12
INDEMNIFICATION
Section 12.1 Indemnification by Sellers. From and after Closing,
Sellers shall jointly and severally indemnify and hold harmless Buyer from and
against any and all Losses arising out of or resulting from:
(a) any untruth, inaccuracy in any representation and
warranty made by Sellers in this Agreement, or any breach or default
by Sellers in the performance of their covenants, agreements, or
obligations under this Agreement, provided, however, that Sellers
shall have no liability for Losses that relate to any circumstance,
act or omission constituting a breach of any representation or
warranty by Sellers or failure by Sellers to comply with any of their
covenants, agreements or obligations hereunder, if Buyer had
knowledge of such circumstance, act, omission or failure at the
Closing Time;
(b) any liabilities relating to employees of Sellers working
for the Systems asserted under any federal, state or local law or
regulation or otherwise pertaining to any labor or employment matter
to the extent such labor or employment matter arises out of and
relates to conditions existing or actions or events occurring at or
prior to the Closing Time; and
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(c) Sellers' failure to perform or satisfy any of the
Retained Obligations and Liabilities.
Section 12.2 Indemnification by Buyer. From and after Closing, Buyer
shall indemnify and hold harmless Sellers from and against any and all Losses
arising out of or resulting from:
(a) any representations and warranties made by Buyer in this
Agreement not being true and accurate when made or when required by
this Agreement to be true and accurate, or any breach or default by
Buyer in the performance of its covenants, agreements, or obligations
under this Agreement, except for Losses that relate to any
circumstance, act or omission constituting a breach of any
representation or warranty by Buyer or failure by Buyer to comply
with any of its covenants, agreements or obligations hereunder, if
Sellers had knowledge of such circumstance, act, omission or failure
at the Closing Time, in which event Buyer shall have no obligation
with respect thereto;
(b) the Assumed Obligations and Liabilities; and
(c) any liabilities relating to employees of Sellers hired
by Buyer pursuant to Section 6.3 arising after the Closing Time
asserted under any federal, state or local law or regulation or
otherwise pertaining to any labor or employment matter arising out of
actions or events occurring or conditions arising subsequent to the
Closing Time.
Section 12.3 Indemnified Third Party Claim.
(a) If any Person not a party to this Agreement shall make
any demand or claim or file or threaten to file or continue any
Litigation with respect to which Buyer or Sellers are entitled to
indemnification pursuant to Sections 12.1 or 12.2, respectively, then
within thirty (30) days after notice (the "Notice") by the party
entitled to such indemnification (the "Indemnitee") to the other (the
"Indemnitor") of such demand, claim or Litigation, the Indemnitor
shall have the option, at its sole cost and expense, to retain
counsel for the Indemnitee (which counsel shall be reasonably
satisfactory to the Indemnitee), to defend any such Litigation.
Thereafter, the Indemnitee shall be permitted to participate in such
defense at its own expense, provided that, if the named parties to
any such Litigation (including any impleaded parties) include both
the Indemnitor and the Indemnitee and if the Indemnitor proposes that
the same counsel represent both the Indemnitee and the Indemnitor,
and such counsel is of the opinion that representation of both
parties by the same counsel would be inappropriate due to actual or
potential differing interests between them, then the Indemnitee shall
have the right to retain its own counsel at the cost and expense of
the Indemnitor (to the extent such cost and expense is reasonable),
unless the Indemnitor shall acknowledge in writing its indemnity
obligation, in which event the retention by
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Indemnitee of its own counsel shall be at its cost and expense. If
the Indemnitor shall fail to respond within thirty (30) days after
receipt of the Notice, the Indemnitee may retain counsel and conduct
the defense of such Litigation as it may in its sole discretion deem
proper, at the sole cost and expense of the Indemnitor (to the extent
such cost and expense is reasonable).
(b) The Indemnitee shall provide reasonable assistance to
the Indemnitor and provide access to its books, records and personnel
as the Indemnitor reasonably requests in connection with the
investigation or defense of the indemnified Losses.
(c) With regard to Litigation of third parties for which
Buyer or Sellers are entitled to indemnification under Sections 12.1
or 12.2, such indemnification shall be paid by the Indemnitor upon:
(i) the entry of a Judgment against the Indemnitee and the expiration
of any applicable appeal period; (ii) the entry of an unappealable
Judgment or final appellate Judgment against the Indemnitee; or (iii)
a settlement with the consent of the Indemnitor, which consent shall
not be unreasonably withheld, provided that no such consent need be
obtained if the Indemnitor fails to respond to the Notice as provided
in Section 12.3(a). Notwithstanding the foregoing, provided that
there is no dispute as to the applicability of indemnification,
reasonable expenses of counsel to the Indemnitee shall be reimbursed
on a current basis by the Indemnitor as if such expenses are a
liability of the Indemnitor, but only if Indemnitor is obligated to
pay such expenses pursuant to Section 12.3(a).
Section 12.4 Determination of Indemnification Amounts and Related
Matters.
(a) In calculating amounts payable to an Indemnitee
hereunder, the amount of the indemnified Losses shall be reduced by
the amount of any insurance proceeds paid to the Indemnitee for such
Losses and by the amount of any tax benefit to the Indemnitee arising
out of such Losses.
(b) Subject to the provisions of Section 12.3, all amounts
payable by the Indemnitor to the Indemnitee in respect of any Losses
under Sections 12.1 or 12.2 shall be payable by the Indemnitor as
incurred by the Indemnitee.
(c) Sellers will not be liable for indemnification arising
under Section 12.1 for (i) any Losses of or to Buyer or any other
Person entitled to indemnification from Sellers or (ii) any Losses
incidental to or relating to or resulting from any of the foregoing
(the items described in clauses (i) and (ii) collectively being
referred to for purposes of this Section 12.4(c) as "Buyer's
Damages") unless the amount of Buyer's Damages for which Sellers
would, but for the provisions of this Section, be liable exceeds, on
an aggregate basis, $100,000, in which case Sellers shall be
responsible for all of Buyer's actual Damages up to the amount stated
in the next succeeding sentence. Notwithstanding anything herein to
the contrary, the maximum aggregate liability of Sellers under this
Agreement (other than for fraud or breaches of the
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representation and warranty set forth in the first sentence of
Section 5.4 shall be 33% of the amount of the Purchase Price that is
paid to Buyer, pursuant to Section 2.4 as adjusted pursuant to
Sections 2.6 and 2.7.
Section 12.5 Time and Manner of Certain Claims. The representations
and warranties of Buyer and Sellers in this Agreement shall survive Closing
until December 31, 1999, except for representations and warranties relating to
title and Taxes, which shall survive until the expiration of the applicable
statute of limitations (the applicable period of such survival being the
"Survival Period"), and Buyer's and Sellers' rights to make claims thereon
shall likewise expire and be extinguished on such respective dates. Neither
Sellers nor Buyer shall have any liability under Sections 12.1(a) or 12.2(a),
respectively, unless a claim for Losses for which indemnification is sought
thereunder is asserted by the party seeking indemnification by written notice
to the party from whom indemnification is sought within the Survival Period.
Each of Seller and Buyer shall continue to be liable under Sections 12.1(b)
and (c) or Sections 12.2(b) and (c), respectively, after the Closing Date
without any limitation as to time.
Section 12.6 Exclusive Remedy. Notwithstanding anything herein to the
contrary, the remedies provided in this Article 12 and in Section 11.3 hereof
are the sole and exclusive remedies that either Buyer or Sellers shall have
after the consummation of a Closing for breach by the other of any
representations and warranties of the other or breach or default by the other
in the performance of the other's covenants, agreements or obligations under
this Agreement.
ARTICLE 13
MISCELLANEOUS
Section 13.1 Expenses. Except as otherwise expressly provided in this
Agreement, each party shall pay its own expenses and the fees and expenses of
its counsel, accountants, and other experts in connection with this Agreement.
Section 13.2 Brokerage. Sellers shall jointly and severally indemnify
and hold Buyer harmless from and against any and all Losses arising from any
employment by them of, or services rendered to Sellers by, any finder, broker,
agency, or other intermediary, in connection with the transactions
contemplated hereby, or any allegation of any such employment or services, and
Buyer shall indemnify and hold Sellers harmless from and against any and all
Losses arising from any employment by it of, or services rendered to Buyer by,
any finder, broker, agency, or other intermediary, in connection with the
transactions contemplated hereby, or any allegation of any such employment or
services.
Section 13.3 Waivers. No action taken pursuant to this Agreement,
including any investigation by or on behalf of any party hereto, shall be
deemed to constitute a waiver by the party taking the action of compliance
with any representation, warranty, covenant or
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agreement contained herein or in any document delivered pursuant hereto. The
waiver by any party hereto of any condition or of a breach of another
provision of this Agreement shall not operate or be construed as a waiver of
any other condition or subsequent breach. The waiver by any party of any of
the conditions precedent to its obligations under this Agreement shall not
preclude it from seeking redress for breach of this Agreement other than with
respect to the condition so waived.
Section 13.4 Notices. All notices, requests, demands, applications,
services of process, and other communications which are required to be or may
be given under this Agreement shall be in writing and shall be deemed to have
been duly given if sent by facsimile transmission, delivered by overnight or
other courier service, or mailed, certified first class mail, postage prepaid,
return receipt requested, to the parties hereto at the following addresses:
To Sellers: Pegasus Cable Television, Inc.
c/o Pegasus Communications Management Company
5 Radnor Corporate Center
100 Matsonford Road, Suite 454
Radnor, Pennsylvania 19087
Attn: Marshall W. Pagon
Telecopy: 610/341-1835
(with a required copy to Ted S. Lodge at the same
address or telecopier number)
Copies (which shall not constitute notice):
Drinker Biddle & Reath LLP
1100 Philadelphia National Bank Building
1345 Chestnut Street
Philadelphia, Pennsylvania 19107
Attn: Michael B. Jordan
Telecopy: 215/988-2757
To Buyer: Avalon Cable of New England, LLC
800 Third Avenue, Suite 2604
New York, New York 10022
Telecopy: 212/501-8695
Attn: Joel Cohen
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Copies (which shall not constitute notice):
Baer Marks & Upham LLP
805 Third Ave.
New York, New York 10022
Attn: Anne E. Pitter, Esq.
Telecopy: 212-702-5835 or 5941
or to such other address as any party shall have furnished to the other by
notice given in accordance with this Section. Such notice shall be effective,
(i) if delivered by courier service or by facsimile transmission, upon actual
receipt by the intended recipient (with appropriate confirmation thereof), or
(ii) if mailed, upon the earlier of five days after deposit with the U.S.
Postal Service or the date of delivery as shown on the return receipt
therefor.
Section 13.5 Entire Agreement; Amendments. This Agreement and the
Confidentiality Agreement dated May 30, 1997 between Buyer and Pegasus
Communications Corporation embody the entire agreement between the parties
hereto with respect to the subject matter hereof and thereof and supersede all
prior agreements and understandings, oral or written, with respect thereto.
This Agreement may not be modified orally, but only by an agreement in writing
signed by the party or parties against whom any waiver, change, amendment,
modification, or discharge may be sought to be enforced.
Section 13.6 Binding Effect; Benefits. This Agreement shall inure to
the benefit of and will be binding upon the parties hereto and their
respective heirs, legal representatives, successors, and permitted assigns.
Except as provided below, neither Buyer nor Sellers shall directly or
indirectly (by transfer of control of a party or otherwise), in whole or in
part, assign this Agreement or delegate any of its duties hereunder, or seek
consent from any Governmental Authority to assign this Agreement or delegate
any of its duties hereunder to any other Person without the prior written
consent of the other. Buyer acknowledges that Sellers may wish to complete a
like-kind exchange under Section 1031 of the Code. Buyer agrees to cooperate
in this as long as such cooperation does not delay the Closing or cause
additional expense to Buyer. Buyer agrees that Sellers may assign Sellers'
right to payment of the Purchase Price under this Agreement to a Qualified
Intermediary, and Buyer agrees in such case to make payment of the Purchase
Price to the Qualified Intermediary. Buyer further agrees to take other
appropriate actions or execute documents, as may reasonably be requested by
Sellers and as may be required in order to effectuate Seller's intent. Sellers
shall jointly and severally indemnify and hold Buyer harmless from any
liability or expense that may arise from any such action by Buyer.
Section 13.7 Headings, Schedules, and Exhibits. The section and other
headings contained in this Agreement are for reference purposes only and will
not affect the meaning or interpretation of this Agreement. Reference to
Schedules or Exhibits shall, unless otherwise indicated, refer to the
Schedules and Exhibits attached to this Agreement as
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supplemented in accordance with Section 6.6, which shall be incorporated in
and constitute a part of this Agreement by such reference.
Section 13.8 Counterparts; Facsimile Signatures. This Agreement may
be executed in any number of counterparts, each of which, when executed, shall
be deemed to be an original and all of which together will be deemed to be one
and the same instrument. Signatures to any document or agreement required to
be executed or delivered hereunder may be delivered by facsimile or in person.
Section 13.9 Publicity. Sellers and Buyer shall consult with and
cooperate with the other with respect to the content and timing of all press
releases and other public announcements, and any oral or written statements to
Sellers' employees concerning this Agreement and the transactions contemplated
hereby. Neither Sellers nor Buyer shall make any such release, announcement,
or statements without the prior written consent of the other, which shall not
be unreasonably withheld or delayed; provided, however, that Sellers or Buyer
may at any time make any announcement required by Legal Requirements so long
as such party, promptly upon learning of such requirement, notifies the other
of such requirement and consults with the other in good faith with respect to
the wording of such announcement. Notwithstanding the foregoing, Sellers may
disclose this Agreement and the transactions contemplated hereby in any
registration statement and any other filing or report made by Sellers or their
affiliates pursuant to the Securities Act or the Securities Exchange Act of
1934 and agrees that any disclosure therein of the Agreement and the
transactions contemplated hereby shall be consistent with the terms of this
Agreement. Sellers will provide Buyer with a copy of any such filing or report
not less than one (1) day prior to filing.
Section 13.10 Governing Law. The validity, performance, and
enforcement of this Agreement and all transaction documents, unless expressly
provided to the contrary, shall be governed by the laws of New York without
giving effect to the principles of conflicts of law of such state.
Section 13.11 Third Parties; Joint Ventures. This Agreement
constitutes an agreement solely among the parties hereto, and, except as
otherwise provided herein, is not intended to and will not confer any rights,
remedies, obligations, or liabilities, legal or equitable, including any right
of employment, on any Person (including but not limited to any employee or
former employee of Sellers) other than the parties hereto and their respective
successors or assigns, or otherwise constitute any Person a third party
beneficiary under or by reason of this Agreement. Nothing in this Agreement,
expressed or implied, is intended to or shall constitute the parties hereto
partners or participants in a joint venture.
Section 13.12 Construction. This Agreement has been negotiated by
Buyer and Seller and their respective legal counsel, and legal or equitable
principles that might require the construction of this Agreement or any
provision of this Agreement against the party
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drafting this Agreement shall not apply in any construction or interpretation
of this Agreement.
Section 13.13 Risk of Loss. The risk of any loss or damage to the
Assets resulting from fire, theft or any other casualty (except reasonable
wear and tear) shall be borne by Seller at all times prior to the Closing
Time. In the event that any such loss or damage shall be sufficiently
substantial so as to preclude and prevent resumption of normal operations of
any material portion of a System within twenty days from the occurrence of the
event resulting in such loss or damage, Sellers shall immediately notify Buyer
in writing of their inability to resume normal operations or to replace or
restore the lost or damaged property, and Buyer, at any time within ten days
after receipt of such notice, may elect by written notice to Seller either to
(a) waive such defect and proceed toward consummation of the transaction
contemplated by this Agreement in accordance with the terms hereof, or (b)
terminate this Agreement. If Buyer elects to so terminate this Agreement,
Buyer and Sellers shall stand fully released and discharged of any and all
obligations hereunder.
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<PAGE>
IN WITNESS WHEREOF, Buyer and Sellers have executed this Agreement as
of the date first written above.
AVALON CABLE OF NEW ENGLAND, LLC
By /s/ David W. Unger
--------------------------------
Name: David W. Unger
---------------------------
Title: Member
--------------------------
PEGASUS CABLE TELEVISION, INC.
By /s/ Ted S. Lodge
--------------------------------
Name: Ted S. Lodge
---------------------------
Title: Senior Vice President
--------------------------
PEGASUS CABLE TELEVISION OF
CONNECTICUT, INC.
By /s/ Ted S. Lodge
--------------------------------
Name: Ted S. Lodge
---------------------------
Title: Senior Vice President
--------------------------
45
